Exhibit 10.50
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RECEIVABLES SALE AGREEMENT
DATED AS OF DECEMBER 19, 2002
AMONG
BOWATER INCORPORATED, LAKE SUPERIOR HOLDINGS INCORPORATED AND
BOWATER AMERICA INC.,
AS SELLERS,
AND
BOWATER FUNDING INC.,
AS BUYER
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TABLE OF CONTENTS
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ARTICLE I AMOUNTS AND TERMS OF CONTRIBUTIONS AND PURCHASES........................................................2
Section 1.1 Contribution of Certain Receivables................................................................2
Section 1.2 Purchases of Other Receivables.....................................................................2
Section 1.3 Payment for the Purchases..........................................................................5
Section 1.4 Purchase Price Credit Adjustments..................................................................6
Section 1.5 Payments and Computations, Etc.....................................................................6
Section 1.6 License of Software................................................................................7
Section 1.7 Characterization...................................................................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES.........................................................................8
Section 2.1 Representations and Warranties of Each Seller......................................................8
(a) Existence and Power......................................................................................8
(b) Power and Authority; Due Authorization, Execution and Delivery...........................................8
(c) No Conflict..............................................................................................8
(d) Governmental Authorization...............................................................................8
(e) Actions, Suits...........................................................................................9
(f) Binding Effect...........................................................................................9
(g) Accuracy of Information..................................................................................9
(h) Use of Proceeds..........................................................................................9
(i) Good Title...............................................................................................9
(j) Perfection..............................................................................................10
(k) Chief Executive Office and Locations of Records.........................................................10
(l) LockBoxes, Etc..........................................................................................10
(m) Seller Material Adverse Effect..........................................................................10
(n) Names...................................................................................................10
(o) Ownership...............................................................................................10
(p) Not a Holding Company or an Investment Company..........................................................11
(q) Compliance with Law.....................................................................................11
(r) Compliance with Credit and Collection Policy............................................................11
(s) Payments to Seller......................................................................................11
(t) Enforceability of Contracts.............................................................................11
(u) Accounting..............................................................................................11
(v) Solvency................................................................................................11
ARTICLE III CONDITIONS OF PURCHASE...............................................................................12
Section 3.1 Conditions Precedent to Initial Purchase..........................................................12
Section 3.2 Conditions Precedent to Subsequent Payments.......................................................12
ARTICLE IV COVENANTS.............................................................................................12
Section 4.1 Affirmative Covenants of Each Seller..............................................................12
(a) Financial Reporting.....................................................................................13
(i) Annual Reporting.....................................................................................13
(ii) Quarterly Reporting...............................................................................13
(iii) Compliance Certificate............................................................................13
(iv) Change in Credit and Collection Policy............................................................13
(v) Other Information....................................................................................13
(b) Notices.................................................................................................14
(i) Termination Events or Unmatured Termination Events...................................................14
(ii) Judgment and Proceedings..........................................................................14
(iii) Seller Material Adverse Effect....................................................................14
(c) Compliance with Laws and Preservation of Existence......................................................14
(d) Audits..................................................................................................15
(e) Keeping and Marking of Records and Books................................................................15
(f) Compliance with Contracts and Credit and Collection Policy..............................................15
(g) Ownership...............................................................................................15
(h) Agents' and Lenders' Reliance...........................................................................15
(i) Collections.............................................................................................16
(j) Taxes...................................................................................................16
Section 4.2 Negative Covenants of Each Seller.................................................................16
(a) Name Change, Offices and Records........................................................................16
(b) Change in Payment Instructions to Obligors..............................................................16
(c) Modifications to Contracts and Credit and Collection Policy.............................................17
(d) Sales, Adverse Claims...................................................................................17
(e) Accounting for Purchases................................................................................17
ARTICLE V TERMINATION EVENTS.....................................................................................17
Section 5.1 Termination Events................................................................................17
Section 5.2 Remedies..........................................................................................19
ARTICLE VI INDEMNIFICATION.......................................................................................19
Section 6.1 Indemnities by Sellers............................................................................19
Section 6.2 Other Costs and Expenses..........................................................................21
Section 6.3 Taxes.............................................................................................21
ARTICLE VII MISCELLANEOUS........................................................................................22
Section 7.1 Waivers and Amendments............................................................................22
Section 7.2 Notices...........................................................................................22
Section 7.3 Protection of Ownership Interests of Buyer........................................................22
Section 7.4 Confidentiality...................................................................................23
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Section 7.5 Bankruptcy Petition...............................................................................24
Section 7.6 Return of Funds Not Constituting Collections......................................................24
Section 7.7 CHOICE OF LAW.....................................................................................24
Section 7.8 CONSENT TO JURISDICTION...........................................................................24
Section 7.9 WAIVER OF JURY TRIAL..............................................................................25
Section 7.10 Integration; Binding Effect; Survival of Terms.................................................25
Section 7.11 Counterparts; Severability; Section References.................................................25
EXHIBITS AND SCHEDULES
Exhibit I - Definitions
Exhibit II - Jurisdictions of Organization; Chief Executive Offices;
Principal Places of Business; Locations of Records;
Organizational Identification Numbers; Other Names
Exhibit III - LockBoxes and LockBox Accounts
Exhibit IV - Form of Compliance Certificate
Exhibit V-1 - Form of Purchase Price Loan Note
Exhibit V-2 - Form of Subordinated Note
Exhibit VI Form of Purchase Report
Exhibit VII Credit and Collection Policy
Schedule A List of Documents to Be Delivered to Buyer Prior to the Initial
Purchase
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RECEIVABLES SALE AGREEMENT
THIS RECEIVABLES SALE AGREEMENT, dated as of December 19,
2002, is by and among Bowater Incorporated, a Delaware corporation (together
with its successors, "BOWATER" or a "SELLER"), Lake Superior Holdings Inc., a
Delaware corporation (together with its successors, "LAKE SUPERIOR" or a
"SELLER"), and Bowater America Inc., a Delaware corporation (together with its
successors, "BAI" or a "SELLER"), and Bowater Funding Inc., a Delaware
corporation (together with its successors, "BUYER"). UNLESS DEFINED ELSEWHERE
HEREIN, CAPITALIZED TERMS USED IN THIS AGREEMENT SHALL HAVE THE MEANINGS
ASSIGNED TO SUCH TERMS IN EXHIBIT I HERETO (OR, IF NOT DEFINED IN EXHIBIT I
HERETO, THE MEANING ASSIGNED TO SUCH TERM IN THE LOAN AGREEMENT).
PRELIMINARY STATEMENTS
Bowater now owns, and from time to time hereafter will own,
Receivables. Bowater wishes to sell to BAI and contribute to Lake
Superior, Lake Superior wishes to contribute to BAI, and BAI wishes to
sell and contribute to Buyer (each of Buyer, BAI and Lake Superior
being sometimes hereinafter referred to as a "TRANSFEREE" with respect
any such sale or contribution), all of their respective right, title
and interest in and to all Receivables originated by Bowater from and
after the Initial Cutoff Date through and including the Termination
Date, together with the Related Security and Collections with respect
thereto.
In addition, BAI now owns, and from time to time hereafter
will own, Receivables. BAI wishes to sell and contribute to Buyer, all
of its right, title and interest in and to all Receivables originated
by BAI from and after the Initial Cutoff Date through and including the
Termination Date, together with the Related Security and Collections
with respect thereto.
Each of the parties hereto intends the transactions
contemplated hereby to be true sales or true contributions by the
applicable Seller to the applicable Transferee of the Receivables
originated or acquired (in each case, as applicable) by it, providing
the applicable Transferee with the full benefits of ownership of such
Receivables, and none of the parties intends these transactions to be,
or for any purpose to be characterized as, loans from any of the
Transferees to any of the Sellers.
Buyer plans to finance its purchases of Receivables hereunder
by borrowing under that certain Loan Agreement dated as of December 19,
2002 (as the same may from time to time hereafter be amended,
supplemented, restated or otherwise modified, the "LOAN AGREEMENT")
among (a) Buyer, as borrower, (b) Bowater, as initial servicer, (c)
Three Pillars Funding Corporation, Blue Ridge Asset Funding
Corporation, SunTrust Bank and Wachovia Bank, National Association
(together with their respective successors and assigns, the "LENDERS"),
(d) SunTrust Capital Markets, Inc. and Wachovia Bank, National
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Association, as "CO-AGENTS," and (e) SunTrust Capital Markets, Inc., as
administrative agent (in such capacity, together with its successor and
assigns in such capacity, the "ADMINISTRATIVE AGENT" and, together with
the Co-Agents, the "AGENTS").
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
AMOUNTS AND TERMS OF CONTRIBUTIONS AND PURCHASES
Section 1.1 Contribution of Certain Receivables.
(a) Effective on the Closing Date, BAI does hereby contribute,
assign, transfer, set-over and otherwise convey to Buyer, and Buyer
does hereby accept from BAI as a contribution to Buyer's capital, all
Receivables originated by BAI that cannot be purchased with cash or the
proceeds of a Subordinated Loan in accordance with the limitation
specified in Section 1.2(c) (such Receivables, the "INITIAL CONTRIBUTED
RECEIVABLES"), together with all Related Security relating thereto and
all Collections thereof. The Initial Contributed Receivables are
expected to have an aggregate Outstanding Balance as of the Initial
Cutoff Date of not less than $100,000,000.
(b) Any Seller may from time to time, at its option, by notice
to the applicable Transferee on or prior to the date of the proposed
contribution, identify Receivables which it proposes to contribute to
such Transferee as a capital contribution. On the date of each such
contribution and after giving effect thereto, such Transferee shall own
the Receivables so identified and contributed (collectively, the
"CONTRIBUTED RECEIVABLES"), together with all Related Security relating
thereto and all Collections thereof.
Section 1.2 Purchases of Other Receivables.
(a) Effective on the Closing Date:
(i) in consideration for the Purchase Price paid to
Bowater and upon the terms and subject to the conditions set forth
herein: (A) Bowater does hereby sell, assign, transfer, set-over and
otherwise convey to BAI, without recourse (except to the extent
expressly provided herein), and (B) BAI does hereby purchase from
Bowater, all of Bowater's right, title and interest in and to all
Receivables originated by Bowater and existing as of the close of
business on the Initial Cutoff Date, together with all Related Security
relating thereto and all Collections thereof; and
(ii) in consideration for the Purchase Price paid to
BAI and upon the terms and subject to the conditions set forth herein:
(A) BAI does hereby sell, assign, transfer, set-over and otherwise
convey to Buyer, without recourse (except to the extent expressly
provided herein), and (B) Buyer does hereby purchase from BAI, all of
BAI's right, title and interest in and to all Receivables (1)
originated by Bowater and (2)
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originated by BAI (other than the Initial Contributed Receivables), and
existing as of the close of business on the Initial Cutoff Date, in
each case, together with all Related Security relating thereto and all
Collections thereof.
(b) On each Purchase Date after the Closing Date:
(i) in consideration for the Purchase Price paid to
Bowater and upon the terms and subject to the conditions set forth
herein: (A) Bowater does hereby sell, assign, transfer, set-over and
otherwise convey to BAI, without recourse (except to the extent
expressly provided herein), and (B) BAI shall purchase from Bowater,
all of Bowater's right, title and interest in and to all Receivables
originated by Bowater and existing as of the close of business on the
Business Day immediately prior to such Purchase Date (other than any
Contributed Receivables and Receivables previously sold pursuant to
this Agreement), in each case, together with all Related Security
relating thereto and all Collections thereof; and
(ii) in consideration for the Purchase Price paid to
BAI and upon the terms and subject to the conditions set forth herein:
(A) BAI does hereby sell, assign, transfer, set-over and otherwise
convey to Buyer, without recourse (except to the extent expressly
provided herein), and (B) Buyer does hereby purchase from BAI, all of
BAI's right, title and interest in and to all Receivables originated by
either Bowater or BAI (other than the Initial Contributed Receivables,
any Contributed Receivables and Receivables previously sold pursuant to
this Agreement) and existing as of the close of business on the
Business Day immediately prior to such Purchase Date, in each case,
together with all Related Security relating thereto and all Collections
thereof.
(c) Each Transferee shall be obligated to pay the applicable
Seller the Purchase Price for the Receivables purchased by it hereunder
(i) in immediately available funds, and/or (ii) by delivery to such
Seller of the proceeds of a loan from such Seller to such Transferee
(each, a "PURCHASE PRICE LOAN") in an amount not to exceed the least of
(A) the remaining unpaid portion of such Purchase Price, (B) the
maximum Purchase Price Loan that could be borrowed without rendering
the Net Worth less than the Required Capital Amount, and (C) fifteen
percent (15%) of such Purchase Price, and/or (iii) unless the
Termination Date has occurred, by accepting a contribution to its
capital in an amount equal to the remaining unpaid balance of such
Purchase Price. Each Purchase Price Loan made by Bowater to BAI shall
be a senior loan, and all such senior Purchase Price Loans shall be
evidenced by a grid promissory note in the form of Exhibit V-1 hereto
(the "PURCHASE PRICE LOAN NOTE"). Each Purchase Price Loan made by BAI
to the Buyer shall be a subordinated loan (each, a "SUBORDINATED
LOAN"), and all such Subordinated Loans shall be evidenced by a single
grid promissory note in the form of Exhibit V-2 hereto (the
"SUBORDINATED NOTE"). Bowater is hereby authorized by BAI to endorse on
the schedule attached to the Purchase Price Loan Note an appropriate
notation evidencing the date and amount of each advance thereunder, as
well as the date of each payment with respect thereto, PROVIDED THAT
the failure to make such notation shall not affect any obligation of
BAI thereunder. BAI is hereby authorized by Buyer to endorse on the
schedule attached to the Subordinated Note an appropriate notation
evidencing the
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date and amount of each advance thereunder, as well as the date of each
payment with respect thereto, PROVIDED THAT the failure to make such
notation shall not affect any obligation of Buyer thereunder. On each
Reporting Date, each Seller shall (or shall require Servicer to)
deliver to the applicable Transferee (with a copy to the Administrative
Agent, as Buyer's pledgee, if requested by the Administrative Agent) a
report in substantially the form of Exhibit VI hereto (each such report
being herein called a "PURCHASE REPORT") with respect to the
Receivables sold or contributed by such Seller during the Calculation
Period then most recently ended. In addition to, and not in limitation
of, the foregoing, in connection with the payment of the Purchase Price
for any Receivables purchased hereunder, each applicable Transferee may
request that the applicable Seller deliver, and such Seller shall
deliver, such information or documents as such Transferee may
reasonably request.
(d) It is the intention of the parties hereto that each sale
or contribution of Receivables to a Transferee pursuant to this
Agreement shall constitute a true sale or contribution or other
absolute transfer and assignment, which sale, contribution, transfer or
assignment is absolute and irrevocable and provides the applicable
Transferee with the full benefits of ownership of the Receivables.
