AMENDED AND RESTATED
RECEIVABLES TRANSFER AGREEMENT
Dated as of September 27, 1996
by and between
MERISEL AMERICAS, INC.
and
MERISEL CAPITAL FUNDING, INC.
Amended and Restated Receivables Transfer Agreement,
dated as of September 27, 1996 (this "Agreement"), between
MERISEL AMERICAS, INC., a Delaware corporation (the "Originator")
and MERISEL CAPITAL FUNDING, INC., a Delaware corporation
("MCF").
R E C I T A L S
A. The Originator and MCF entered into a
Receivables Transfer Agreement, dated as of October 2, 1995 (the
"Initial Receivables Transfer Agreement").
B. The Originator and MCF desire to enter into an
amendment and restatement of the Initial Receivables Transfer
Agreement pursuant to the terms and conditions set forth herein.
C. MCF is a wholly owned subsidiary of the
Originator.
D. MCF has been formed for the sole purpose of
purchasing or otherwise acquiring certain trade receivables
originated by Merisel, Inc., the Originator and/or their
subsidiaries.
E. The Originator intends to sell, and MCF intends to
purchase, such trade receivables, from time to time, as described
herein.
F. The Originator may, from time to time, contribute
capital to MCF in the form of Contributed Receivables or cash.
The parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.01. Definitions. Except as otherwise
expressly provided herein or unless the context otherwise
requires, capitalized terms not otherwise defined herein shall
have the meanings assigned to such terms in Annex X hereto, which
is incorporated by reference herein. All other capitalized terms
used herein shall have the meanings specified herein.
SECTION 1.02. Other Terms and Interpretation. All
other terms and the interpretation of this Agreement shall be as
set out in Annex X hereto.
ARTICLE II
TRANSFERS OF RECEIVABLES
SECTION 2.01. Agreement to Transfer. (a) On and
after the date of this Agreement, the Originator agrees to sell
or contribute to MCF all Receivables originated by the
Originator. On or before the Effective Date, the Originator and
MCF shall enter into a separate Certificate of Assignment
substantially in the form of Exhibit A hereto (the "Assignment").
(b) The Originator shall, on the date hereof and on
each date thereafter (or if such date is not a Business Day, the
following Business Day, each such date, a "Transfer Date"),
transfer to MCF all outstanding Receivables originated and owned
by the Originator through such date. On each Transfer Date, the
Originator shall identify (i) all outstanding Receivables
originated through such date which are owned by the Originator on
such date, (ii) at its option a certain number of Receivables to
be contributed to MCF (the "Contributed Receivables"), and (iii)
all such Receivables not previously identified as purchased and
sold or contributed or identified as to be contributed pursuant
to clause (ii) of this sentence, to be purchased by MCF and sold
by the Originator (the "Sold Receivables"). Each such
identification shall be made as of the opening of business of the
Originator on each Transfer Date. The Originator may deliver to
MCF a Request Notice making the identification of such
Receivables, provided that the Originator shall keep such records
necessary to promptly deliver a Request Notice in respect of each
prior Transfer Date if requested by MCF or the Operating Agent.
To the extent not identified by the Originator as being
contributed or sold, the transfer of such Receivables to MCF
shall be deemed to have been a purchase by MCF and sale by the
Originator on such Transfer Date. The Originator confirms that
it has, pursuant to the Initial Receivables Purchase Agreement,
heretofore sold or contributed to MCF all of its Receivables
existing on the Effective Date or arising thereafter.
(c) The price paid for the Sold Receivables shall be
the Sale Price. Such Sale Price shall be paid by means of (i) an
immediate cash payment to the Originator or, (ii) upon the
agreement of the Originator and MCF, indebtedness owed by MCF to
the Originator evidenced by, and payable with interest pursuant
to a note in the form of Exhibit B (the "Subordinated Note") or
both, provided that the indebtedness under the Subordinated Note
shall not be increased on any day if, after giving effect
thereto, MCF's Net Worth Percentage would be less than 15%. On
each Transfer Date the Sold Receivables and Contributed
Receivables shall be assigned, and on such Transfer Date MCF
shall pay the Sale Price for such Sold Receivables. The portion
of the Sale Price payable in cash shall be payable by wire
transfer on the Transfer Date to an account designated by the
Originator (and approved by the Operating Agent).
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(d) On and after each Transfer Date hereunder, MCF
shall own the Transferred Receivables (assuming payment by MCF in
accordance with Section 2.01(c) hereof in the case of Sold
Receivables) and the Originator shall not take any action
inconsistent with such ownership, nor shall the Originator claim
any ownership interest in any such Transferred Receivables.
(e) Until the occurrence of an Event of Servicer
Termination or a resignation of the Servicer pursuant to the
Purchase Agreement, (i) the Originator, as Servicer, shall
conduct the servicing, administration and collection of such
Transferred Receivables and shall take, or cause to be taken, all
such actions as may be necessary or advisable to service,
administer and collect such Transferred Receivables, from time to
time, all in accordance with (A) the terms of the Purchase
Agreement, (B) customary and prudent servicing procedures for
trade receivables of a similar type and (C) all applicable laws,
rules and regulations, and (ii) documents relating to Transferred
Receivables shall be held in trust by the Originator, as
Servicer, for the benefit of MCF and its assignees as the owners
thereof, and possession of any incident relating to the
Transferred Receivables and Contracts so retained is for the sole
purpose of facilitating the servicing of the Transferred
Receivables. Such retention and possession thereof is at the will
of MCF and its assignees and in a custodial capacity for their
benefit only.
Each sale and contribution by the Originator to MCF is made
without recourse to the Originator, except as set forth in
Section 4.04 hereof
SECTION 2.02. Grant of Security Interest. It is the
intention of the parties hereto that each transfer of Transferred
Receivables to be made hereunder shall constitute a purchase and
sale or capital contribution, as the case may be, and not a loan.