Except for the Purchase Price Credits owed to the applicable Seller
pursuant to Section 1.4, each sale of Receivables hereunder by a Seller
is made without recourse to such Seller; PROVIDED, HOWEVER, that (i)
such Seller shall be liable to the applicable Transferee and each of
its assigns for all representations, warranties, covenants and
indemnities made by such Seller pursuant to the terms of the
Transaction Documents to which such Seller is a party, and (ii) no such
sale constitutes, or is intended to result in, an assumption by any
Transferee or any assignee thereof of any obligation of such Seller or
any other Person arising in connection with the Receivables, the
related Contracts and/or other Related Security or any other
obligations of such Seller. In view of the intention of the parties
hereto that each sale or contribution of Receivables made hereunder
shall constitute a true sale or contribution of such Receivables rather
than a loan secured thereby, each Seller agrees that it will, on or
prior to the Closing Date and in accordance with Section 4.1(e)(ii),
▇▇▇▇ its master data processing records relating to the Receivables
with a legend stating that "The accounts receivable of Bowater
Incorporated and Bowater America Inc. reflected herein have been sold
or contributed, directly or indirectly, to Bowater Funding Inc.
(`SPC'), and a security interest in such receivables has been granted
by SPC to SunTrust Capital Markets, Inc., as administrative agent for
various parties" and to note in its financial statements that its
Receivables have been sold or contributed to the applicable Transferee.
Upon the request of any Transferee or the Administrative Agent, each
Seller will prepare and file such financing or continuation statements,
or amendments thereto or assignments thereof, and such other
instruments or notices, as may be necessary or appropriate to perfect
and maintain the perfection of its applicable Transferee's (and
ultimately, Buyer's) ownership interest in the Receivables and the
Related Security that is subject to Article 9 of the UCC and
Collections with respect thereto, or as any Transferee or the
Administrative Agent may reasonably request.
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Section 1.3 Payment for the Purchases.
(a) The Purchase Price for each Purchase occurring on the
Closing Date shall be payable in full by the applicable Transferee to
the applicable Seller on the Closing Date, and shall be paid to such
Seller in the manner described in Section 1.2(c). The Purchase Price
for each Receivable coming into existence after the Initial Cutoff Date
shall be due and owing in full (but not necessarily payable) by the
applicable Transferee to the applicable Seller or its designee on the
Purchase Date immediately following the Business Day on which such
Receivable comes into existence (except that each Transferee may, with
respect to any such Purchase Price, offset against such Purchase Price
any amounts owed by such Seller to such Transferee hereunder and which
have become due but remain unpaid) and shall be paid to such Seller in
the manner provided in the following paragraphs (b), (c) and (d).
(b) With respect to each Receivable (other than a Contributed
Receivable) coming into existence after the Initial Cutoff Date, on
each Settlement Date, each applicable Transferee shall pay the
applicable Seller the Purchase Price therefore, in accordance with
Section 1.3(d), by delivery to such Seller of (i) immediately available
funds, and/or (ii) the proceeds of a Purchase Price Loan of the type
and subject to the limitations on amount set forth in Section 1.2(c),
and/or (iii) unless the Termination Date has occurred, by accepting a
contribution to its capital in an amount equal to the remaining unpaid
balance of such Purchase Price. Each Purchase Price Loan shall be
evidenced by the Purchase Price Loan Note. Each Subordinated Loan shall
be evidenced by the Subordinated Note. Bowater is hereby authorized by
BAI to endorse on the schedule attached to the Purchase Price Loan Note
an appropriate notation evidencing the date and amount of each advance
thereunder, as well as the date of each payment with respect thereto,
PROVIDED THAT the failure to make such notation shall not affect any
obligation of BAI thereunder. BAI is hereby authorized by Buyer to
endorse on the schedule attached to the Subordinated Note an
appropriate notation evidencing the date and amount of each advance
thereunder, as well as the date of each payment with respect thereto,
PROVIDED THAT the failure to make such notation shall not affect any
obligation of Buyer thereunder.
(c) From and after the Termination Date, no Seller shall be
obligated to (but may, at its option) sell or contribute Receivables to
any Transferee.
(d) Although the Purchase Price for each Receivable coming
into existence after the Initial Cutoff Date shall be due and owing in
full by the applicable Transferee to the applicable Seller on the
Purchase Date immediately following the Business Day on which such
Receivable comes into existence, settlement of the Purchase Price
between each Transferee and its applicable Seller shall be effected on
a monthly basis on Settlement Dates with respect to all Receivables
originated during the same Calculation Period and based on the
information contained in the applicable Purchase Report delivered by or
on behalf of such Seller for the Calculation Period then most recently
ended. Although settlement shall be effected on Settlement Dates, any
contribution of capital by a Seller to its Transferee made pursuant to
Section 1.3(b) shall be deemed to
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have occurred and shall be effective as of the last Business Day of the
Calculation Period to which such settlement relates.
Section 1.4 Purchase Price Credit Adjustments. If on any day:
(a) the Outstanding Balance of any Receivable purchased from a
Seller is:
(i) reduced as a result of any defective, rejected or
returned goods or services, any discount or adjustment or otherwise by
such Seller (other than a reduction in such Outstanding Balance
resulting from (A) cash Collections received by the applicable
Transferee or by its assigns or Servicer, on such Transferee's behalf,
on account of such Receivable's Outstanding Balance, or (B) any reserve
established against or write-off of such Receivable that is made due to
its becoming a Defaulted Receivable or otherwise based on the
uncollectibility of such Receivable on account of the insolvency,
bankruptcy, lack of creditworthiness or financial inability to pay of
the applicable Obligor), or
(ii) reduced (in whole or in part) as a result of a
setoff in respect of any claim by any Person (whether such claim arises
out of the same or a related transaction or an unrelated transaction),
or
(b) any of such Seller's representations and warranties set
forth in Sections 2.1(i), (j), (r), (s), (t), the second sentence of
Section 2.1(q) hereof and the last sentence of Section 2.1(c) are not
true when made or deemed made with respect to any Receivable,
then, in such event, the applicable Transferee shall be entitled to a credit
(each, a "PURCHASE PRICE CREDIT") against the Purchase Price otherwise payable
to such Seller hereunder equal to (x) in the case of a reduction under the
preceding clause (a)(i) or (ii), the amount of such whole or partial reduction,
and (y) in the case of a misrepresentation described in the preceding clause
(b), the full Outstanding Balance of such Receivable. In any event described in
clause (a)(i) or (a)(ii), the applicable Transferee shall deem this Receivable
collected. If such Purchase Price Credit owing to a Transferee by its applicable
Seller exceeds the aggregate Original Balance of the Receivables originated on
any day by such Seller, such Seller shall pay the remaining amount of such
Purchase Price Credit in cash (i) if the Termination Date has not occurred, not
later than the next Settlement Date, and (ii) if the Termination Date has
occurred, immediately.
Section 1.5 Payments and Computations, Etc. All amounts to be
paid or deposited by a Transferee hereunder shall be paid or deposited in
accordance with the terms hereof on the day when due in immediately available
funds to the account of the applicable Seller designated from time to time by
such Seller or as otherwise directed by such Seller. In the event that any
payment owed by any Person hereunder becomes due on a day that is not a Business
Day, then such payment shall be made on the next succeeding Business Day. If any
Person fails to pay any amount hereunder when due, such Person agrees to pay, on
demand, the Default Fee in respect thereof until paid in full; PROVIDED,
HOWEVER, that such Default Fee shall not at any time exceed the maximum rate
permitted by applicable law. All computations of
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interest payable hereunder shall be made on the basis of a year of 360 days for
the actual number of days (including the first but excluding the last day)
elapsed.
Section 1.6 License of Software.
(a) To the extent that any software used by a Seller to
account for the Receivables transferred by it is non-transferable, each
Seller hereby grants to its Transferee, such Transferee's assigns, the
Administrative Agent and Servicer an irrevocable, non-exclusive license
to use, without royalty or payment of any kind, all such software used
by such Seller to account for such Receivables, to the extent necessary
to administer such Receivables, whether such software is owned by such
Seller or is owned by others and used by such Seller under license
agreements with respect thereto, PROVIDED THAT should the consent of
any licensor of such software be required for the grant of the license
described herein, to be effective, such Seller hereby agrees that upon
the request of its Transferee (or its assigns), such Seller will use
its reasonable efforts to obtain the consent of such third-party
licensor. The license granted hereby shall be irrevocable until the
later to occur of (i) indefeasible payment in full of the Obligations
(as defined in the Loan Agreement), and (ii) the date on which each of
this Agreement and the Loan Agreement terminates in accordance with its
terms.
(b) Upon the request to any Seller by its Transferee and/or
the Administrative Agent (as the ultimate assignee), such Seller (i)
shall take such action that may be necessary or appropriate to ensure
that Buyer has an enforceable ownership interest in the records
included in the Receivable Files relating to the Receivables, and (ii)
shall use its reasonable efforts to ensure that each of the Buyer, the
Administrative Agent and the Servicer has an enforceable right (whether
by license or sublicense or otherwise) to use all of the computer
software used to account for such Receivables and/or to recreate such
records.
Section 1.7 Characterization. If, notwithstanding the
intention of the parties expressed in Section 1.2(d), any sale or contribution
by a Seller of Receivables hereunder shall be characterized as a secured loan
and not a sale or such sale shall for any reason be ineffective or
unenforceable, then this Agreement shall be deemed to constitute a security
agreement under the UCC and other applicable law. For this purpose and without
being in derogation of the parties' intention that each transfer of Receivables
by a Seller hereunder shall constitute a true sale thereof: each Seller hereby
grants to its applicable Transferee and its assigns a valid and continuing
security interest in all of such Seller's right, title and interest in, to and
under all Receivables originated or acquired by such Seller which are now
existing or hereafter arising and are intended to be sold or contributed to such
Transferee in accordance with the terms of this Agreement, all Collections and
Related Security with respect thereto, all other rights and payments relating to
such Receivables and all proceeds of the foregoing to secure the prompt and
complete payment of a loan deemed to have been made in an amount equal to the
Purchase Price of the Receivables purchased from such Seller together with all
other obligations of such Seller hereunder, which security interest shall be
prior to all other Adverse Claims thereto. Furthermore, to the extent that any
Seller has been granted a security interest pursuant to this Section 1.7, such
Seller hereby grants a valid and continuing security interest in such security
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interest to its applicable Transferee and such Transferee's assigns. The
applicable Transferee and its assigns shall have, in addition to the rights and
remedies which they may have under this Agreement, all other rights and remedies
provided to a secured creditor under the UCC and other applicable law, which
rights and remedies shall be cumulative.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of Each Seller.
Each Seller hereby represents and warrants to its applicable Transferee and its
assigns on the Closing Date and on each Purchase Date thereafter as to such
Seller and the Receivables transferred by it that:
(a) Existence and Power. Such Seller is duly organized under
the laws of its jurisdiction of organization specified in Exhibit II hereto.
Such Seller is validly existing and in good standing under the laws of its
jurisdiction of organization and is duly qualified to do business and is in good
standing as a foreign corporation and has and holds all corporate or company
power and all governmental licenses, authorizations, consents and approvals
required to carry on its business in each jurisdiction in which its business is
conducted except where the failure to so qualify or so hold could not reasonably
be expected to have a Seller Material Adverse Effect.
(b) Power and Authority; Due Authorization, Execution and
Delivery. The execution and delivery by such Seller of this Agreement and each
other Transaction Document to which it is a party, and the performance of its
obligations hereunder and thereunder, and such Seller's use of the proceeds of
each Purchase made from it hereunder, are within its corporate powers and
authority and have been duly authorized by all necessary action on its part.
This Agreement and each other Transaction Document to which such Seller is a
party has been duly executed and delivered by such Seller.
(c) No Conflict. The execution and delivery by such Seller of
this Agreement and each other Transaction Document to which it is a party, and
the performance of its obligations hereunder and thereunder do not contravene or
violate (i) its Organizational Documents, (ii) any law, rule or regulation
applicable to it, (iii) any restrictions under any agreement, contract or
instrument to which it is a party or by which it or any of its property is
bound, or (iv) any order, writ, judgment, award, injunction or decree binding on
or affecting it or its property, and do not result in the creation or imposition
of any Adverse Claim on assets of such Seller or its Subsidiaries (except as
created hereunder) except, in any case set forth in clause (ii)-(iv) above,
where such contravention or violation could not reasonably be expected to have a
Seller Material Adverse Effect. No transaction contemplated hereby requires
compliance with any bulk sales act or similar law.
(d) Governmental Authorization. Other than the filing of the
financing statements required hereunder, no authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution and delivery by such Seller of
this Agreement and each other Transaction Document to which it is a party and
the performance of its obligations hereunder and thereunder.
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(e) Actions, Suits. There is no litigation, arbitration,
governmental investigation, proceeding or inquiry pending or, to the knowledge
of any of its Senior Executives, threatened against or affecting such Seller or
any of its Subsidiaries that, if adversely determined, would have a Seller
Material Adverse Effect or which seeks to prevent, enjoin or delay any Purchase.
(f) Binding Effect. This Agreement and each other Transaction
Document to which such Seller is a party constitute the legal, valid and binding
obligations of such Seller enforceable against such Seller in accordance with
their respective terms, except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other similar laws relating to or
limiting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law).
(g) Accuracy of Information.
(i) All written representations, warranties, reports or
certificates of any Seller's Senior Executives heretofore furnished by such
Seller to its applicable Transferee (or its assigns) for purposes of or in
connection with this Agreement, any of the other Transaction Documents or any
transaction contemplated hereby or thereby are, and all such written
representations, warranties, reports or certificates hereafter furnished by such
Seller to its applicable Transferee (or its assigns) shall be, complete and
correct and fairly present the information contained therein as of the date such
information is certified and do not and will not contain any material
misstatement of fact as of such date or omit to state a material fact or any
fact necessary to make the information contained therein, taken as a whole with
all other written or verbal information provided by such Seller's Senior
Executives as of such date, not misleading.
(ii) To the best of such Seller's knowledge, all verbal
information furnished by any Senior Executive of such Seller to its applicable
Transferee (or its assigns) for purposes of or in connection with this
Agreement, any of the other Transaction Documents or any transaction
contemplated hereby or thereby are, and all such verbal information hereafter
furnished by any Senior Executive of such Seller to its applicable Transferee
(or its assigns) shall be, complete and correct as of the date when made and
will not contain any material misstatement of fact as of such date or omit to
state a material fact or any fact necessary to make such information, taken as a
whole with all other written or verbal information provided by such Seller's
Senior Executives as of such date, not misleading.
(h) Use of Proceeds. No portion of any Purchase Price payment
hereunder will be used for a purpose that violates, or would be inconsistent
with, any law, rule or regulation applicable to such Seller.
(i) Good Title. Immediately prior to each Purchase from such
Seller hereunder and upon the creation of each Receivable originated after the
Initial Cut-Off Date, such Seller (i) is the legal and beneficial owner of such
Receivable and the Collections with respect thereto and (ii) is the legal and
beneficial owner of the Related Security with respect thereto or possesses a
valid and perfected security interest therein, in each case, free and clear of
any Adverse Claim, except as created by the Transaction Documents and the Loan
Agreement.