In the event, however, that a court of competent jurisdiction
were to hold that any transaction provided for hereby constitutes
a loan and not a purchase and sale or capital contribution, it is
the intention of the parties hereto that this Agreement shall
constitute a security agreement under applicable law and that the
Originator shall be deemed to have granted to MCF a first
priority security interest in all of the Originator's right,
title and interest in, to and under the Transferred Receivables,
all payments of principal, interest, fees, charges and
indemnities on or under such Transferred Receivables and all
Proceeds of any such Transferred Receivables.
SECTION 2.03. Addition of Originator. Any Subsidiary
or Affiliate of the Parent may become an Originator hereunder if
the Rating Agency Condition is satisfied with respect to such
addition and there is no event that has occurred and is
continuing which constitutes a Termination Event or would
constitute a Termination Event but for the requirement that
notice be given or time elapse or both. The Originator and any
Subsidiary or Affiliate of the Parent that is proposed to be
added as an Originator shall give to MCF and its assigns prior
written notice of its desire to add such Subsidiary or Affiliate
as an Originator. Once the notice has been given, any addition
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of a Subsidiary or Affiliate of the Parent as an Originator
pursuant to this Section 2.03 shall become effective on the first
Business Day following the date on which (i) the Rating Agency
Condition has been satisfied, (ii) the Subsidiary or Affiliate
and the parties hereto shall have executed and delivered the
agreements, instruments and other documents and the amendments or
other modifications to the Related Documents, in form and
substance reasonably satisfactory to MCF and the Operating Agent,
that MCF or the Operating Agent reasonably determine are
necessary or appropriate to effect the addition and (iii) the
Operating Agent shall have given written notice of its approval
of such addition.
SECTION 2.04. Termination of Status as an Originator.
(a) At any time when more than one Person is an Originator, an
Originator may terminate its obligations as an Originator
hereunder if:
(i) the Originator (a "Terminating Originator") shall
have given MCF and its assigns not less than 60 days' prior
written notice of its intention to terminate,
(ii) an Authorized Officer of the Terminating
Originator shall have certified that the termination by the
Terminating Originator of its status as an Originator will
not have a material adverse effect on the business,
financial condition or operations of MCF, and
(iii) both immediately before and after giving
effect to the termination by the Terminating Originator, no
Termination Event shall have occurred and be continuing or
shall reasonably be expected to occur as a result of such
termination.
Any termination by an Originator shall become effective
on the first Business Day that follows the day on which the
requirements of clauses (a)(i) through (iii) shall have been
satisfied (or such later date specified in the notice or
certificate referred to in the clauses). Any termination by an
Originator shall terminate its rights and obligations hereunder;
provided, however, that the termination shall not relieve the
Terminating Originator of obligations which relate to Transferred
Receivables originated by or obligations of the Terminating
Originator prior to the effective date of the termination.
(b) An Originator's right and obligation to sell its
Receivables to MCF shall terminate immediately if the Originator
ceases to be a Subsidiary or Affiliate of the Parent; provided,
however, that the termination shall not relieve the Originator of
obligations which relate to Transferred Receivables originated by
or obligations of the Originator prior to the effective date of
the termination.
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ARTICLE III
CONDITIONS OF SALE
SECTION 3.01. Conditions Precedent to the Initial
Sale. The initial Sale hereunder is subject to the conditions
precedent that MCF shall have received on or before the Effective
Date, each dated such date (unless otherwise indicated), in form
and substance satisfactory to MCF:
(i) an Assignment executed by the Originator;
(ii) a copy of resolutions duly adopted by the
Board of Directors of the Originator approving this
Agreement, the Assignment and the other documents to be
delivered by it hereunder and the transactions and matters
contemplated hereby, certified by its Secretary or Assistant
Secretary;
(iii) the charter, as amended, of the Originator,
certified by the Secretary of State of the Originator's
state of incorporation, dated not earlier than 10 days prior
to the Effective Date;
(iv) a good standing certificate for the
Originator issued by the Secretary of State of the
Originator's state of incorporation, dated not earlier than
10 days prior to the Effective Date;
(v) a copy of the Originator's by-laws, as
amended, certified by the Originator's Secretary or
Assistant Secretary;
(vi) a certificate of the Secretary or Assistant
Secretary of the Originator certifying the names and true
signatures of the officers authorized on behalf of the
Originator to sign this Agreement, the Assignment, and the
other documents to be delivered by the Originator hereunder
(on which certificate MCF may conclusively rely until such
time as MCF shall receive from the Originator a revised
certificate meeting the requirements of this Subsection
(vi)) and certifying that (A) the charter of the Originator
has not changed since the date of the certificate referred
to in Section 3.01(iii), (B) the Originator is still in good
standing in all jurisdictions where it is qualified to do
business, including, without limitation, that referred to in
Section 3.01(iv), (C) all representations and warranties
made by the Originator in this Agreement are true and
correct in all material respects (except with respect to
Section 4.01(b) and those already so qualified which are
true and correct in all respects) and (D) no financing
statements or other similar instruments relating to the
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Receivables have been filed in any jurisdiction, other than
those financing statements, other similar instruments and
documents shown on the certified copies of the requests for
information or copies (Form UCC-11)(or a similar search
report certified by a party acceptable to the Operating
Agent) provided pursuant to clause (ix);
(vii) copies of proper financing statements (Form
UCC-1), dated on or prior to the Effective Date, naming the
Originator as the assignor of the Transferred Receivables
and MCF as assignee, or other similar instruments or
documents, in form and substance sufficient for filing under
the UCC or any comparable law of any and all jurisdictions
as may be necessary or, in the reasonable opinion of the
Operating Agent desirable to perfect MCF's ownership
interest in all Transferred Receivables, in each case in
which an interest may be assigned hereunder;
(viii) copies of properly executed termination
statements or statements of release (Forms UCC-2 or UCC-3)
or other similar instruments or documents, if any, in form
and substance satisfactory for filing under the UCC or any
comparable law of any and all jurisdictions as may be
necessary or, in the reasonable opinion of the Operating
Agent, desirable to release all security interests and
similar rights of any Person in the Transferred Receivables
previously granted by the Originator;
(ix) certified copies of requests for information
or copies (Form UCC-11) (or a similar search report
certified by a party acceptable to the Operating Agent),
dated a date reasonably near and prior to the Effective
Date, listing all effective financing statements and other
similar instruments and documents, which name the Originator
(under its present name and any previous name) as debtor and
which are filed in the jurisdictions in which filings are to
be made pursuant to such Subsections (vii) and (viii) above,
together with copies of such financing statements, none of
which shall cover any Transferred Receivables unless
termination statements or statements of release are provided
with respect thereto pursuant to Subsection (viii) above;
(x) any necessary third party consents to the
closing of the transactions contemplated hereby, in the form
and substance reasonably satisfactory to the Operating
Agent; and
(xi) the Lockbox Agreements in respect of each
Lockbox Account, in each case duly executed by the parties
thereto and acknowledged and agreed to by the applicable
Lockbox Bank.
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SECTION 3.02. Conditions Precedent to All Sales. The
obligation of MCF to pay for each Sold Receivable on each
Transfer Date (including the initial Transfer Date) shall be
subject to the further conditions precedent that on such Transfer
Date:
(a) The following statements shall be true (and
delivery by the Originator of a Request Notice and the acceptance
by the Originator of the Sale Price for any Receivables on any
Transfer Date shall constitute a representation and warranty by
the Originator that on such Transfer Date such statements are
true):
(i) the representations and warranties of the
Originator contained in Section 4.01 shall be correct on and
as of such Transfer Date in all material respects (except
with respect to Section 4.01(b) and those already so
qualified which are true and correct in all respects),
before and after giving effect to the Sale of Receivables on
such Transfer Date and to the application of proceeds
therefrom, as though made on and as of such date; and
(ii) the Originator is in compliance with each of
its covenants and other agreements set forth herein.
(b) The Originator shall have taken such other action,
including delivery of approvals, consents, opinions, documents
and instruments as MCF may reasonably request.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 4.01. Representations and Warranties of the
Originator. The Originator represents and warrants to MCF as of
each Transfer Date, that:
(a) With respect to the Originator:
(i) the Originator is a corporation duly
organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation and is
duly qualified to do business and is in good standing in
every jurisdiction in which the nature of its business
requires it to be so qualified except where the failure to
be so qualified would not materially and adversely affect
(1) the performance of MCF or the Originator of its
obligations under this Agreement or any of the Related
Documents, (2) the validity or enforceability of this
Agreement or any of the Related Documents, (3) the
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Transferred Receivables, the Contracts or the interests of
MCF or its assigns therein, or (4) the business, operations,
financial condition or prospects of MCF or the Originator;
(ii) the Originator has the corporate power and
authority to own, pledge, mortgage, operate and convey all
of its properties and assets, to execute and deliver this
Agreement and the Related Documents and to perform the
transactions contemplated hereby and thereby;
(iii) the execution, delivery and performance by
the Originator of this Agreement and the Related Documents
and the transactions contemplated hereby and thereby (A)
have been duly authorized by all necessary corporate or
other action on the part of the Originator, (B) do not
contravene or cause the Originator to be in default under
(1) the Originator's certificate or articles of
incorporation or by-laws, (2) any contractual restriction
with respect to any Debt of the Originator or contained in
any material indenture, loan or credit agreement, lease,
mortgage, security agreement, bond, note, or other material
agreement or instrument binding on or affecting the
Originator, its affiliates or their or its respective
property or (3) any law, rule, regulation, order, writ,
judgment, award, injunction or decree applicable to, binding
on or affecting the Originator, or its property and (C) do
not result in or require the creation of any Adverse Claim
upon or with respect to any of its properties (other than in
favor of MCF with respect to this Agreement and Redwood and
the Collateral Agent under the Purchase Agreement);
(iv) this Agreement and the Related Documents have
each been duly executed and delivered by the Originator;
(v) no approval or consent of, notice to, filing
with or licenses, permits, qualifications or other action by
any Governmental Authority or any other party, is required
or necessary for the conduct of the Originator's business as
currently conducted and for the due execution, delivery and
performance by the Originator of this Agreement or any of
the Related Documents or for the perfection of or the
exercise by MCF, Redwood, the Operating Agent or the
Collateral Agent of any of their rights or remedies
thereunder or hereunder, except (A) approvals, consents,
notices, filings and other actions which have been obtained
or made and complete copies of which have been provided to
Redwood, the Operating Agent and the Collateral Agent (other
than confirmation statements in respect of any such filings)
and (B) where the failure to obtain such approval, consent,
license, permit or qualification, make or present such
notice or filing, or take such other action would not
materially and adversely affect (1) the performance of MCF
or the Originator of its obligations under this Agreement or
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any of the Related Documents, (2) the validity or
enforceability of this Agreement or any of the Related
Documents, (3) the Transferred Receivables, the Contracts or
the interests of MCF or its assigns therein, or (4) the
business, operations, financial condition or prospects of
MCF or the Originator;
(vi) this Agreement and the other Related
Documents delivered by the Originator are the legal, valid
and binding obligations of the Originator enforceable
against the Originator in accordance with their respective
terms subject to (A) any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the
enforceability of creditors' rights generally and (B)
general equitable principles, whether applied in a
proceeding at law or in equity;
(vii) there is no pending or, to the knowledge of
the Originator, threatened, nor, to the knowledge of the
Originator, any reasonable basis for, any action, suit or
proceeding against or affecting the Originator, its officers
or directors, or the property of the Originator, in any
court or tribunal, or before any arbitrator of any kind or
before or by any Governmental Authority (A) asserting the
invalidity of this Agreement or any of the Related