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(j) Perfection. This Agreement, together with the filing of
the financing statements contemplated hereby, is effective to transfer to such
Seller's applicable Transferee (and such Transferee shall acquire from such
Seller): (i) legal and equitable title to, with the right to sell and encumber
each Receivable originated or acquired by such Seller, whether now existing and
hereafter arising, together with the Collections with respect thereto, and (ii)
all of such Seller's right, title and interest in the Related Security
associated with each such Receivable, in each case, free and clear of any
Adverse Claim, except as created by the Transactions Documents and the Loan
Agreement. There have been duly filed all financing statements or other similar
instruments or documents necessary under the UCC (or any comparable law) of all
appropriate jurisdictions to perfect Buyer's ownership interest in such
Receivables, the Related Security and the Collections.
(k) Chief Executive Office and Locations of Records. The
location of the chief executive office of such Seller and the offices where it
keeps all of its Receivable Files are located at the address(es) listed on
Exhibit II or such other locations of which Buyer has been notified in
accordance with Section 4.2(a) in jurisdictions where all action required by
Section 4.2(a) has been taken and completed. Such Seller's Organizational
Identification Number is correctly set forth on Exhibit II.
(l) LockBoxes, Etc. The addresses of all existing LockBoxes
and the related banks, account names and account numbers for all existing
LockBox Accounts are correctly listed on Exhibit III. Each of the LockBox
Accounts has been transferred into Buyer's name. Such Seller has not granted any
Person, other than Buyer (and the Administrative Agent, as its pledgee) dominion
and control of any LockBox or LockBox Account, or the right to take dominion and
control of any such LockBox or LockBox Account at a future time or upon the
occurrence of a future event.
(m) Seller Material Adverse Effect. Since the last day of the
fiscal year of such Seller as to which financial statements have most recently
been delivered pursuant to Section 4.1(a)(i), no event has occurred and is
continuing that would have a Seller Material Adverse Effect.
(n) Names. The name in which such Seller has executed this
Agreement is identical to the name of such Seller as indicated on the public
record of its jurisdiction of organization as listed on Exhibit II hereto. In
the past five (5) years, such Seller has not used any legal names, trade names
or assumed names other than the name in which it has executed this Agreement and
as listed on Exhibit II.
(o) Ownership. Bowater owns 100% of the issued and outstanding
equity interests of Lake Superior, Lake Superior owns 100% of the issued and
outstanding equity interests of BAI, and BAI owns 100% of the issued and
outstanding equity interests of Buyer. All such equity interests are validly
issued, fully paid and nonassessable, and there are no options, warrants or
other rights to acquire securities of any Seller (other than Bowater) or Buyer.
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(p) Not a Holding Company or an Investment Company. Such
Seller is not a "holding company" or a "subsidiary holding company" of a
"holding company" within the meaning of the Public Utility Holding Company Act
of 1935, as amended, or any successor statute. Such Seller is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or any successor statute.
(q) Compliance with Law. Such Seller has complied with all
applicable laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it is subject, except where the failure to so comply
would not have a Seller Material Adverse Effect. Each Receivable transferred by
such Seller, together with the Contract related thereto, does not contravene any
laws, rules or regulations applicable thereto (including, without limitation,
laws, rules and regulations relating to truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt collection practices
and privacy), and no part of such Contract is in violation of any such law, rule
or regulation, except where such contravention or violation could not reasonably
be expected to have a Seller Material Adverse Effect.
(r) Compliance with Credit and Collection Policy. With regard
to each Receivable transferred by such Seller, such Seller has complied in all
material respects with the Credit and Collection Policy and the related
Contract. Such Seller has not made any change in or amendment to the Credit and
Collection Policy, except (i) to the extent such change or amendment would not
be reasonably likely to materially and adversely affect the collectibility of
Receivables transferred by such Seller or to materially decrease the credit
quality of any newly created Receivables in any material respect or (ii) to the
extent such change or amendment has been consented to by the Buyer and the
Co-Agents.
(s) Payments to Seller. With regard to each Receivable sold by
such Seller, the Purchase Price received by such Seller constitutes reasonably
equivalent value in consideration therefor. No transfer hereunder by such Seller
of any Receivable is or may be voidable under any section of the Bankruptcy
Reform Act of 1978 (11 U.S.C. ss.ss.101 et seq.), as amended.
(t) Enforceability of Contracts. As of the Purchase Date of
each Receivable transferred by such Seller, each Contract with respect to such
Receivable is, on such date, effective to create, and has created, a legally
valid and binding obligation of the related Obligor to pay the Outstanding
Balance of the Receivable created thereunder and any accrued interest thereon,
enforceable against the Obligor in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization
or other similar laws relating to or limiting creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(u) Accounting. The manner in which such Seller accounts for
the transactions contemplated by this Agreement in its financial statements does
not jeopardize the characterization of the transactions contemplated herein as
being true sales.
(v) Solvency. Such Seller is Solvent.
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ARTICLE III
CONDITIONS OF PURCHASE
Section 3.1 Conditions Precedent to Initial Purchase. The
initial Purchase under this Agreement is subject to the conditions precedent
that (a) Buyer shall have been capitalized with the Initial Contributed
Receivables and not less than $300,000 of cash, (b) Buyer shall have received on
or before the Closing Date those documents listed on Schedule A, and (c) all of
the conditions to the initial Loan under the Loan Agreement shall have been
satisfied or waived in accordance with the terms thereof.
Section 3.2 Conditions Precedent to Subsequent Payments. Each
applicable Transferee's obligation to pay for Receivables coming into existence
after the Initial Cutoff Date shall be subject to the further conditions
precedent that: (a) the Commitment Termination Date shall not have occurred
under the Loan Agreement; (b) Buyer (and the Administrative Agent as its
pledgee) shall not have received written notice that the indebtedness under the
Bowater Credit Agreement has been accelerated (it being understood that this
condition precedent cannot be waived by Buyer or its assigns); (c) Buyer (or its
assigns) shall have received such other documents as it may reasonably request;
and (d) on the date such Receivable came into existence, the following
statements shall be true (and acceptance of the proceeds of any payment for such
Receivable shall be deemed a representation and warranty by the applicable
Seller that such statements are then true):
(i) the representations and warranties of such Seller set
forth in Article II are true and correct on and as of the date such
Receivable came into existence as though made on and as of such date;
and
(ii) no event has occurred and is continuing that constitutes
a Termination Event.
Notwithstanding the foregoing conditions precedent, upon the
applicable Purchase Date for a Receivable (prior to the occurrence of a
Termination Event), title to such Receivable and the Related Security and
Collections with respect thereto shall vest in the applicable Transferee,
whether or not the conditions precedent to such Transferee's obligation to pay
for such Receivable were in fact satisfied and whether or not the Purchase Price
has actually been paid as of such date. If any Seller fails to satisfy any of
the foregoing conditions precedent, however, Buyer, as the ultimate Transferee,
may rescind the related Purchase and direct BAI to pay to Buyer (and BAI and
Lake Superior may, in turn direct their applicable Sellers to pay to them) an
amount equal to the Purchase Price payment, if any, made with respect to the
Receivables included in such Purchase.
ARTICLE IV
COVENANTS
Section 4.1 Affirmative Covenants of Each Seller. Until the
date on which this Agreement terminates in accordance with its terms, each
Seller hereby covenants as set forth below:
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(a) Financial Reporting. Bowater will maintain, for itself and
each Consolidated Subsidiary, a system of accounting established and
administered in accordance with GAAP, and furnish to Buyer and to the
Administrative Agent (as Buyer's pledgee) for distribution to the Co-Agents:
(i) Annual Reporting. Within 120 days after the close
of each of its fiscal years, an audit report (with all amounts stated in
Dollars), unqualified as to scope or going concern and certified by independent
certified public accountants of recognized national standing or otherwise
reasonably acceptable to the Administrative Agent, prepared in accordance with
GAAP on a consolidated basis for Bowater and the Consolidated Subsidiaries,
including a consolidated balance sheet and the related consolidated statements
of income, cash flows and statements of changes in common shareholders' equity,
setting forth in each case in comparative form the figures for such fiscal year
and the previous fiscal year; PROVIDED THAT delivery of a copy of Bowater's
Forms 10-K filed with the Securities and Exchange Commission for such fiscal
year shall constitute compliance with this requirement.
(ii) Quarterly Reporting. Within 60 days after the
close of the first three quarterly periods of each of its fiscal years, for
Bowater and the Consolidated Subsidiaries, an unaudited consolidated balance
sheet as at the close of each such period and a consolidated income statement
and a statement of cash flows for the period from the beginning of such fiscal
year to the end of such quarter, setting forth in the case of such statements of
income and cash flows in comparative form the figures for the corresponding
quarter and the corresponding portion of Seller's previous fiscal year, all
certified (subject to normal year-end adjustments) as to fairness of
presentation, preparation in accordance with GAAP and consistency by a Financial
Officer of Bowater; provided that delivery of a copy of Bowater's Forms 10-Q
filed with the Securities and Exchange Commission for such fiscal quarter shall
constitute compliance with this requirement.
(iii) Compliance Certificate. Together with the
financial statements required hereunder, a compliance certificate in
substantially the form of Exhibit IV signed by a Financial Officer of Bowater
and dated the date of such annual financial statement or such quarterly
financial statement, as the case may be.
(iv) Change in Credit and Collection Policy. At least
thirty (30) days prior to the effectiveness of any change in or amendment to the
Credit and Collection Policy, a notice (A) indicating such proposed change or
amendment, and (B) if such proposed change or amendment would be reasonably
likely to materially and adversely affect the collectibility of the Receivables
transferred by such Seller or to materially decrease the credit quality of any
newly created Receivables in any material respect, requesting Buyer's (and the
Co-Agents') consent thereto, which consent shall not be unreasonably withheld or
delayed.
(v) Other Information. Promptly, from time to time,
such other information, documents, records or reports relating to the
Receivables transferred by such Seller or the condition or operations, financial
or otherwise, of such Seller as Buyer (or its assigns) may from time to time
reasonably request in order to protect the interests of Buyer (and its assigns)
under or as contemplated by this Agreement.
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(b) Notices. As soon as practicable and in any event within
one (1) Business Day after learning of any of the following, such Seller will
notify Buyer (or its assigns) in writing of any of the following, describing the
same and, if applicable, the steps being taken with respect thereto:
(i) Termination Events or Unmatured Termination
Events. The occurrence of each Termination Event and each Unmatured Termination
Event.
(ii) Judgment and Proceedings. The institution of any
litigation, arbitration proceeding or governmental proceeding against such
Seller or any of its Subsidiaries, except proceedings or disputes that, if
adversely determined, would not have a Seller Material Adverse Effect.
(iii) Seller Material Adverse Effect. The occurrence
of any event or condition that has had, or would have, a Seller Material Adverse
Effect.
(c) Compliance with Laws and Preservation of Existence. Such
Seller will comply in all respects with all applicable laws, rules, regulations,
orders, writs, judgments, injunctions, decrees or awards to which it is then
subject, except where the failure to so comply could not reasonably be expected
to have a Seller Material Adverse Effect. Such Seller will preserve and maintain
its legal existence, rights, franchises and privileges in the jurisdiction of
its organization, and qualify and remain qualified in good standing as a foreign
entity in each jurisdiction where its business is conducted, except where the
failure to so qualify or remain in good standing could not reasonably be
expected to have a Seller Material Adverse Effect.
(d) Audits. Such Seller will furnish to Buyer and the
Administrative Agent (as Buyer's pledgee) from time to time such information
with respect to such Seller and the Receivables transferred by it as Buyer or
the Administrative Agent may reasonably request. Such Seller will, from time to
time during regular business hours as requested by Buyer (or the Administrative
Agent), upon reasonable notice and at the sole cost of such Seller, permit an
accounting firm designated by the Administrative Agent (as Buyer's pledgee) and
reasonably acceptable to the Buyer: (i) to examine and make copies of and
abstracts from all Receivable Files in the possession or under the control of
such Seller and other records relating to the Receivables, the Collections and
the Related Security, including, without limitation, the related Contracts, and
(ii) to visit the offices and properties of such Seller for the purpose of
examining such materials described in clause (i) above, and to discuss matters
relating to such Seller's financial condition or the Receivables and the Related
Security or such Seller's performance under any of the Transaction Documents or
such Seller's performance under the Contracts and, in each case, with any of the
officers or employees of such Seller having knowledge of such matters; PROVIDED,
HOWEVER, that, prior to a Bowater Downgrade and in the absence of a Termination
Event, Sellers will only be required to pay for up to one (1) such examination
in any calendar year, and PROVIDED FURTHER, in the event of a Bowater Downgrade,
the Sellers shall only be required to pay for up to two (2) such examinations in
any calendar year, and PROVIDED FURTHER, that from and after the occurrence of a
Termination Event, the Sellers shall be responsible to pay for, and the
Administrative Agent (or its representatives) shall be entitled to
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conduct, as many examinations as Buyer or the Administrative Agent may deem
necessary or appropriate to protect the interests of the Buyer and the Secured
Parties.
(e) Keeping and Marking of Records and Books.
(i) Such Seller will maintain and implement
administrative and operating procedures (including, without limitation,
an ability to recreate records evidencing Receivables in the event of
the destruction of the originals thereof), and keep and maintain all
documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without
limitation, records adequate to permit the immediate identification of
each new Receivable and all Collections of and adjustments to each
existing Receivable). Such Seller will give Buyer (or its assigns)
notice of any material change in the administrative and operating
procedures referred to in the previous sentence.
(ii) Such Seller will (A) on or prior to the Closing
Date, ▇▇▇▇ its master data processing records and other books and
records relating to the Receivables with a legend, acceptable to Buyer
(or its assigns), describing Buyer's ownership interests in the
Receivables and further describing the security interest of the
Administrative Agent (on behalf of the Secured Parties) under the Loan
Agreement and (B) upon the request of Buyer (or its assigns) from and
after the occurrence of a Termination Event: (x) ▇▇▇▇ each invoice
evidencing any Receivable with a legend describing Buyer's ownership
thereof and further describing the security interest of the
Administrative Agent (on behalf of the Agents and the Lenders) and (y)
at any time after such Seller (or one of its Affiliates) is no longer
acting as Servicer, deliver to Buyer (or its assigns) all Contracts
relating to such Receivables.
(f) Compliance with Contracts and Credit and Collection
Policy. Such Seller will timely and fully (i) perform and comply in all material
respects with all provisions, covenants and other promises required to be
observed by it under the Contracts related to the Receivables hereunder, and
(ii) comply in all material respects with the Credit and Collection Policy in
regard to each such Receivable and the related Contract.