Documents, (B) seeking to prevent the transfer, sale, pledge
or contribution of any Receivable or the consummation of any
of the transactions contemplated hereby or thereby, (C)
seeking any determination or ruling that might materially
and adversely affect (1) the performance by MCF or the
Originator of its obligations under this Agreement or any of
the Related Documents, (2) the validity or enforceability of
this Agreement or any of the Related Documents, or (3) the
Transferred Receivables, the Contracts or the interests of
MCF or its assigns therein, or (D) reasonably likely to
result in damages or penalties in an uninsured amount in
excess of $1,000,000;
(viii) no injunction, writ, restraining order or
other order (collectively, "Orders") of any nature adverse
to the Originator or the conduct of its business or which is
inconsistent with the due consummation of the transactions
contemplated by this Agreement or the Purchase Agreement or
any of the other Related Documents has been issued by a
Governmental Authority nor been sought by any Person except
such Orders that would not materially and adversely affect
(1) the performance of MCF or the Originator of its
obligations under this Agreement or any of the Related
Documents, (2) the validity or enforceability of this
Agreement or any of the Related Documents, (3) the
Transferred Receivables or the Contracts or the interests of
MCF or its assigns therein, or the business, operations,
financial condition or prospects of MCF or the Originator;
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(ix) the principal place of business, the chief
executive office and all other places of business of the
Originator are located at the addresses of the Originator
referred to in Schedule 1 and there are now no, and during
the past four months there have not been any, other
locations where the Originator is located (as that term is
used in the UCC of the jurisdiction where such principal
place of business is located) or keeps Records;
(x) the legal name of the Originator is as set
forth at the beginning of this Agreement and the Originator
has not changed its name in the last six years, and during
such period the Originator did not use, nor does the
Originator now use, any trade names, fictitious names,
assumed names or "doing business as" names other than as set
forth in Schedule 1;
(xi) the Originator is solvent and will not become
insolvent after giving effect to the transactions
contemplated by this Agreement and the Related Documents;
the Originator is paying its Debts as they mature; the
Originator has not incurred Debts beyond its ability to pay
as they mature; and the Originator, after giving effect to
the transactions contemplated by this Agreement and the
Related Documents, will have an adequate amount of capital
to conduct its business in the foreseeable future;
(xii) for federal income tax, reporting and
accounting purposes (except in any consolidated financial
statements and consolidated tax returns), the Originator
will treat the sale of each Sold Receivable sold or assigned
pursuant to this Agreement as a sale of, or absolute
assignment of, its full right, title and ownership interest
in such Receivable to MCF (and those Receivables contributed
to MCF by the Originator pursuant to this Agreement shall be
accounted for as an increase in the stated capital of MCF),
and the Originator has not in any other respect accounted
for or treated the transactions contemplated by this
Agreement or the Related Documents.
(xiii) the Originator has complied in all material
respects with all applicable laws, rules, regulations, and
orders with respect to it, its business and properties and
all Transferred Receivables and related Contracts (including
without limitation, all applicable environmental, health and
safety requirements) and all restrictions contained in any
indenture, loan or credit agreement, mortgage, security
agreement, bond, note or other agreement or instrument
binding on or affecting the Originator or its property;
(xiv) without limiting the generality of the prior
representation, no condition exists or event has occurred
which, in itself or with the giving of notice or lapse of
time or both, would result in the suspension, revocation,
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impairment, forfeiture or non-renewal of any Governmental
Consent applicable to the Originator or any Subsidiary
except where such conditions or events would not, separately
or in the aggregate, have a material adverse effect on (A)
the performance by MCF or the Originator of its obligations
under this Agreement or any of the Related Documents, (B)
the validity or enforceability of this Agreement or any of
the Related Documents, or (C) the Transferred Receivables
or the Contracts or the interests of MCF or Redwood therein;
(xv) the Originator has filed on a timely basis
all tax returns (federal, state and local) required to be
filed and has paid or made adequate provisions for the
payment of all taxes, fees, assessments and other
governmental charges due from the Originator (other than
taxes, fees, amendments or governmental charges which the
Originator is contesting in good faith with such taxing
authority and in respect of which no final unappealable
order has been made against the Originator), no tax lien or
similar Adverse Claim has been filed, and no claim is being
asserted, with respect to any such tax, fee, assessment, or
other governmental charge. Any taxes, fees, assessments and
other governmental charges payable by the Originator in
connection with the execution and delivery of this Agreement
and the Related Documents and the transactions contemplated
hereby or thereby have been paid or shall have been paid
when due, at or prior to such Transfer Date;
(xvi) the Originator is licensed or otherwise has
the lawful right to use all patents, trademarks,
servicemarks, tradenames, copyrights, technology, know-how
and processes used in or necessary for the conduct of its
business as currently conducted which are material to its
financial condition, business, operations, assets and
prospects, individually or taken as a whole;