(g) Ownership. Such Seller will take all necessary action to
establish and maintain, irrevocably in Buyer as ultimate Transferee: (A) legal
and equitable title to the Receivables transferred by it and the related
Collections and (B) all of such Seller's right, title and interest in the
Related Security associated with the Receivables described in the preceding
clause (A), in each case, free and clear of any Adverse Claims other than the
Adverse Claims in favor of Buyer (and its assigns) (INCLUDING, WITHOUT
LIMITATION, the filing of all financing statements or other similar instruments
or documents necessary under the UCC (or any comparable law) of all appropriate
jurisdictions to perfect Buyer's interest in such Receivables, Related Security
and Collections and such other action to perfect, protect or more fully evidence
the interest of Buyer as Buyer (or its assigns) may reasonably request).
(h) Agents' and Lenders' Reliance. Such Seller acknowledges
that the Agents and Lenders are entering into the transactions contemplated by
the Loan Agreement in reliance
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upon Buyer's identity as a legal entity that is separate from such Seller and
any Affiliates thereof. Therefore, from and after the Closing Date, such Seller
will take all reasonable steps within such Seller's control to maintain Buyer's
identity as a separate legal entity and to make it manifest to third parties
that Buyer is an entity with assets and liabilities distinct from those of such
Seller and any Affiliates thereof and not just a division of such Seller or any
such Affiliate. Without limiting the generality of the foregoing and in addition
to the other covenants set forth herein, such Seller (i) will not hold itself
out to third parties as liable for the debts of Buyer nor purport to own any of
the Receivables and other assets acquired by Buyer, (ii) will not take any
action that would cause Buyer to violate the "separateness covenants" set forth
in Section 9.1.7 of the Loan Agreement and (iii) will cause all tax liabilities
arising in connection with the transactions contemplated herein or otherwise to
be allocated between such Seller and Buyer on an arm's-length basis and in a
manner consistent with the procedures set forth in U.S. Treasury Regulations
ss.ss.1.1502-33(d) and 1.1552-1.
(i) Collections. In the event any payments relating to
Receivables transferred by such Seller are remitted directly to such Seller or
any Affiliate of such Seller, such Seller will remit (or will cause all such
payments to be remitted) directly to a Lockbox Account which is in Buyer's name
and listed on Exhibit III hereto within three (3) Business Days following
receipt thereof and, at all times prior to such remittance, such Seller will
itself hold or, if applicable, will cause such payments to be held in trust for
the exclusive benefit of Buyer and its assigns. Such Seller will transfer
exclusive ownership, dominion and control of each LockBox and LockBox Account to
Buyer and, will not grant the right to take dominion and control of any LockBox
or any LockBox Account at a future time or upon the occurrence of a future event
to any Person, except to Buyer, as contemplated by this Agreement, and to the
Administrative Agent, as contemplated by the Loan Agreement.
(j) Taxes. Such Seller will file all tax returns and reports
required by law to be filed by it and promptly pay all Covered Taxes at any time
owing, except any such Covered Taxes which are not yet delinquent or are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books.
Section 4.2 Negative Covenants of Each Seller. Until the date
on which this Agreement terminates in accordance with its terms, each Seller
hereby covenants that:
(a) Name Change, Offices and Records. Such Seller will not
change its (i) state of organization, (ii) legal name, (iii) identity or
structure (within the meaning of Article 9 of any applicable enactment of the
UCC) or any office where Receivable Files are kept unless, in each of the
foregoing cases, it shall have: (A) given Buyer (and the Administrative Agent as
Buyer's pledgee) at least ten (10) Business Days' prior written notice thereof
and (B) delivered to the Administrative Agent (as Buyer's pledgee) all financing
statements, instruments and other documents reasonably requested by Buyer (or
the Administrative Agent, as Buyer's pledgee) in connection with such change or
relocation.
(b) Change in Payment Instructions to Obligors. Such Seller
will not add or terminate any LockBox or LockBox Account, or make any change in
the instructions to Obligors
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regarding payments to be made to any LockBox or any LockBox Account, unless
Buyer and the Administrative Agent shall have received, at least ten (10) days
before the proposed effective date therefor, (i) written notice of such
addition, termination or change and (ii) with respect to the addition of a
LockBox or LockBox Account, an executed LockBox Account Agreement; PROVIDED,
HOWEVER, that Seller may make changes in instructions to Obligors regarding
payments if such new instructions require such Obligor to make payments to
another existing LockBox or LockBox Account.
(c) Modifications to Contracts and Credit and Collection
Policy. Such Seller will not, without the consent of the Buyer and the
Co-Agents, make any change to the Credit and Collection Policy that could
reasonably be expected to materially and adversely affect the collectibility of
the Receivables transferred by it or materially decrease the credit quality of
any of its newly created Receivables. Except (i) in accordance with the Credit
and Collection Policy and (ii) as otherwise permitted hereunder and under the
Loan Agreement, if such Seller is acting as Servicer pursuant to the Loan
Agreement, such Seller will not extend, amend or otherwise modify the terms of
any Receivable or any Contract related thereto.
(d) Sales, Adverse Claims. Such Seller will not sell, assign
(by operation of law or otherwise) or otherwise dispose of, or grant any option
with respect to, or create or suffer to exist any Adverse Claim upon (including,
without limitation, the filing of any financing statement) or with respect to,
any Receivable, Related Security or Collections, or upon or with respect to any
Contract under which any Receivable arises, or any LockBox or any LockBox
Account, or assign any right to receive income with respect thereto (other than,
in each case, the creation of the interests therein in favor of Buyer, as
provided for herein, and of Lenders, as provided for in the Loan Agreement), and
such Seller will defend the right, title and interest of Buyer in, to and under
any of the foregoing property, against all claims of third parties claiming
through or under such Seller.
(e) Accounting for Purchases. Such Seller will not, and will
not permit any Affiliate to, account for the transactions contemplated hereby in
any financial statements in any manner other than the sale (or other outright
conveyance) by such Seller to the applicable Transferee of the Receivables and
the associated Collections and Related Security except to the extent that such
transactions are not recognized on account of consolidated financial reporting
in accordance with generally accepted accounting principles.
ARTICLE V
TERMINATION EVENTS
Section 5.1 Termination Events. The occurrence of any one or
more of the following events shall constitute a Termination Event:
(a) Any Seller shall fail to make any payment or deposit
required hereunder when due and such failure shall continue for three
(3) consecutive Business Days.
(b) Any representation, warranty, certification or statement
made by any Seller in this Agreement, any other Transaction Document or
in any other document
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delivered pursuant hereto or thereto shall prove to have been incorrect
in any material respect when made or deemed made; PROVIDED THAT the
materiality threshold in the preceding clause shall not be applicable
with respect to any representation or warranty which itself contains a
materiality threshold and PROVIDED FURTHER, that any such incorrect
representation, warranty, certification or statement relating to a
Receivable for which Buyer has actually received a Purchase Price
Credit shall not constitute a Termination Event hereunder.
(c) Any Seller shall breach any covenant contained in Section
4.1(b)(i) which is not cured within three (3) days, or any Seller shall
breach any covenant contained in Section 4.2(c) or 4.2(e), which is not
cured within thirty (30) days, or any Seller shall breach any other
covenant contained in Section 4.2(a), (b) or (d).
(d) Any Seller shall breach, fail to perform or observe any
covenant contained in any Section of this Agreement (which is not
covered by another subsection, paragraph or clause of this Section 5.1)
or of any other Transaction Document to which it is a party which is
not cured within thirty (30) days after written notice from Buyer (or
the Administrative Agent, as Buyer's pledgee).
(e) Failure of any Seller or any of its Subsidiaries to pay
any Material Debt when due; or the default by any Seller or any of its
Subsidiaries in the performance of any term, provision or condition
contained in any agreement under which any Material Debt was created or
is governed, or any other event shall occur or condition exist, the
effect of which is to cause, or to permit the holder or holders of such
Material Debt to cause such Material Debt to become due prior to its
stated maturity; or Material Debt of any Seller or any of its
Subsidiaries shall be declared to be due and payable or required to be
prepaid (other than by a regularly scheduled payment or as a result of
the sale of an asset securing such Material Debt) prior to the stated
maturity thereof.
(f) (i) Any Seller shall generally not pay its debts as such
debts become due or shall admit in writing its inability to pay its
debts generally or shall make a general assignment for the benefit of
creditors; or (ii) any proceeding shall be instituted by or against any
Seller seeking to adjudicate it bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee or other similar official for it or any
substantial part of its property, and, if against Seller, any such
proceeding or case shall continue undismissed for a period of sixty
(60) or more days, or (iii) any Seller shall take any corporate action
to authorize any of the actions set forth in the foregoing clauses (i)
or (ii) of this subsection (f).
(g) A Change of Control shall occur.
(h) A final judgment or judgments for the payment of money in
excess of $10,000,000 in the aggregate (exclusive of judgment amounts
fully covered by insurance where the insurer has admitted liability in
respect of such judgment) or in excess of
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$50,000,000 in the aggregate (regardless of insurance coverage) shall
be rendered by one or more courts, administrative tribunals or other
bodies having jurisdiction against any Seller or any of its
Subsidiaries and the same shall not be discharged (or provision shall
not be made for such discharge), or a stay of execution thereof shall
not be procured, within thirty (30) days from the date of entry thereof
and the Company or the relevant Subsidiary shall not, within said
period of thirty (30) days, or such longer period during which
execution of the same shall have been stayed, appeal therefrom and
cause the execution thereof to be stayed during such appeal
(i) The Subordinated Note shall be assigned, pledged or
otherwise transferred to any Person in violation of the last section
thereof.
Section 5.2 Remedies.
Upon the occurrence and during the continuation of a
Termination Event, Buyer may take any of the following actions: (i) declare the
Termination Date to have occurred, whereupon the Termination Date shall
forthwith occur, without demand, protest or further notice of any kind, all of
which are hereby expressly waived by each Seller; PROVIDED, HOWEVER, that upon
the occurrence of a Termination Event described in Section 5.1(f), or of an
actual or deemed entry of an order for relief with respect to any Seller under
the Federal Bankruptcy Code, the Termination Date shall automatically occur,
without demand, protest or any notice of any kind, all of which are hereby
expressly waived by each Seller and (ii) to the fullest extent permitted by
applicable law, declare that the Default Fee shall accrue with respect to any
amounts then due and owing by each Seller to any Transferee. The aforementioned
rights and remedies shall be without limitation and shall be in addition to all
other rights and remedies of each of the Transferees and its assigns otherwise
available under any other provision of this Agreement, by operation of law, at
equity or otherwise, all of which are hereby expressly preserved, including,
without limitation, all rights and remedies provided under the UCC, all of which
rights shall be cumulative.
ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnities by Sellers. Without limiting any other
rights that any Transferee may have hereunder or under applicable law, each
Seller hereby agrees to indemnify (and pay upon demand to) each Transferee and
its assigns, officers, directors, agents and employees (each a "SELLER
INDEMNIFIED PARTY") from and against any and all damages, losses, claims,
Covered Taxes, liabilities, costs, expenses and for all other amounts payable,
including reasonable attorneys' fees (which attorneys may be employees of a
Transferee or any such assign) and disbursements (all of the foregoing being
collectively referred to as "SELLER INDEMNIFIED AMOUNTS") awarded against or
incurred by any of them arising out of any of the following:
(i) any representation or warranty made by such
Seller (or any officers of such Seller) under or in connection with any
Purchase Report, this Agreement, any other Transaction Document or any
other information or report delivered by or on
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behalf of such Seller pursuant hereto or thereto that shall have been
false or incorrect when made or deemed made, except to the extent Buyer
(as the ultimate Transferee) has received a Purchase Price Credit in
connection therewith;
(ii) the failure by such Seller, to comply with any
applicable law, rule or regulation with respect to any Receivable
transferred by it or any Contract related thereto, or the nonconformity
of any such Receivable or Contract included therein with any such
applicable law, rule or regulation or any failure of such Seller to
keep or perform any of its obligations, express or implied, with
respect to any Contract;
(iii) any failure of such Seller to perform its
duties, covenants or other obligations in accordance with the
provisions of this Agreement or any other Transaction Document to which
such Seller is a party;
(iv) any products liability, personal injury or
damage, suit or other similar claim arising out of or in connection
with goods, insurance or services that are the subject of any Contract
or any Receivable transferred by such Seller;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor or failure to pay due to
financial inability) of the Obligor to the payment of any Receivable
transferred by such Seller (including, without limitation, a defense
based on such Receivable or the related Contract not being a legal,
valid and binding obligation of such Obligor enforceable against it in
accordance with its terms), or any other claim resulting from the sale
of the merchandise or service related to such Receivable or the
furnishing or failure to furnish such merchandise or services;
(vi) the commingling by such Seller of Collections of
Receivables at any time with other funds;
(vii) any investigation, litigation or proceeding
related to or arising from this Agreement or any other Transaction
Document to which such Seller is a party, the transactions contemplated
hereby, such Seller's use of the proceeds of any Purchase from it
hereunder, the ownership of the Receivables or any other investigation,
litigation or proceeding relating to such Seller in which any Seller
Indemnified Party becomes involved as a result of any of the
transactions contemplated hereby;
(viii) any inability to litigate any claim against
any Obligor in respect of any Receivable transferred by such Seller as
a result of such Obligor being immune from civil and commercial law and
suit on the grounds of sovereignty or otherwise from any legal action,
suit or proceeding;
(ix) any failure to vest and maintain vested in
Buyer, or to transfer to Buyer, legal and equitable title to, and
ownership of, the Receivables and the associated Collections
transferred by such Seller, and all of such Seller's right, title and
interest in the Related Security associated with such Receivables, in
each case, free and clear of any Adverse Claim other than as created
under the Loan Agreement;
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(x) the failure to have filed, or any delay in
filing, financing statements or other similar instruments or documents
under the UCC of any applicable jurisdiction or other applicable laws
with respect to any Receivable transferred by such Seller, or the
Related Security and Collections with respect thereto, and the proceeds
of any thereof, whether at the time of any Purchase from such Seller
hereunder or at any subsequent time; and/or
(xi) any attempt by any Person to void any Purchase
from such Seller hereunder under statutory provisions or common law or
equitable action;
EXCLUDING, HOWEVER, (a) Seller Indemnified Amounts to the extent a final
judgment of a court of competent jurisdiction holds that such Seller Indemnified
Amounts resulted from gross negligence or willful misconduct on the part of the
Seller Indemnified Party seeking indemnification; (b) Seller Indemnified Amounts
to the extent the same includes losses in respect of Receivables that are
uncollectible on account of the insolvency, bankruptcy, financial inability to
pay or lack of creditworthiness of the related Obligor; and (c) Excluded Taxes.
Nothing in this Section 6.1 shall limit the liability of any Seller or limit the
recourse of any applicable Transferee (or its assigns) to such Seller for
amounts otherwise specifically provided to be paid by such Seller under the
terms of this Agreement.
Anything contained in this Section 6.1 to the contrary
notwithstanding: (1) the foregoing indemnification is not intended to, and shall
not, constitute a guarantee of the collectibility or payment of the Receivables
conveyed hereunder, and (2) nothing in this Section 6.1 shall require any Seller
to indemnify any Seller Indemnified Party for Receivables which are not
collected, not paid or are otherwise uncollected on account of the insolvency,
bankruptcy, lack of creditworthiness or financial inability to pay of the
applicable Obligor.
Section 6.2 Other Costs and Expenses. Subject to Section
4.1(d), each Seller agrees to pay to its applicable Transferee, on demand, all
reasonable out-of-pocket costs and expenses in connection with (a) the
preparation, execution and delivery of this Agreement and the other documents to
be delivered hereunder, (b) the preparation, execution and delivery of any
amendment hereto or waiver hereof requested by such Seller, and (b) any and all
costs and expenses of such Transferee, if any, including reasonable counsel fees
and expenses, in connection with the enforcement of this Agreement and the other
documents delivered hereunder.
Section 6.3 Taxes. All payments by each Seller to or for the
account of its Transferee (or any of its assigns) hereunder or under any other
Transaction Document to which such Seller is a party shall be made free and
clear of and without deduction for any and all Covered Taxes. If any Seller
shall be required by law to deduct any Covered Taxes from or in respect of any
sum payable hereunder to its applicable Transferee (or any of its assigns), (a)
the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 6.3), such Transferee (or such assign, as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (b) such Seller shall make such deductions, (c) such
Seller shall pay the full amount deducted to the relevant authority in
accordance with
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applicable law and (d) such Seller shall furnish to such Transferee (and to the
Administrative Agent, as the Buyer's pledgee) the original copy of a receipt
evidencing payment thereof within 30 days after such payment is made.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Waivers and Amendments.
(a) No failure or delay on the part of any Transferee (or its
assigns) in exercising any power, right or remedy under this Agreement
shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude any other further
exercise thereof or the exercise of any other power, right or remedy.
The rights and remedies herein provided shall be cumulative and
nonexclusive of any rights or remedies provided by law. Any waiver of
this Agreement shall be effective only in the specific instance and for
the specific purpose for which given.
(b) No provision of this Agreement may be amended,
supplemented, modified or waived except in writing signed by Sellers
and Buyer and, to the extent required under the Loan Agreement, the
Agents. Any material amendment, supplement, modification of waiver may
require the applicable Conduit Lender's receipt of written notice from
the rating agencies who rate its Commercial Paper Notes that such
change will not cause the rating on the then outstanding Commercial
Paper Notes to be downgraded or withdrawn.
Section 7.2 Notices. All communications and notices provided
for hereunder shall be in writing (including bank wire, telecopy or electronic
facsimile transmission or similar writing) and shall be given to the other
parties hereto at their respective addresses or telecopy numbers set forth on
Schedule B hereto or at such other address or telecopy number as such Person may
hereafter specify for the purpose of notice to each of the other parties hereto.
Each such notice or other communication shall be effective (a) if given by
telecopy, upon the receipt thereof, (b) if given by mail, five (5) Business Days
after the time such communication is deposited in the mail with first class
postage prepaid or (c) if given by any other means, when received at the address
specified in this Section 7.2.
Section 7.3 Protection of Ownership Interests of Buyer.
(a) Each Seller agrees that from time to time, at its expense,
it will promptly execute and deliver all instruments and documents, and
take all actions, that may be necessary or desirable, or that Buyer (or
its assigns) may reasonably request, to perfect, protect or more fully
evidence the interest of Buyer and its assigns therein, or to enable
Buyer (or its assigns) to exercise and enforce all rights and remedies
afforded to any Transferee hereunder. At any time following the earlier
to occur of a Termination Event or an Amortization Event: Buyer (or its
assigns) may, at the applicable Seller's sole cost and expense, direct
each Seller to notify the Obligors of Receivables transferred by it of
the ownership interests of Buyer under this Agreement and may also
direct that payments of all amounts due or that become due under any or
all Receivables transferred by it be made directly to Buyer or its
designee.
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(b) If any Seller fails to perform any of its obligations
hereunder:
(i) Buyer (or its assigns) may (but shall not be
required to) perform, or cause performance of, such obligations, and
Buyer's (or such assigns') costs and expenses incurred in connection
therewith shall be payable by such Seller as provided in Section 6.2;
(ii) Each Seller irrevocably authorizes Buyer (and
its assigns) at any time and from time to time in the sole discretion
of Buyer (or its assigns), and appoints Buyer (and its assigns) as its
attorney(ies)-in-fact, to act on behalf of such Seller (A) to execute
(if necessary) on behalf of such Seller as debtor and to file (with or,
to the extent permitted by applicable law, without signatures)
financing statements necessary or desirable in Buyer's (or its
assigns') sole discretion to perfect and to maintain the perfection and
priority of the interest of Buyer in the Receivables transferred by
such Seller and the associated Related Security and Collections and (B)
to file a carbon, photographic or other reproduction of this Agreement
or any financing statement with respect to the Receivables as a
financing statement in such offices as Buyer (or its assigns) in their
sole discretion deem necessary or desirable to perfect and to maintain
the perfection and priority of Buyer's interests in such Receivables.
The appointment under the foregoing clause (ii) is coupled
with an interest and is irrevocable.
Section 7.4 Confidentiality.
(a) Each Seller shall maintain and shall cause each of its
employees and officers to maintain the confidentiality of the Fee
Letters (as defined in the Loan Agreement) and the other confidential
or proprietary information with respect to the Agents and Lenders and
their respective businesses obtained by it or them in connection with
the structuring, negotiating and execution of the transactions
contemplated herein, except that each Seller and its officers and
employees may disclose such information to such Seller's external
accountants, attorneys and other advisors and as required by any
applicable law, rule, direction, request or order of any judicial,
administrative or regulatory authority or proceeding (whether or not
having the force or effect of law). The restrictions in this Section
7.4(a) shall not apply to any information which is or becomes generally
available to the public other than as a result of disclosure by a
Seller.
(b) Each Seller hereby consents to the disclosure of any
nonpublic information with respect to it (i) to Buyer, the Agents or
Lenders by each other, (ii) to any prospective or actual assignee or
participant of any of the Persons described in clause (i), and (iii) to
any rating agency, Commercial Paper Note dealer or Support Provider (as
defined in the Loan Agreement) to any Lender or any entity organized
for the purpose of purchasing, or making loans secured by, financial
assets for which any of the Agents acts as the administrator or agent
or any of the Agents and to any officers, directors, employees, outside
accountants and attorneys of any of the foregoing, PROVIDED each Person
described in the foregoing clauses (ii) and (iii) is informed of the
confidential
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nature of such information and each Person described in the foregoing
clause (ii) agrees in writing to maintain the confidential nature of
such information. In addition, the Lenders and Agents may disclose any
such nonpublic information pursuant to any law, rule, regulation,
direction, request or order of any judicial, administrative or
regulatory authority or proceedings (whether or not having the force or
effect of law).
Section 7.5 Bankruptcy Petition. Each Seller and Buyer hereby
covenant and agree that, prior to the date that is one year and one day after
the payment in full of all outstanding senior indebtedness of any Conduit Lender
(as defined in the Loan Agreement), it will not institute against, or join any
other Person in instituting against, any Conduit Lender any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of the
United States.
Section 7.6 Return of Funds Not Constituting Collections. If
any funds other than Collections are received in any Lock Box Account, such
remittances will be removed from such account and will be delivered through
inter-company transfers or otherwise to the owner thereof within three (3)
Business Days following determination that the same do not comprise Collections.
Section 7.7 CHOICE OF LAW
. THIS AGREEMENT SHALL BE A CONTRACT MADE UNDER AND GOVERNED
BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT OF
LAW PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL
OBLIGATIONS LAW) EXCEPT TO THE EXTENT THAT THE LAWS OF ANOTHER JURISDICTION
GOVERN THE PERFECTION, OR THE EFFECT OF PERFECTION OR NONPERFECTION, OF THE
OWNERSHIP OR SECURITY INTERESTS OF BUYER.
Section 7.8 CONSENT TO JURISDICTION. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH OF THE PARTIES HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE
COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH PARTY PURSUANT TO
THIS AGREEMENT AND EACH OF THE PARTIES HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF
BUYER (OR ITS ASSIGNS) TO BRING PROCEEDINGS AGAINST ANY SELLER IN THE COURTS OF
ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY SELLER AGAINST BUYER (OR
ITS ASSIGNS) OR ANY AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
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AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH SELLER PURSUANT TO THIS AGREEMENT
SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.
Section 7.9 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY IN
ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER
SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY ANY SELLER PURSUANT
TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
Section 7.10 Integration; Binding Effect; Survival of Terms.
(a) This Agreement and each other Transaction Document contain
the final and complete integration of all prior expressions by the parties
hereto with respect to the subject matter hereof and shall constitute the entire
agreement among the parties hereto with respect to the subject matter hereof
superseding all prior oral or written understandings.
(b) This Agreement shall be binding upon and inure to the
benefit of Sellers, Buyer and their respective successors and permitted assigns
(including any trustee in bankruptcy). No Seller may assign any of its rights
and obligations hereunder or any interest herein without the prior written
consent of Buyer. Buyer may assign at any time its rights and obligations
hereunder and interests herein to any other Person without the consent of any
Seller. Without limiting the foregoing, each Seller acknowledges that Buyer,
pursuant to the Loan Agreement, may pledge to the Administrative Agent, for the
benefit of the Agents and the Lenders, its rights, remedies, powers and
privileges hereunder. Each Seller agrees that the Administrative Agent, as the
pledgee of Buyer, shall, subject to the terms of the Loan Agreement, have the
right to enforce this Agreement and to exercise directly all of Buyer's rights
and remedies under this Agreement (including, without limitation, the right to
give or withhold any consents or approvals of Buyer to be given or withheld
hereunder). This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms and shall remain
in full force and effect until terminated in accordance with its terms;
PROVIDED, HOWEVER, that the rights and remedies with respect to (i) any breach
of any representation and warranty made by any Seller pursuant to Article II;
(ii) the indemnification and payment provisions of Article VI; and (iii) Section
7.5 shall be continuing and shall survive any termination of this Agreement.
Section 7.11 Counterparts; Severability; Section References.
This Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute
one and the same Agreement. Any provisions of this Agreement which are
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any
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jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. Unless otherwise expressly indicated, all references herein
to "Article," "Section," "Schedule" or "Exhibit" shall mean articles and
sections of, and schedules and exhibits to, this Agreement.
(signature pages follow)
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized officers as of
the date hereof.
BOWATER INCORPORATED
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and Treasurer
LAKE SUPERIOR HOLDINGS INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and Treasurer
BOWATER AMERICA INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and Treasurer
BOWATER FUNDING INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and Treasurer
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EXHIBIT I
Definitions
This is Exhibit I to the Agreement (as hereinafter defined).
As used in the Agreement and the Exhibits and Schedules thereto, capitalized
terms have the meanings set forth in this Exhibit I (such meanings to be equally
applicable to the singular and plural forms thereof). IF A CAPITALIZED TERM IS
USED IN THE AGREEMENT, OR ANY EXHIBIT OR SCHEDULE THERETO, AND IS NOT OTHERWISE
DEFINED THEREIN OR IN THIS EXHIBIT I, SUCH TERM SHALL HAVE THE MEANING ASSIGNED
THERETO IN THE LOAN AGREEMENT (HEREINAFTER DEFINED).
"ADMINISTRATIVE AGENT" has the meaning set forth in the
Preliminary Statements to the Agreement.
"ADVERSE CLAIM" means any lien (statutory or other), mortgage,
pledge, hypothecation, assignment, encumbrance or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, the interest of a vendor or lessor under any
conditional sale, capitalized lease or other title retention agreement).
"AGENTS" has the meaning set forth in the Preliminary
Statements to the Agreement.
"AGREEMENT" means the Receivables Sale Agreement, dated as of
December 19, 2002, between Sellers and Buyer, as the same may be amended,
restated or otherwise modified.
"BAI" has the meaning set forth in the preamble to the
Agreement.
"BOWATER" has the meaning set forth in the preamble to the
Agreement.
"BOWATER CREDIT AGREEMENT" means that certain Credit Agreement
dated as of May 22, 2002, between Bowater and various of its Subsidiaries, as
borrowers, the lenders from time to time party thereto, and JPMorgan Chase Bank,
as administrative agent, as amended, restated or otherwise modified or replaced
from time to time.
"BOWATER DOWNGRADE" means that Bowater's unsecured senior debt
is rated "BB" or less by S&P or "Ba2" or less by Moody's.
"BOWATER GROUP" means, collectively, Bowater and each of its
Subsidiaries other than any Receivables Entity and any Subsidiary of any
Receivables Entity.
"BUYER" has the meaning set forth in the preamble to the
Agreement.
"CALCULATION PERIOD" means each calendar month or portion
thereof which elapses during the term of the Agreement. The first Calculation
Period shall commence on the Closing Date and the final Calculation Period shall
terminate on the Termination Date.
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"CAPITAL LEASE OBLIGATIONS" means, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board), and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13).
"CHANGE OF CONTROL" means (a) during any period of 25
consecutive calendar months, a majority of the Board of Directors of Bowater
shall no longer be composed of individuals (i) who were members of said Board on
the first day of such period, (ii) whose election or nomination to said Board
was approved by individuals referred to in clause (i) above constituting at the
time of such election or nomination at least a majority of said Board or (iii)
whose election or nomination to said Board was approved by individuals referred
to in clauses (i) and (ii) above constituting at the time of such election or
nomination at least a majority of said Board, or (b) Bowater ceases to own
(directly or indirectly) and control the right to vote 100% of the outstanding
shares of voting stock of (i) Lake Superior, (ii) BAI or (iii) Buyer.
"CO-AGENTS" has the meaning set forth in the Preliminary
Statements to the Agreement.
"COLLECTIONS" means, with respect to any Receivable, all cash
collections and other cash proceeds in respect of such Receivable, including,
without limitation, all yield, Finance Charges or other related amounts accruing
in respect thereof and all cash proceeds of Related Security with respect to
such Receivable.
"CONSOLIDATED SUBSIDIARY" means, at any date as of which the
same is to be determined, any Subsidiary or other entity the accounts of which
would be consolidated with those of Bowater in its consolidated financial
statements if such statements were prepared as of such date in accordance with
GAAP.
"CONTRACT" means either (i) a written agreement between a
Seller and an Obligor, or (ii) an invoice issued by a Seller to an Obligor, in
either of the foregoing cases, pursuant to which such Obligor is obligated to
pay for goods, merchandise and/or services.
"CONTRIBUTED RECEIVABLES" has the meaning set forth in Section
1.1(b) to the Agreement.
"COVERED TAXES" means all Taxes other than Excluded Taxes.
"CREDIT AND COLLECTION POLICY" means the credit and collection
policy relating to Contracts and Receivables attached hereto as Exhibit VII, as
may be modified from time to time in accordance with this Agreement.