(xvii) as of the date of each Request Notice
delivered by the Originator, such Request Notice contains an
accurate list of the aggregate amount of all Transferred
Receivables contributed or sold by the Originator to MCF as
of the relevant Transfer Date;
(xviii) each Obligor of a Transferred Receivable has
been directed, and is required to, remit all payments with
respect to such Receivable for deposit in a Lockbox Account
or a Lockbox;
(xix) except as set forth on Schedule 2, the
Originator is in compliance with ERISA and has not incurred
and does not expect to incur any liabilities (except for
premium payments arising in the ordinary course of business)
payable to the PBGC (or any successor thereof) under ERISA
or the Internal Revenue Code;
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(xx) except as set forth on Schedule 2, each
pension plan or profit sharing plan to which the Originator
or any Affiliate is a party has been administered and fully
funded in accordance with the obligations the Originator
under law and as set forth in such plan, and the Originator
has complied with the applicable provisions of ERISA or the
Internal Revenue Code in effect as of such Transfer Date;
(xxi) the Originator has not agreed to pay any fee
or commission to any agent, broker, finder or other person
for or on account of services rendered as a broker or finder
in connection with this Agreement or the Related Documents
or the transactions contemplated hereby or thereby which
would give rise to any valid claim against MCF for any
brokerage commission or finder's fee or like payment;
(xxii) all information heretofore or hereafter
furnished with respect to the Originator to MCF in
connection with any transaction contemplated by this
Agreement or the Related Documents is and will be true and
complete in all material respects and does not and will not
omit to state a material fact necessary to make the
statements contained herein or therein not misleading,
provided that any projections, pro forma or preliminary
financial information furnished are based on good faith
estimates and assumptions believed by the Originator to be
reasonable at the time made and MCF acknowledges that such
projections as to future events are not to be viewed as
facts and that actual results for such period may differ
from the projected results;
(xxiii) no part of the proceeds received by the
Originator or any Affiliate from the Sale Price will be used
directly or indirectly for the purpose of purchasing or
carrying, or for payment in full or in part of, Debt that
was incurred for the purposes of purchasing or carrying any
"margin stock," as such term is defined in Regulations G and
U of the Board of Governors of the Federal Reserve System;
(xxiv) other than the Services Agreement, there are
not now, nor will there be at any time in the future, any
agreement or understanding between the Originator and MCF
(other than as expressly set forth herein) providing for the
allocation or sharing of obligations to make payments or
otherwise in respect of any taxes, fees, assessments or
other governmental charges;
(xxv) no transaction contemplated by this Agreement
or any of the Related Documents requires compliance with any
bulk sales act or similar law;
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(xxvi) the Request Notice with respect to such
Transfer Date is accurate in all material respects;
(xxvii) each purchase of Receivables under this
Agreement will constitute (A) a "current transaction" within
the meaning of Section 3(a)(3) of the Securities Act of
1933, as amended, and (B) a purchase or other acquisition of
notes, drafts, acceptances, open accounts receivable or
other obligations representing part or all of the sales
price of merchandise, insurance or services within the
meaning of Section 3(c)(5) of the Investment Company Act of
1940, as amended;
(xxviii) (A) the Originator is not a party to any
indenture, loan or credit agreement or any lease or other
agreement or instrument or subject to any charter or
corporation restriction that is reasonably likely to have,
and no provision of applicable law or governmental
regulation is reasonably likely to have, a material adverse
effect on the ability of the Originator to carry out its
obligations under this Agreement and the other Related
Documents to which the Originator is a party and (B) the
Originator is not in default under or with respect to any
contract, agreement, lease or other instrument to which the
Originator is a party and which is material to the
Originator's ability to perform its obligations hereunder or
to the quality or collectibility of the receivables, and
the Originator has not delivered or received any notice of
default thereunder;
(xxix) the Originator is not an "investment company"
or an "affiliated person" of, or "promoter" or "principal
underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended.
The purchase or acquisition of the Transferred Receivables
by MCF, the application of the proceeds and the consummation
of the transactions contemplated by this Agreement and the
other Related Documents to which the Originator is a party
will not violate any provision of such Act or any rule,
regulation or order issued by the Securities and Exchange
Commission thereunder;
(xxx) the bylaws or the articles of incorporation
of the Originator require it to maintain (A) books and
records of account, and (B) minutes of the meetings and
other proceedings of its shareholders and board of
directors;
(xxxi) the Lockboxes and the Lockbox Accounts are
the only lockboxes and accounts maintained by the Originator
into which Collections of any Transferred Receivables are
deposited; and
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(xxxii) each of the representations and warranties of
the Originator contained in the Related Documents (other
than this Agreement) is true and correct in all material
respects and the Originator hereby makes each such
representation and warranty to, and for the benefit of, the
Collateral Agent, the Operating Agent and Redwood as if the
same were set forth in full herein.