"DEBT" means, with respect to any Person at any date, without
duplication: (i) all indebtedness of such Person for borrowed money, (ii) all
indebtedness of such Person for the deferred purchase price of property or
services (other than property and services purchased, and
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expense accruals and deferred compensation items arising, in the ordinary course
of business), (iii) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments (other than performance, surety and
appeal bonds arising in the ordinary course of business), (iv) all indebtedness
of such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (v)
all obligations of such Person under leases which have been or should be, in
accordance with GAAP, recorded as capital leases, to the extent required to be
so recorded, (vi) all reimbursement, payment or similar obligations of such
Person, contingent or otherwise, under acceptance, letter of credit or similar
facilities (other than letters of credit in support of trade obligations or in
connection with workers' compensation, unemployment insurance, old-age pensions
and other social security benefits in the ordinary course of business), (vii)
all net obligations of such Person in respect of interest rate swap, cap,
collar, swaption, option or similar agreements, (viii) all obligations arising
in connection with a sale or other transfer of any of such Person's financial
assets which are, or are intended to be, classified as loans for federal tax
purposes, (ix) all Debt referred to in clauses (i) through (viii) above
guaranteed directly or indirectly by such Person, or in effect guaranteed
directly or indirectly by such Person through an agreement (A) to pay or
purchase such Debt or to advance or supply funds for the payment or purchase of
such Debt, (B) to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling the debtor to
make payment of such Debt or to assure the holder of such Debt against loss in
respect of such Debt, (C) to supply funds to or in any other manner invest in
the debtor (including any agreement to pay for property or services irrespective
of whether such property is received or such services are rendered) or (D)
otherwise to assure a creditor against loss in respect of such Debt, and (x) all
Debt referred to in clauses (i) through (viii) above secured by (or for which
the holder of such Debt has an existing right, contingent or otherwise, to be
secured by) any Adverse Claim, security interest or other charge or encumbrance
upon or in property (including, without limitation, accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such Debt.
"DEFAULT FEE" means a per annum rate of interest equal to the
sum of (i) the Base Rate, PLUS (ii) 2.00% per annum.
"DISCOUNT FACTOR" means a percentage calculated to provide
Buyer with a reasonable return on its investment in the Receivables after taking
account of (i) the time value of money based upon the anticipated dates of
collection of such Receivables and the cost to Buyer of financing its investment
in such Receivables during such period, (ii) the risk of nonpayment by the
Obligors, and (iii) contractual allowances granted to Obligors. Sellers and
Buyer may agree from time to time to change the Discount Factor based on changes
in one or more of the items affecting the calculation thereof, PROVIDED THAT any
change to the Discount Factor shall take effect as of the commencement of a
Calculation Period, shall apply only prospectively and shall not affect the
Purchase Price payment made prior to the Calculation Period during which Sellers
and Buyer agree to make such change.
"DOLLARS," "DOLLARS" and "$" shall mean lawful money of the
United States of America.
-30-
"EXCLUDED TAXES" means, in the case of Buyer (or any Seller
Indemnified Party), taxes imposed on its overall net income, and franchise taxes
and branch profit taxes based on net income, imposed on it by (i) the
jurisdiction under the laws of which Buyer (or such Seller Indemnified Party) is
incorporated or organized or (ii) the jurisdiction in which Buyer's (or such
Seller Indemnified Party's) principal executive office is located.
"FINANCE CHARGES" means, with respect to a Contract, any
finance, interest, late payment, returned check charges or similar charges owing
by an Obligor pursuant to such Contract.
"FINANCIAL OFFICER" means, as to any Seller, the Chief
Financial Officer, Treasurer or Controller of such Seller.
"GAAP" means accounting principles generally accepted in the
United States of America as recommended by the Financial Accounting Standards
Board as in effect as of the Closing Date applied consistently with the audited
financial statements of Bowater and its Consolidated Subsidiaries for the fiscal
year ended December 31, 2001.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
federal, state, local or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
authority or functions of or pertaining to government including any authority or
other quasi-governmental entity established to perform any of such functions.
"GUARANTEE" means a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including causing a bank or other financial institution to issue a letter of
credit or other similar instrument for the benefit of another Person, but
excluding endorsements for collection or deposit in the ordinary course of
business. The terms "GUARANTEE" and "GUARANTEED" used as a verb shall have a
correlative meaning.
"INDEBTEDNESS" means, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of property or services, other than trade
accounts payable (other than for borrowed money) arising, and accrued expenses
incurred, in the ordinary course of business, so long as such trade accounts
payable are payable within 90 days of the date the respective goods are
delivered or the respective services are rendered; (c) Indebtedness of others
secured by a Adverse Claim on the property of such Person, whether or not the
respective Indebtedness so secured has been assumed by such Person; (d)
obligations (contingent or
-31-
otherwise) of such Person in respect of letters of credit or similar instruments
issued or accepted by banks and other financial institutions for account of such
Person; (e) Capital Lease Obligations of such Person; (f) Indebtedness of others
Guaranteed by such Person; and (g) any obligations of such Person in respect of
transactions commonly referred to in commercial settings as an "accounts
receivable securitization."
"INITIAL CONTRIBUTED RECEIVABLES" has the meaning set forth in
Section 1.1(a) to the Agreement.
"INITIAL CUTOFF DATE" means the Business Day immediately prior
to the Closing Date.
"INTEREST RATE PROTECTION AGREEMENT" shall have the meaning
given to such term in the Bowater Credit Agreement.
"IRS" means the Internal Revenue Service and any Person
succeeding to the functions thereof.
"LENDERS" has the meaning set forth in the Preliminary
Statements to the Agreement.
"LOAN AGREEMENT" has the meaning set forth in the Preliminary
Statements to the Agreement.
"MATERIAL DEBT" means Debt of any Seller and/or one or more of
its Subsidiaries (other than Buyer), arising in one or more related or unrelated
transactions, in an aggregate principal or face amount exceeding $50,000,000.
For purposes of determining Material Debt, the "principal amount" of the
obligations of any Person in respect of any Interest Rate Protection Agreement
at any time shall be the maximum aggregate amount (giving effect to any netting
requirements) that such Person would be required to pay if such Interest Rate
Protection Agreement were terminated at such time.
"MOODY'S" means ▇▇▇▇▇'▇ Investors Service, Inc.
"NET WORTH" means as of the last Business Day of each
Calculation Period preceding any date of determination, the excess, if any, of
(a) the aggregate Outstanding Balance of the Receivables at such time, OVER (b)
the sum of (i) the aggregate outstanding principal balance of the Loans under
the Loan Agreement at such time, PLUS (ii) the aggregate outstanding principal
balance of the Subordinated Loans (including any Subordinated Loan proposed to
be made on the date of determination).
"ORGANIZATIONAL DOCUMENTS" means, for any Person, the
documents for its formation and organization, which, for example, (a) for a
corporation are its corporate charter and bylaws, (b) for a partnership are its
certificate of partnership (if applicable) and partnership agreement, (c) for a
limited liability company are its certificate of formation or organization and
its operating agreement, regulations or the like and (d) for a trust is the
trust agreement, declaration of trust, indenture or bylaws under which it is
created.
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"ORIGINAL BALANCE" means, with respect to any Receivable, the
Outstanding Balance of such Receivable on the date it was created.
"OUTSTANDING BALANCE" of any Receivable at any time means the
then outstanding principal balance thereof.
"PERSON" means an individual, partnership, limited liability
company, corporation (including a business trust), joint stock company, trust,
unincorporated association, joint venture, government or any agency or political
subdivision thereof or any other entity.
"PURCHASE" means each purchase by a Transferee from a Seller
pursuant to Section 1.2 of the Agreement of Receivables and the Related Security
and Collections related thereto.
"PURCHASE DATE" means the Closing Date and each such
subsequent Business Day on or before the Termination Date.
"PURCHASE PRICE" means, with respect to each Purchase by a
Transferee from a Seller, the aggregate price to be paid by such Transferee to
such Seller for such Purchase in accordance with Section 1.3 of the Agreement
for the Receivables transferred by such Seller and the associated Collections
and Related Security, which price shall equal on any date (i) the product of (x)
the Outstanding Balance of such Receivables being sold on such date, MULTIPLIED
BY (y) one minus the Discount Factor in effect on such date, minus (ii) any
Purchase Price Credits to be credited in accordance with Section 1.4 of the
Agreement against the Purchase Price otherwise payable.
"PURCHASE PRICE CREDIT" has the meaning set forth in Section
1.4 of the Agreement.
"PURCHASE PRICE LOAN" has the meaning set forth in Section
1.2(c).
"PURCHASE PRICE LOAN NOTE" has the meaning set forth in
Section 1.2(c).
"PURCHASE REPORT" has the meaning set forth in Section 1.2(c)
of the Agreement.
"QSPE" means each subsidiary of Bowater organized for a
limited purpose with traditional "bankruptcy-remote" features such as an
independent director or member, PROVIDED THAT:
(a) either no portion of the Indebtedness or any other
obligations (contingent or otherwise) of such Subsidiary (i) is
Guaranteed by any member of the Bowater Group, (ii) is recourse to or
obligates any member of the Bowater Group in any way other than
pursuant to Standard Securitization Undertakings or (iii) subjects any
property of any member of the Bowater Group, directly or indirectly,
contingently or otherwise, to the satisfaction thereof (other than, in
the case of this clause (iii), pursuant to Standard Securitization
Undertakings),
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(b) with which no member of the Bowater Group has any material
contract, agreement, arrangement or understanding other than on terms
no less favorable to any member of the Bowater Group than those that
might be obtained at the time from Persons that are not Affiliates of
any member of the Bowater Group, and
(c) to which no member of the Bowater Group has any obligation
to maintain or preserve such entity's financial condition or cause such
entity to achieve certain levels of operating results.
"RECEIVABLE" means all indebtedness and other obligations owed
to a Seller (at the times it arises, including, without limitation, before
giving effect to any transfer or conveyance under the Agreement and whether
evidenced by chattel paper or any instrument) arising in connection with the
sale of goods or the rendering of services by such Seller (other than as to any
sales of goods (a) to any Affiliate of such Seller, or (b) which are incidental
to the sale of any operational unit of such Seller), and further includes the
applicable Obligor's obligation to pay any Finance Charges, freight charges and
other obligations of such Obligor with respect thereto. Indebtedness and other
rights and obligations arising from any one transaction, including, without
limitation, indebtedness and other rights and obligations represented by an
individual invoice, shall constitute a Receivable separate from a Receivable
consisting of the indebtedness and other rights and obligations arising from any
other transaction; PROVIDED, that any indebtedness, rights or obligations
referred to in the immediately preceding sentence shall be a Receivable
regardless or whether the account debtor or applicable Seller treats such
indebtedness, rights or obligations as a separate payment obligation.
"RECEIVABLES ENTITY" means (a) the Buyer and (b) any other
direct or indirect Subsidiary of Bowater (or another Person in which any member
of the Bowater Group may make an Investment) to which any member of the Bowater
Group sells, conveys or otherwise transfers (whether directly or indirectly)
accounts receivable and Related Security and/or one or more financial
instruments arising from the sale (whether through the sale of stock, membership
interests or assets) of accounts receivable and Related Security, which engages
in no material activities other than in connection with the financing of such
assets and which is designated by Bowater (as provided below) as a Receivables
Entity, (i) no portion of the Indebtedness or any other obligations (contingent
or otherwise) of which (A) is Guaranteed by any member of the Bowater Group, (B)
is recourse to or obligates any member of the Bowater Group in any way other
than pursuant to Standard Securitization Undertakings or (C) subjects any
property of any member of the Bowater Group, directly or indirectly,
contingently or otherwise, to the satisfaction thereof, other than such accounts
receivable and Related Security sold, conveyed or otherwise transferred into the
applicable securitization permitted by Bowater's agreements governing
Indebtedness and other than pursuant to Standard Securitization Undertakings,
(ii) with which no member of the Bowater Group has any material contract,
agreement, arrangement or understanding other than on terms no less favorable to
any member of the Bowater Group than those that might be obtained at the time
from Persons that are not Affiliates of any member of the Bowater Group, other
than fees payable in the ordinary course of business in connection with
servicing receivables, and (iii) to which no member of the Bowater Group has any
obligation to maintain or preserve such entity's financial condition or cause
such entity to achieve certain
-34-
levels of operating results. Any such designation by Bowater shall be evidenced
to the Administrative Agent by filing with the Administrative Agent an officer's
certificate of Bowater certifying, to the best of such officer's knowledge and
belief after consulting with counsel, that such designation complied with the
foregoing conditions.
"RELATED SECURITY" means, with respect to any Receivable, (a)
all right, title and interest, but none of the obligations, of the applicable
Seller, in the goods (including returned goods), if any, relating to the sale
which gave rise to such Receivable, (b) all right, title and interest, but none
of the obligations, of such Seller, in, to and under other Adverse Claims and
property subject to Adverse Claims from time to time purporting to secure
payment of such Receivable, whether pursuant to the Contract related to such
Receivable or otherwise, (c) all UCC financing statements or similar instruments
covering any collateral securing payment of such Receivable, (d) all guaranties,
indemnities, insurance and other agreements (including the related Receivable
File) or arrangement and other collateral of whatever character from time to
time supporting or securing payment of such Receivable, whether pursuant to the
Contract relating to such Receivable or otherwise relating to such Receivable,
(e) all right, title and interest, if any, of such Seller in any related money
held in any LockBox or LockBox Account, and (f) all other instruments and all
rights under the documents in the Receivables File relating to such Receivables
and all rights (but not obligations) relating to such Receivables.
"REPORTING DATE" means the second Business Day preceding each
Distribution Date (as defined in the Loan Agreement).
"REQUIRED CAPITAL AMOUNT" means (a) as of any date of
determination while the Loan Agreement remains in effect, an amount equal to the
greater of (i) the product of (A) 1.5 times the product of the Default Ratio (as
defined in the Loan Agreement) times the Loss Horizon Ratio (as defined in the
Loan Agreement) times (B) the Outstanding Balance of all Receivables as of such
date, each as determined from the most recent Monthly Report delivered to
Administrative Agent, and (ii) the amount necessary to ensure that Buyer remains
Solvent, and (b) at all other times, the amount determined pursuant to the
preceding clause (a)(ii).
"S&P" means Standard & Poor's Ratings Group, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc.
"SELLER" has the meaning set forth in the preamble to the
Agreement.
"SELLER INDEMNIFIED AMOUNTS" has the meaning set forth in
Section 6.1.
"SELLER INDEMNIFIED PARTY" has the meaning set forth in
Section 6.1.
"SELLER MATERIAL ADVERSE EFFECT" means a material adverse
effect on (i) on the business, property, condition (financial or otherwise) or
results of operations or prospects of Sellers and their Subsidiaries taken as a
whole, (ii) the ability of any Seller to perform its obligations under the
Agreement or any other Transaction Document to which it is a party, (iii) the
legality, validity or enforceability of the Agreement or any other Transaction
Document, (iv) the interest of any Transferee or of the Administrative Agent (on
behalf of the Agents and the Lenders) in the Receivables generally or in any
significant portion of the Receivables, the
-35-
Related Security or Collections with respect thereto, or (v) the collectibility
of the Receivables generally or of any material portion of the Receivables.
"SENIOR EXECUTIVE" means, as to any Seller, the Chief
Executive Officer, Chief Financial Officer, President, Treasurer, Assistant
Treasurer, Controller, Secretary, Assistant Secretary, Executive Vice President,
Senior Vice President or Director of Corporate Finance of such Seller.
"SETTLEMENT DATE" means, with respect to each Calculation
Period, the second Business Day after the Reporting Date following the end of
such Calculation Period.
"SOLVENT" means with respect to any Person that as of the date
of determination both (A)(i) the then fair saleable value of the property of
such Person is (y) greater than the total amount of liabilities (including
contingent liabilities) of such Person and (z) not less than the amount that
will be required to pay the probable liabilities on such Person's then existing
debts as they become absolute and matured considering all financing alternatives
and potential asset sales reasonably available to such Person; (ii) such
Person's capital is not unreasonably small in relation to its business or any
contemplated or undertaken transaction; and (iii) such Person does not intend to
incur, or believe (nor should it reasonably believe) that it will incur, debts
beyond its ability to pay such debts as they become due; and (B) such Person is
"solvent" within the meaning given that term and similar terms under applicable
laws relating to fraudulent transfers and conveyances. For purposes of this
definition, the amount of any contingent liability at any time shall be computed
as the amount that, in light of all of the facts and circumstances existing at
such time, represents the amount that can reasonably be expected to become an
actual or matured liability.
"STANDARD SECURITIZATION UNDERTAKINGS" means, collectively,
(i) customary arms-length servicing obligations (together with any related
performance guarantees), (ii) obligations (together with any related performance
guarantees) to refund the purchase price or grant purchase price credits for
dilutive events or misrepresentation (in each case unrelated to the
collectibility of receivables or creditworthiness of the associated account
debtors), (iii) representations, warranties, covenants and indemnities (together
with any related performance guarantees) of a type that are reasonably customary
in accounts receivable securitizations (or, in the case of a QSPE, the
transactions of the type for which such Person was organized) and (iv) in the
case of a QSPE, a guarantee by members of the Bowater Group of any make-whole
premium (but not any principal or interest) on Indebtedness of the QSPE.
"SUBORDINATED LOAN" has the meaning set forth in Section
1.2(c).
"SUBORDINATED NOTE" has the meaning set forth in Section
1.2(c).
"SUBSIDIARY" means, for any Person, any corporation,
partnership or other entity of which at least a majority of the securities or
other ownership interests having by the terms thereof ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions of such corporation, partnership or other entity (irrespective of
whether or not at the time securities or other ownership interests of any other
class or classes of
-36-
such corporation, partnership or other entity shall have or might have voting
power by reason of the happening of any contingency) is at the time directly or
indirectly owned or controlled by such Person or one or more Subsidiaries of
such Person or by such Person and one or more Subsidiaries of such Person;
PROVIDED, HOWEVER, that the term "SUBSIDIARY" shall not include any QSPE.
"TAXES" means any and all present or future taxes, duties,
levies, imposts, deductions, charges or withholdings, and any and all
liabilities (including but not limited to interest and penalties) with respect
to the foregoing, imposed by any Governmental Authority.
"TERMINATION DATE" means the earliest to occur of (i) the
Commitment Termination Date under and as defined in the Loan Agreement, (ii) the
Business Day immediately prior to the occurrence of a Termination Event set
forth in Section 5.1(f), (iii) the Business Day specified in a written notice
from Buyer to Sellers following the occurrence of any other Termination Event,
(v) the date which is ten (10) Business Days after Buyer's receipt of written
notice from any Seller that it wishes to terminate the facility evidenced by
this Agreement, and (v) the first date on which the condition precedent in
Section 3.2(b) is not satisfied.
"TERMINATION EVENT" has the meaning set forth in Section 5.1
of the Agreement.
"TRANSACTION DOCUMENTS" means, collectively, this Agreement,
each LockBox Account Agreement, the Subordinated Note, each Purchase Price Loan
Note, and all other instruments, documents and agreements executed and delivered
in connection herewith.
"TRANSFEREE" has the meaning set forth in the preliminary
statements to the Agreement.
"UNMATURED TERMINATION EVENT" means an event which, with the
passage of time or the giving of notice, or both, would constitute a Termination
Event.
ALL ACCOUNTING TERMS NOT SPECIFICALLY DEFINED HEREIN SHALL BE
CONSTRUED IN ACCORDANCE WITH GAAP. ALL TERMS USED IN ARTICLE 9 OF THE UCC IN THE
STATE OF NEW YORK, AND NOT SPECIFICALLY DEFINED HEREIN, ARE USED HEREIN AS
DEFINED IN SUCH ARTICLE 9.
-37-
EXHIBIT II
JURISDICTIONS OF ORGANIZATION; CHIEF EXECUTIVE OFFICES;
PRINCIPAL PLACES OF BUSINESS; LOCATIONS OF RECORDS;
ORGANIZATIONAL IDENTIFICATION NUMBERS; OTHER NAMES
Jurisdiction Chief Executive Office/ Organizational
of Principal Place Identification
Entity Organization of Business Locations of Records Number Other Names
--------------------------- ------------ ----------------------- --------------------------------- -------------- --------------
Bowater Incorporated Delaware ▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇ None
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Lake Superior Holdings Inc. Delaware ▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇ None
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Bowater America Inc. Delaware ▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ 55 E. Camperdown Way 0843530 Avenor
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ America, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇-▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-38-
Jurisdiction Chief Executive Office/ Organizational
of Principal Place Identification
Entity Organization of Business Locations of Records Number Other Names
--------------------------- ------------ ----------------------- --------------------------------- -------------- --------------
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
-39-
EXHIBIT III
LOCKBOXES AND LOCKBOX ACCOUNTS
BANK OF AMERICA
Bowater Incorporated (being changed to Bowater Funding Inc.)
Account Number 3750202618
▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
WACHOVIA BANK
Bowater Incorporated (being changed to Bowater Funding Inc.)
Account Number ▇▇▇▇▇▇▇▇▇▇
▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Bowater Incorporated (being changed to Bowater Funding Inc.)
Account Number ▇▇▇▇▇▇▇
▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
JPMORGAN CHASE MANHATTAN BANK
Bowater Incorporated (being changed to Bowater Funding Inc.)
ABA ▇▇▇▇▇▇▇▇▇
Account Number 9102524478 (electronic lockbox)
-40-
EXHIBIT IV
FORM OF COMPLIANCE CERTIFICATE
This Compliance Certificate is furnished pursuant to that
certain Receivables Sale Agreement dated as of December 19, 2002, among Bowater
Incorporated (together with its successors, "BOWATER"), Lake Superior Holdings
Inc., Bowater America Inc., and Bowater Funding Inc. (as amended, restated or
otherwise modified from time to time, the "AGREEMENT"). Capitalized terms used
and not otherwise defined herein are used with the meanings attributed thereto
in the Agreement.
THE UNDERSIGNED FINANCIAL OFFICER HEREBY CERTIFIES THAT:
1. I am the duly elected ______________ of Bowater.
2. I have reviewed the terms of the Agreement and I have
made, or have caused to be made under my supervision, a detailed review of the
transactions and conditions of Bowater and its Subsidiaries during the
accounting period covered by the attached financial statements.
3. The examinations described in paragraph 2 did not
disclose, and I have no knowledge of, the existence of any condition or event
which constitutes a Termination Event or an Unmatured Termination Event, as each
such term is defined under the Agreement, during or at the end of the accounting
period covered by the attached financial statements or as of the date of this
Certificate[, except as set forth below].
[4. Described below are the exceptions, if any, to
paragraph 3 by listing, in detail, the nature of the condition or event, the
period during which it has existed and the action which Bowater has taken, is
taking, or proposes to take with respect to each such condition or event:
_______________________________].
The foregoing certifications, together with the financial
statements delivered with this Certificate, are made and delivered this ____ day
of ______________, 200_.
BOWATER INCORPORATED
By:______________________________
Name:
Title:
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EXHIBIT V-1
[FORM OF] PURCHASE PRICE LOAN NOTE
PURCHASE PRICE LOAN NOTE
December 19, 2002
1. Note. FOR VALUE RECEIVED, the undersigned, Bowater
America Inc., a Delaware corporation ("TRANSFEREE"), hereby unconditionally
promises to pay to the order of Bowater Incorporated, a Delaware corporation
("SELLER"), in lawful money of the United States of America and in immediately
available funds, upon demand, the aggregate unpaid principal sum outstanding of
all Purchase Price Loans made from time to time by Seller to Transferee pursuant
to and in accordance with the terms of that certain Receivables Sale Agreement
dated as of December 19, 2002 among Seller, Transferee and certain of their
affiliates (as amended, restated, supplemented or otherwise modified from time
to time, the "SALE AGREEMENT"). Reference to Sections 1.2(c) and 1.3(b) of the
Sale Agreement is hereby made for a statement of the terms and conditions under
which the loans evidenced hereby have been and will be made. CAPITALIZED TERMS
USED AND NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS ASCRIBED TO SUCH
TERMS IN THE SALE AGREEMENT.
2. Interest. Transferee further promises to pay interest
on the outstanding unpaid principal amount hereof from the date of the initial
Purchase Price Loan hereunder until payment in full hereof at a rate per annum
equal to the Prime Rate (as hereinafter defined); PROVIDED, HOWEVER, that if
Transferee shall default in the payment of any principal hereof, Transferee
promises to pay, on demand, interest at the rate equal to the Prime Rate plus
2.00% per annum on any such unpaid amounts, from the date such payment is due to
the date of actual payment. Interest shall be payable on the first Business Day
of each month in arrears; PROVIDED, HOWEVER, that Transferee may elect on the
date any interest payment is due hereunder to defer such payment and upon such
election the amount of interest due but unpaid on such date shall constitute
principal under this Purchase Price Loan Note. The outstanding principal of any
loan made under this Purchase Price Loan Note may be repaid or prepaid at any
time without premium or penalty. As used herein, "PRIME RATE" means a rate per
annum equal to the prime rate published from time to time in THE WALL STREET
JOURNAL, changing when and as such published rate changes and shall be computed
for actual days elapsed on the basis of a year consisting of 360 days.
3. Principal. Seller is authorized and directed by
Transferee to enter on the grid attached hereto, or, at its option, in its books
and records, the date and amount of each Purchase Price Loan and the amount of
each payment of principal made by Transferee, and absent manifest error, such
entries shall constitute prima facie evidence of the accuracy of the information
so entered; PROVIDED THAT neither the failure of Seller to make any such entry
or any error therein shall expand, limit or affect the obligations of Transferee
hereunder.
4. GOVERNING LAW. THIS PURCHASE PRICE LOAN NOTE SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
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WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF (OTHER THAN SECTION
5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). WHEREVER POSSIBLE EACH
PROVISION OF THIS PURCHASE PRICE LOAN NOTE SHALL BE INTERPRETED IN SUCH MANNER
AS TO BE EFFECTIVE AND VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF THIS
PURCHASE PRICE LOAN NOTE SHALL BE PROHIBITED BY OR INVALID UNDER APPLICABLE LAW,
SUCH PROVISION SHALL BE INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR
INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE
REMAINING PROVISIONS OF THIS PURCHASE PRICE LOAN NOTE.
5. Waivers. All parties hereto, whether as makers,
endorsers, or otherwise, severally waive presentment for payment, demand,
protest and notice of dishonor.
BOWATER AMERICA INC.
By:_____________________________
Name:
Title:
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SCHEDULE
TO
PURCHASE PRICE LOAN NOTE
PURCHASE PRICE LOANS AND PAYMENTS OF PRINCIPAL
-----------------------------------------------------------------------------------------------------------
AMOUNT OF AMOUNT OF UNPAID
SUBORDINATED PRINCIPAL PRINCIPAL NOTATION MADE BY
DATE LOAN PAID BALANCE (INITIALS)
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EXHIBIT V-2
[FORM OF] SUBORDINATED NOTE
SUBORDINATED NOTE
December 19, 2002
1. Note. FOR VALUE RECEIVED, the undersigned, Bowater
Funding Inc., a Delaware corporation ("BUYER"), hereby unconditionally promises
to pay to the order of Bowater America Inc., a Delaware corporation ("BAI"), in
lawful money of the United States of America and in immediately available funds,
on or before the date following the Termination Date which is one year and one
day after the date on which (i) the Outstanding Balance of all Receivables sold
by BAI under that certain Receivables Sale Agreement dated as of December 19,
2002 between BAI and certain of its affiliates and Buyer (as amended, restated,
supplemented or otherwise modified from time to time, the "SALE AGREEMENT") has
been reduced to zero and (ii) BAI has paid to Buyer all indemnities, adjustments
and other amounts which may be owed thereunder in connection with the Purchases
thereunder (the "COLLECTION DATE"), the aggregate unpaid principal sum
outstanding of all Subordinated Loans made from time to time by BAI to Buyer
pursuant to and in accordance with the terms of the Sale Agreement. Reference to
Sections 1.2(c) and 1.3(b) of the Sale Agreement is hereby made for a statement
of the terms and conditions under which the loans evidenced hereby have been and
will be made. CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN SHALL HAVE
THE MEANINGS ASCRIBED TO SUCH TERMS IN THE SALE AGREEMENT.
2. Interest. Buyer further promises to pay interest on
the outstanding unpaid principal amount hereof from the date of the initial
Subordinated Loan hereunder until payment in full hereof at a rate per annum
equal to the Prime Rate (as hereinafter defined); PROVIDED, HOWEVER, that if
Buyer shall default in the payment of any principal hereof, Buyer promises to
pay, on demand, interest at the rate equal to the Prime Rate plus 2.00% per
annum on any such unpaid amounts, from the date such payment is due to the date
of actual payment. Interest shall be payable on the first Business Day of each
month in arrears; PROVIDED, HOWEVER, that Buyer may elect on the date any
interest payment is due hereunder to defer such payment and upon such election
the amount of interest due but unpaid on such date shall constitute principal
under this Subordinated Note. The outstanding principal of any loan made under
this Subordinated Note shall be due and payable on the Collection Date and may
be repaid or prepaid at any time without premium or penalty. As used herein,
"PRIME RATE" means a rate per annum equal to the prime rate published from time
to time in THE WALL STREET JOURNAL, changing when and as such published rate
changes and shall be computed for actual days elapsed on the basis of a year
consisting of 360 days.
3. Principal. BAI is authorized and directed by Buyer to
enter on the grid attached hereto, or, at its option, in its books and records,
the date and amount of each Subordinated Loan and the amount of each payment of
principal made by Buyer, and absent manifest error, such entries shall
constitute prima facie evidence of the accuracy of the
-45-
information so entered; PROVIDED THAT neither the failure of BAI to make any
such entry or any error therein shall expand, limit or affect the obligations of
Buyer hereunder.