(b) On each Transfer Date and as of the date of each
Investment Base Certificate delivered under the Purchase
Agreement with respect to each Transferred Receivable designated
as an Eligible Receivable:
(i) such Receivable is an Eligible Receivable and
is a receivable created through the provision of
merchandise, goods or services by the Originator in the
ordinary course of its business;
(ii) such Receivable was created in accordance
with and satisfies in all material respects all applicable
requirements of the Credit and Collection Policies;
(iii) such Receivable represents the genuine,
legal, valid and binding obligation in writing of the
Obligor enforceable by the holder thereof in accordance with
its terms, subject to (A) any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting the
enforceability of creditors' rights generally and (B)
general equitable principles, whether applied in a
proceeding at law or in equity and neither such Receivable
nor its related Contract has been satisfied, subordinated,
rescinded or amended in any manner which would impair the
collectibility of such Receivable, adjust the value of such
Receivable, or modify the payment terms of such Receivable
after its creation;
(iv) such Receivable is not and will not be
subject to any exercise of any right of rescission, set-off,
recoupment, counterclaim or defense;
(v) prior to its sale or contribution to MCF such
Receivable was owned by the Originator free and clear of any
Adverse Claim, and the Originator had the right to
contribute, sell, assign and transfer the same and interests
therein as contemplated under this Agreement, upon such sale
or contribution, MCF will have acquired good and marketable
title to and the sole record and beneficial ownership
interest in such Receivable, free and clear of any Adverse
Claim and, after such sale or contribution, such Receivable
did not become subject to any Adverse Claim as a result of
any action or inaction of the Originator;
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(vi) this Agreement and the Assignment constitute
a valid sale, contribution, transfer, assignment, setover
and conveyance to MCF of all right, title and interest of
the Originator in and to such Receivable;
(vii) such Receivable is entitled to be paid
pursuant to the terms of the related Contract, has not been
paid in full or been compromised, adjusted, extended,
satisfied, subordinated, rescinded or modified, and is not
subject to compromise, adjustment, extension, satisfaction,
subordination, rescission, or modification by the Originator
except in accordance with any applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting the
enforceability of creditors' rights generally;
(viii) the Originator has submitted all necessary
documentation for payment of such Receivable to the Obligor
and has fulfilled all its other obligations in respect
thereof;
(ix) the stated term of such Receivable, if any,
is not greater than 90 days;
(x) such Receivable is an "account" within the
meaning of the UCC of the jurisdiction where the
Originator's chief executive office is located;
(xi) neither such Receivable nor its related
Contract contravenes in any material respect any laws, rules
or regulations applicable thereto (including, without
limitation, laws, rules and regulations relating to usury,
consumer protection, truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and no party to such
related Contract is in violation of any such law, rule or
regulation in any material respect;
(xii) such Receivable does not represent "billed
but not yet shipped" goods or merchandise, unperformed
services, consigned goods or "sale or return" goods; nor
does such Receivable arise from a transaction for which any
additional performance by MCF or acceptance or other act of
the Obligor remains to be performed as a condition to any
payments on such Receivable;
(xiii) there are no proceedings or investigations
pending or to the Originator's knowledge threatened before
any Governmental Authority (A) asserting the invalidity of
such Receivable or such Contract, (B) asserting the
bankruptcy or insolvency of the related Obligor, (C) seeking
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the payment of such Receivable or payment and performance of
such Contract, or (D) seeking any determination or ruling
that might materially and adversely affect the validity or
enforceability of such Receivable or such Contract;
(xiv) as of the relevant Transfer Date hereunder,
no Obligor on such Receivable is bankrupt or insolvent, is
unable to make payment of its obligations when due, is the
debtor in a voluntary or involuntary bankruptcy proceeding,
or is the subject of a comparable receivership or insolvency
proceeding, other than Obligors under the protection of a
bankruptcy court or receivership which has approved payment
by any such Obligor of such Receivable; and
(xv) the Originator has no knowledge of any fact
(including any defaults by the Obligor on any other
accounts) which leads it or should have led it to expect
that any payments on such Receivable will not be paid in
full when due or to expect any other material adverse effect
on (A) the performance by MCF or the Originator of its
obligations under this Agreement or any of the Related
Documents, (B) the validity or enforceability of this
Agreement or any of the Related Documents, or (C) the
Transferred Receivables or the Contracts or the interests of
MCF or Redwood therein.
It is understood and agreed that the representations and
warranties described in this Section 4.01 shall survive the sale
or contribution of the Transferred Receivables to MCF, any
subsequent assignment of the Transferred Receivables by MCF, and
the termination of this Agreement and the Purchase Agreement and
shall continue so long as any Transferred Receivable shall remain
outstanding.
SECTION 4.02. Covenants of the Originator.
(a) Offices and Records. The Originator shall keep
its chief place of business and chief executive offices and the
office where it keeps its Records at the respective locations
specified in Schedule 1 hereto or, upon at least 30 days prior
written notice to MCF and the Collateral Agent, at such other
location in a jurisdiction where all action required by Section
4.02(d) shall have been taken with respect to the Transferred
Receivables. The Originator shall, for not less than three years
or for such longer period as may be required by law, from the
date on which any Transferred Receivable arose, maintain adequate
Records with respect to each Transferred Receivable, including
records of all payments received, credits granted and merchandise
returned. Upon prior notice to the Originator, except after the
occurrence of any Termination Event, the Originator will permit
representatives of MCF, the Servicer, the Operating Agent or the
Collateral Agent at any time and from time to time during normal
business hours, and at such times outside of normal business
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hours as MCF, the Servicer, the Operating Agent or the Collateral
Agent shall reasonably request, (i) to inspect and make copies of
and abstracts from such records, (ii) to visit the properties of
the Originator utilized in connection with the collection,
processing or servicing of the Transferred Receivables for the
purpose of examining such Records, and (iii) to discuss matters
relating to the Transferred Receivables or the Originator's
performance under this Agreement or the affairs, finances and
accounts of the Originator with any of its officers, directors,
employees, representatives or agents and with its independent
certified accountants. The Originator will advise its
independent certified accountants that MCF, the Operating Agent,
the Servicer and the Collateral Agent have been authorized to
review and discuss with such accountants any and all financial
statements and other information of any kind that they may have
with respect to the Originator and deliver a letter (the
"Accountants' Letter") addressed to such accountants instructing
them to make available to MCF, the Operating Agent, the Servicer
and the Collateral Agent such information and records as MCF, the
Operating Agent, the Servicer and the Collateral Agent may
reasonably request and to otherwise comply with the provisions of
this Section 4.02(a). The Originator shall be given prior notice
of any discussions with its accountants and the opportunity to
participate; provided that the Originator's failure or inability
to participate shall not prevent any of MCF, the Operating Agent,
the Servicer and the Collateral Agent from engaging in such
discussions. After the Effective Date, if the Originator engages
the services of accountants other than Deloitte & Touche, it
shall deliver a letter addressed to such accountants containing
the same terms and provisions as the Accountants' Letter. In
connection with the foregoing, in the event any of the
Originator, the Operating Agent or the Collateral Agent
determines that a deterioration has or is reasonably likely to
occur in the quality of servicing of the Transferred Receivables,
any of them, individually or collectively, may institute
procedures to permit it to confirm the Obligor's outstanding
balances in respect of any Transferred Receivables. The
Originator agrees to render to MCF, the Operating Agent and the
Collateral Agent, at the Originator's own cost and expense, such
clerical and other assistance as may be reasonably requested with
regard to the foregoing. If a Termination Event under the
Purchase Agreement shall have occurred and be continuing,
promptly upon request therefor, the Originator shall assist MCF
in delivering to the Operating Agent records reflecting activity
through the close of business on the immediately preceding
Business Day.
(b) Compliance With Credit and Collection Policies.
The Originator shall comply in all material respects with the
Credit and Collection Policies with regard to each Transferred
Receivable and the related Contracts, and with the terms of such
Receivables and Contracts.
(c) Notice of Adverse Claim. The Originator shall
advise MCF and any assignees, promptly, in reasonable detail, (i)
of any Adverse Claim known to it made or asserted against any of
the Transferred Receivables, (ii) of any determination that a
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Sold Receivable, or any other Receivable designated as an
Eligible Receivable in a Request Notice or otherwise, was not an
Eligible Receivable at such time and (iii) of the occurrence of
any event which would have a material adverse effect on the
aggregate value of the Transferred Receivables or on the validity
of the transfers in this Agreement.
(d) Further Assurances; Financing Statements.
(i) The Originator agrees that at any time and
from time to time, at its expense, upon the request of MCF
or MCF's assignees it shall promptly execute and deliver all
further instruments and documents, and take all further
action, that may be necessary or, in the reasonable opinion
of MCF or any assignee, desirable or that MCF or any
assignee may reasonably request to perfect, preserve,
continue and maintain fully and protect the transfers made
and the right, title and interests (including any security
interests) granted to MCF by this Agreement or to enable MCF
or any assignee to exercise and enforce its rights and
remedies under this Agreement or any of the Related
Documents with respect to any Transferred Receivables.
Without limiting the generality of the foregoing, the
Originator shall execute and file such financing or
continuation statements, or amendments thereto, and such
other instruments or notices as may be necessary or in the
reasonable opinion of MCF or any assignee desirable or that
MCF or any assignee may reasonably request to protect and
preserve and perfect the transfers and security interests
granted by this Agreement, free and clear of all Adverse
Claims.
(ii) The Originator hereby authorizes MCF and the
Collateral Agent to file one or more financing or
continuation statements, and amendments thereto, relating to
all or any part of the Transferred Receivables without the
signature of the Originator where permitted by law. A
carbon, photographic or other reproduction of this Agreement
or any notice or financing statement covering the
Transferred Receivables or any part thereof shall be
sufficient as a notice or financing statement where
permitted by law. The Seller will promptly send to the
Originator any financing or continuation statements thereto
which it files without the signature of the Originator
except, in the case of filings of copies of this Agreement
as financing statements, the Seller will promptly send the
Originator the filing or recordation information with
respect thereto.
(e) Assignment. The Originator acknowledges and
agrees that, to the extent permitted under the Purchase
Agreement, MCF may assign all of its right, title and interest
in, to and under the Transferred Receivables and its right, title
and interest under this Agreement, including its right to
exercise the remedies created by Section 4.04. The Originator
agrees that, upon such assignment, the assignee under the
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Purchase Agreement may enforce directly, without joinder of MCF,
the repurchase obligations of the Originator set forth in Section
4.04 with respect to breaches of the representations and
warranties or covenants set forth in Section 4.01 and 4.02.
(f) Compliance With Agreements and Applicable Laws.
The Originator shall perform each of its obligations under this
Agreement and the Related Documents and comply with all material
requirements of any law, rule or regulation applicable to it,
provided that the Originator shall be deemed to have complied
with any such requirements for as long as the Originator contests
in good faith the application of such requirement, a stay has
been granted with respect to any penalty imposed on the
Originator in respect of such requirement and no final
unappealable order in respect of such requirement has been made
against the Originator except for any noncompliance with laws
which would not have a material adverse effect on (1) the
performance of MCF or the Originator of its obligations under
this Agreement or any of the Related Documents, (2) the validity
or enforceability of this Agreement or any of the Related
Documents, (3) the Transferred Receivables or the Contracts or
the interests of MCF or its assigns therein, or the business,
operations, financial condition or prospects of MCF or the
Originator.
(g) Corporate Existence. Subject to Section 4.03(d),
the Originator shall maintain its corporate existence and shall
at all times continue to be duly organized under the laws of the
state of its incorporation and duly qualified and duly authorized
(as described in Section 4.01) and shall conduct its business in
accordance with the terms of its certificate of incorporation and
bylaws.
(h) Notice of Material Event. The Originator shall
promptly inform MCF and any assignee (except in respect of clause
(i), in which event the Originator shall immediately inform MCF
and any assignee) in writing of the occurrence of any of the
following:
(i) the submission of any claim or the initiation
of any legal process, litigation or administrative or
judicial investigation against the Originator or with
respect to or in connection with all or any portion of the
Transferred Receivables, in excess of $1,000,000 or which,
if adversely determined, would be reasonably likely to have
a material adverse effect on the Originator;
(ii) any change in the location of the
Originator's principal office or any change in the location
of the Originator's books and records;
(iii) the commencement or threat of any rule making
or disciplinary proceedings or any proceedings instituted by
or against the Originator in any federal, state or local
court or before any governmental body or agency, or before
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any arbitration board, or the promulgation of any proceeding
or any proposed or final rule which, if adversely
determined, would have a material adverse effect with
respect to the Originator;
(iv) the commencement of any proceedings by or
against the Originator under any applicable bankruptcy,
reorganization, liquidation, rehabilitation, insolvency or
other similar law now or hereafter in effect or of any
proceeding in which a receiver, liquidator, conservator,
trustee or similar official shall have been, or may be,
appointed or requested for the Originator or any of its
assets;
(v) the receipt of notice that (A) the Originator
is being placed under regulatory supervision, (B) any
license, permit, charter, registration or approval necessary
for the conduct of the Originator's business is to be, or
may be, suspended or revoked, or (C) the Originator is to
cease and desist any practice, procedure or policy employed
by the Originator in the conduct of its business, and such
cessation may have a material adverse effect with respect to
the Originator; or
(vi) any other event, circumstance or condition
that has had, or has a material possibility of having, a
material adverse effect in respect of the Originator.