4. Subordination. BAI shall have the right to receive,
and Buyer shall make, any and all payments and prepayments relating to the loans
made under this Subordinated Note, PROVIDED THAT, after giving effect to any
such payment or prepayment, the aggregate Outstanding Balance of Receivables
owned by Buyer at such time exceeds any and all then outstanding "Obligations"
under and as defined in that certain Loan Agreement dated as of December 19,
2002 by and among Buyer, Bowater Incorporated, as initial Servicer, various
lenders and co-agents, and SunTrust Capital Markets, Inc., a Tennessee
corporation, as "Administrative Agent" (as amended, restated, supplemented or
otherwise modified from time to time, the "LOAN AGREEMENT"). BAI hereby agrees
that at any time during which the conditions set forth in the proviso of the
immediately preceding sentence shall not be satisfied, BAI shall be subordinate
in right of payment to the prior payment of all Obligations under and as defined
under the Loan Agreement. The subordination provisions contained herein are for
the direct benefit of, and may be enforced by, Administrative Agent, on behalf
of the Secured Parties under and as defined in the Loan Agreement
(Administrative Agent and the Secured Parties being hereinafter collectively
referred to as the "SENIOR CLAIMANTS"). Until the date on which the
"Obligations" under and as defined in the Loan Agreement (all such Obligations,
collectively, the "SENIOR CLAIM") have been indefeasibly paid and satisfied in
full, BAI shall not institute against Buyer any proceeding of the type described
in Section 5.1(f) of the Sale Agreement unless and until the Collection Date has
occurred. Should any payment, distribution or security or proceeds thereof be
received by BAI in violation of this Section 4, BAI agrees that such payment
shall be segregated, received and held in trust for the benefit of, and deemed
to be the property of, and shall be immediately paid over and delivered to
Administrative Agent for the benefit of the Senior Claimants.
5. Bankruptcy; Insolvency. Upon the occurrence of any
proceeding of the type described in Section 5.1(f) of the Sale Agreement
involving Buyer as debtor, then and in any such event the Senior Claimants shall
receive payment in full of all amounts due or to become due on or in respect of
the Aggregate Invested Amount and the Senior Claim (including, without
limitation, any interest thereon accruing after the commencement of any such
proceeding, whether or not any or all of such interest is an allowable claim in
any such proceeding) before BAI is entitled to receive payment on account of
this Subordinated Note, and to that end, any payment or distribution of assets
of Buyer of any kind or character, whether in cash, securities or other
property, in any applicable insolvency proceeding, which would otherwise be
payable to or deliverable upon or with respect to any or all indebtedness under
this Subordinated Note, is hereby assigned to and shall be paid or delivered by
the Person making such payment or delivery (whether a trustee in bankruptcy, a
receiver, custodian or liquidating trustee or otherwise) directly to
Administrative Agent for application to, or as collateral for the payment of,
the Senior Claim until such Senior Claim shall have been paid in full and
satisfied.
6. Amendments. This Subordinated Note shall not be
amended or modified except in accordance with Section 7.1 of the Sale Agreement.
The terms of this Subordinated
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Note may not be amended or otherwise modified without the prior written consent
of each of the Agents (under and as defined in the Loan Agreement).
7. GOVERNING LAW. THIS SUBORDINATED NOTE SHALL BE
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICT OF LAW PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW). WHEREVER POSSIBLE EACH PROVISION OF THIS SUBORDINATED
NOTE SHALL BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND VALID UNDER
APPLICABLE LAW, BUT IF ANY PROVISION OF THIS SUBORDINATED NOTE SHALL BE
PROHIBITED BY OR INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF SUCH PROVISION OR THE REMAINING PROVISIONS OF THIS
SUBORDINATED NOTE.
8. Waivers. All parties hereto, whether as makers,
endorsers, or otherwise, severally waive presentment for payment, demand,
protest and notice of dishonor. BAI additionally expressly waives all notice of
the acceptance by any Senior Claimant of the subordination and other provisions
of this Subordinated Note and expressly waives reliance by any Senior Claimant
upon the subordination and other provisions herein provided.
9. Assignment, Pledge and Transfer. This Subordinated
Note may not assigned, pledged or otherwise transferred to any Person other than
its delivery to the Administrative Agent, and any attempted assignment, pledge
or transfer in violation hereof shall be void ab initio.
BOWATER FUNDING INC.
By:_____________________________
Name:
Title:
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SCHEDULE
TO
SUBORDINATED NOTE
SUBORDINATED LOANS AND PAYMENTS OF PRINCIPAL
-----------------------------------------------------------------------------------------------------------
AMOUNT OF AMOUNT OF UNPAID
SUBORDINATED PRINCIPAL PRINCIPAL NOTATION MADE BY
DATE LOAN PAID BALANCE (INITIALS)
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EXHIBIT VI
[FORM OF] PURCHASE REPORT
For the Calculation Period beginning [date] and ending [date]
____________
TO: ______________________, AS TRANSFEREE, AND THE ADMINISTRATIVE AGENT
--------------------------------------------------------- -------------------------- ----------------------- ---------
Aggregate Outstanding Balance of all Receivables
created during the period: $_____________ A
--------------------------------------------------------- -------------------------- ----------------------- ---------
LESS (IF APPLICABLE): Aggregate Outstanding Balance
of all Receivables contributed during the period: $____________) (B)
--------------------------------------------------------- -------------------------- ----------------------- ---------
EQUALS: Aggregate Outstanding Balance of all
Receivables sold during the period (A - B ): $___________ =C
--------------------------------------------------------- -------------------------- ----------------------- ---------
LESS: Purchase Price discount during the Period: ($____________) (D)
--------------------------------------------------------- -------------------------- ----------------------- ---------
EQUALS: Gross Purchase Price Payable during the period
(A - D) $____________ =E
--------------------------------------------------------- -------------------------- ----------------------- ---------
LESS: Total Purchase Price Credits arising during the
Period: ($____________) (F)
--------------------------------------------------------- -------------------------- ----------------------- ---------
EQUALS: Net Purchase Price payable during the Period
(E - F): $____________ =G
--------------------------------------------------------- -------------------------- ----------------------- ---------
--------------------------------------------------------- -------------------------- ----------------------- ---------
Cash Purchase Price Paid to Seller: $_____________ H
--------------------------------------------------------- -------------------------- ----------------------- ---------
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EXHIBIT VII
CREDIT AND COLLECTION POLICY
CREDIT MANUAL
BOWATER INCORPORATED
PAPER PRODUCTS
MISSION:
The mission of the credit department is to assist in the selling of the
company's products to all qualified customers while protecting the company's
investment in accounts receivable.
CREDIT PHILOSOPHY:
The company manufactures pulp, and paper products for a wide variety of end
users. Each class of users has different degrees of risk. The company is willing
to take a larger degree of risk in order to make our products available to a
wider audience.
CREDIT DEPARTMENT GOALS:
The credit department sets goals each year. The goals will be based on the
department's accomplishment of the prior year's goals, current market
conditions, corporate goals, and the company's credit philosophy.
CREDIT STAFF AND RESPONSIBILITIES:
The Credit Department reports to the Director of Financial Planning and
Analysis, who reports to the VP Administration and Planning. There are 6 staff
positions within the Credit Department.
a. Director of Credit - Has over-all responsibility for the Credit
Department
b. Two credit managers - Have responsibility for credit and collection for
assigned products and geographic areas
c. Accounts Receivable manger - Has responsibility for the integrity of
corporate AR
d. Two Credit Analyst - Assist AR manager and credit managers
CREDIT MANAGEMENT POLICIES:
Each new potential customer is reviewed by the appropriate credit manager and if
warranted ask to complete and sign a credit application. A credit investigation
to determine the creditworthiness of each new potential customer is performed by
obtaining bank and trade reports or by pulling a credit report from a credit
reporting agency or from an industry credit group. Financial statements are
required at the discretion of the assigned credit manager. Credit lines are
assigned at the discretion of the assigned credit manager. If no credit limit is
assigned, all orders for the account are credit approved before production.
Terms other than the industry or country "normal" require approval by the next
level of management.
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Customer will receive products as long as their account is current and within
the approved line of credit. If a customer's account is not current or within
the approved line of credit, each new order for the customer is reviewed by the
assigned credit manager and must be manually approved before production. All
efforts are made to proactively qualify orders for production.
COLLECTION MANAGEMENT POLICIES:
The Credit Department will collect all outstanding AR in a timely manner.
Customer will be contacted by:
a. CSR or sales person responsible for account
b. Directly by credit manager or other assigned credit personnel
Aging reports are produced weekly or on demand to assist CSR/sales and credit
manager ascertain which accounts need collection effort. If a customer is unable
or unwilling to pay their outstanding balance, the Credit Manager will consider
placing the account with an authorized collection agency or collection attorney.
Items are not written off to bad debt until all efforts to collect are
exhausted.
INFORMATION MANAGEMENT POLICIES:
The AR/credit system is CODA. CODA provides on line real time customer
information. Weekly, monthly and on-demand aging reports are available to assist
the credit mangers in account evaluations. Reports are provided to higher
management as required. Each credit manager is a member of NACM and attends
industry credit meeting. Each Credit Manager is responsible for his/her self
education in credit management skills.
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SCHEDULE A
DOCUMENTS TO BE DELIVERED TO BUYER
ON OR PRIOR TO THE INITIAL PURCHASE
1. Executed copies of the Receivables Sale Agreement, duly executed by
the parties thereto.
2. Copy of each Seller's Credit and Collection Policy.
3. A certificate of each Seller's [Assistant] Secretary certifying:
(a) A copy of the Resolutions of the Board of Directors of such Seller,
authorizing such Seller's execution, delivery and performance of the Receivables
Sale Agreement and the other documents to be delivered by it thereunder;
(b) A copy of the Organizational Documents of such Seller (also
certified, to the extent that such documents are filed with any governmental
authority, by the Secretary of State of the jurisdiction of organization of
Seller on or within thirty (30) days prior to closing);
(c) Good Standing Certificates for such Seller issued by the Secretary
of State of its state of organization and each other jurisdiction where it has
material operations; and
(d) The names and signatures of the officers authorized on such
Seller's behalf to execute the Receivables Sale Agreement and any other
documents to be delivered by it hereunder.
4. Pre-filing state and federal tax lien, judgment lien and UCC lien
searches against each Seller in the jurisdiction where it maintains its chief
executive office and where it is organized.
5. Duly executed UCC financing statements in form suitable for filing
in all jurisdictions as may be necessary or, in the opinion of Buyer (or the
Administrative Agent as its pledgee), desirable, under the UCC of all
appropriate jurisdictions or any comparable law in order to perfect the
ownership interests contemplated by the Receivables Sale Agreement.
6. Time-stamped receipt copies of proper UCC termination statements, if
any, necessary to release all security interests and other rights of any Person
in the Receivables, Contracts or Related Security previously granted by such
Seller.
7. Executed LockBox Account Agreement for each LockBox Account. All
LockBox Accounts to be transferred into Buyer's name.
8. One or more favorable opinions of internal and outside legal counsel
for each Seller reasonably acceptable to Buyer (and the Administrative Agent) as
to the following (it being understood that at a minimum, all UCC opinions and
enforceability opinions are to come from outside counsel, as well as
non-contravention of the Bowater Credit Agreement and other
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material financing agreements or indentures identified in an officer's
certificate as being material to Bowater and its Subsidiaries taken as a whole):
(a) Such Seller is a corporation, duly organized, validly existing, and
in good standing under the laws of the State of ______________.
(b) Such Seller has all requisite authority to conduct its business in
each jurisdiction where failure to be so qualified would have a material adverse
effect on such Seller's business.
(c) The execution and delivery by such Seller of the Receivables Sale
Agreement and each other Transaction Document to which it is a party and its
performance of its obligations thereunder have been duly authorized by all
necessary organizational action and proceedings on the part of such Seller and
will not:
(i) require any action by or in respect of, or filing with,
any governmental body, agency or official (other than the filing of UCC
financing statements);
(ii) contravene, or constitute a default under, any provision
of applicable law or regulation or of its Organizational Documents or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
such Seller; or
(iii) result in the creation or imposition of any Adverse
Claim on assets of such Seller (except as contemplated by the Receivables Sale
Agreement).
(d) The Receivables Sale Agreement and each other Transaction Document
to which it is a party has been duly executed and delivered by such Seller and
constitutes the legally valid, and binding obligation of such Seller enforceable
in accordance with its terms, except to the extent the enforcement thereof may
be limited by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and subject also to the availability of equitable
remedies if equitable remedies are sought.
(e) In the event that the Receivables Sale Agreement is held to create
a transfer for security purposes rather than a true sale or other outright
assignment, the provisions of the Receivables Sale Agreement are effective to
create valid security interests in favor of the applicable Transferee, in all of
such Seller's right, title and interest, in and to the Receivables and Related
Security described therein which constitute "accounts," "chattel paper" or
"general intangibles" (each as defined in the UCC) (collectively, the "OPINION
COLLATERAL"), as security for the payment of a loan deemed to have been made by
such Transferee to such Seller in an amount equal to the aggregate Purchase
Prices (as defined therein) of the Receivables (as defined therein) sold by such
Seller, together with all other obligations of such Seller thereunder.
(f) Each of the UCC-1 Financing Statements naming such Seller as
debtor, any Transferee, as secured party, and/or the Administrative Agent, as
assignee of secured party to be filed in the [describe filing offices], is in
appropriate form for filing therein. Upon filing of such UCC-1 Financing
Statements in such filing offices and payment of the required filing fees,
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the security interest in favor of such Transferee in the Opinion Collateral
transferred by such Seller will be perfected and assigned of record to the
Administrative Agent.
(g) Based solely on our review of the [describe UCC Search
Reports], and assuming (i) the filing of the Financing Statements and payment of
the required filing fees in accordance with paragraph (f) and (ii) the absence
of any intervening filings between the date and time of the Search Reports and
the date and time of the filing of the Financing Statements, the security
interest of Buyer in the Opinion Collateral is prior to any security interest
granted in the Opinion Collateral by such Seller, the priority of which is
determined solely by the filing of a financing statement in the [describe filing
offices].
(h) To the best of the opinion giver's knowledge, there is no
action, suit or other proceeding against any Seller or any Affiliate of any
Seller, which would materially adversely affect the business or financial
condition of any Seller and its Affiliates taken as a whole or which would
materially adversely affect the ability of any Seller to perform its obligations
under the Receivables Sale Agreement.
9. A "TRUE SALE" opinion and "SUBSTANTIVE CONSOLIDATION" opinion(s) of
outside counsel for the Sellers with respect to the transactions contemplated by
the Receivables Sale Agreement.
10. A Certificate of a Financial Officer of Bowater certifying that, as
of the closing date, no Termination Event or Unmatured Termination Event exists
and is continuing.
11. Executed copies of (i) all consents from and authorizations by any
Persons and (ii) all waivers and amendments to existing credit facilities, that
are necessary in connection with the Receivables Sale Agreement
12. Performance Undertaking executed by Bowater in favor of the Buyer.
13. The Subordinated Note executed by the Buyer in favor of BAI.
14. A Purchase Price Loan Note executed by BAI in favor of Lake
Superior and a Purchase Price Loan Note executed by Lake Superior in favor of
Bowater.
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SCHEDULE B
NOTICE ADDRESSES
SELLERS:
c/o Bowater Incorporated
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Treasurer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
BUYER:
Bowater Funding Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Treasurer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
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