(i) Maintenance of Licenses. The Originator shall
maintain all licenses, permits, charters and registrations which
are material to the conduct of its business.
(j) Use of Proceeds. The Originator shall apply its
funds towards general corporate purposes (including the
retirement or repayment of third party debt) and towards the
other sums payable by the Originator under this Agreement and the
Related Documents in connection with the transactions
contemplated hereby and by the Related Documents and for no other
purpose.
(k) Separate Identity.
(i) The Originator shall maintain corporate
records and books of account separate from those of MCF.
(ii) The financial statements of the Parent and
its consolidated Subsidiaries shall (i) disclose the effects
of the Originator's transactions in accordance with GAAP and
(ii) either (a) disclose that the assets of MCF are not
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available to pay creditors of the Originator or any other
Affiliate of the Originator or (b) contain the language set
forth in Section 4.02(k)(iii)(b).
(iii) The annual financial statements of the Parent
and its consolidated subsidiaries (including MCF) will
contain footnotes or other information to the effect that
with respect to MCF: (a) MCF's business consists of the
purchase of the Receivables from the Originator and (b) MCF
is a separate corporate entity with its own separate
creditors, which upon its liquidation will be entitled to be
satisfied out of MCF's assets prior to any value in MCF
becoming available to MCF's equityholders.
(iv) The resolutions and other instruments
underlying the transactions described in this Agreement
shall be continuously maintained by the Originator as
official records.
(v) Except as set forth in the Services
Agreement, the Originator shall use its best efforts to
maintain an arm's-length relationship with MCF and will not
hold itself out as being liable for the debts of MCF.
(vi) Except as set forth in the Services
Agreement, the Originator shall use its best efforts to keep
its assets (except with respect to any Records necessary for
the servicing of the Transferred Receivables) and its
liabilities wholly separate from those of MCF.
(vii) The Originator will conduct its business
solely in its own name (including any trade or fictitious
name) through its duly authorized officers or agents so as
not to mislead others as to the identity of the Originator.
(viii) The Originator will use its best efforts to
avoid the appearance of conducting business on behalf of MCF
or that the assets of the Originator are available to pay
the creditors of MCF.
(ix) Except as set forth in the Services
Agreement, the Originator will cause operating expenses and
liabilities of MCF to be paid from MCF's funds.
(l) ERISA. The Originator shall give the Operating
Agent prompt notice of each of the following events (but in no
event more than 30 days after the occurrence of the event): (i)
an Accumulated Funding Deficiency, (ii) the failure to make a
material required contribution to a Plan or Multiemployer Plan
(but in no event will a contribution failure sufficient to give
rise to a lien under 302(f) of ERISA be considered immaterial),
(iii) a Reportable Event, (iv) any action by a Commonly
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Controlled Entity to terminate any Plan or withdraw from any
Multiemployer Plan, (v) any action by the PBGC to terminate or
appoint a trustee to administer a Plan, (vi) the reorganization
or insolvency of any Multiemployer Plan and (vii) an aggregate
Underfunding for all Underfunded Plans in excess of $100,000.
(m) Cooperation With Requests for Information or
Documents. The Originator will cooperate fully with all
reasonable requests of MCF or any assignee regarding the
provision of any information or documents, necessary, including
the provision of such information or documents in electronic or
machine-readable format, or desirable to allow MCF and each
assignee to carry out its responsibilities under the Related
Documents.
(n) Payment, Performance and Discharge of Obligations.
The Originator will pay, perform and discharge all of its
obligations and liabilities, including, without limitation, all
taxes, assessments and governmental charges upon its income and
properties when due the non-payment, performance or discharge of
which would materially and adversely affect (1) the performance
of MCF or the Originator of its obligations under this Agreement
or any of the Related Documents, (2) the validity or
enforceability of this Agreement or any of the Related Documents,
(3) the Transferred Receivables or the Contracts or the interests
of MCF or its assigns therein, or (4) the business, operations,
financial condition or prospects of MCF or the Originator, unless
and to the extent only that such obligations, liabilities, taxes,
assessments and governmental charges shall be contested in good
faith and by appropriate proceedings and that, to the extent
required by GAAP, proper and adequate book reserves relating
thereto are established by the Originator and then only to the
extent that a bond is filed in cases where the filing of a bond
is necessary to avoid the creation of an Adverse Claim against
any of its properties.
SECTION 4.03. Negative Covenants of the Originator.
The Originator shall not, without the written consent of MCF and
each assignee of MCF's rights:
(a) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist any Adverse
Claim upon or with respect to, or assign any right to receive
income in respect of any Transferred Receivable or related
Contract with respect thereto, or upon or with respect to any
Lockbox or any Lockbox Account;
(b) extend, amend, forgive, discharge, compromise,
cancel or otherwise modify the terms of any Transferred
Receivable, or amend, modify or waive any term or condition of
any Contract related thereto (except as to the Originator in its
capacity as the Servicer under the Purchase Agreement and in the
case of any such Contracts, any amendments or modifications to
any provision thereof other than payment terms or any term
adversely affecting the payment of such Receivable), provided
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that the foregoing shall not prohibit the Servicer from offering
early pay discounts to the extent permitted by the Credit and
Collection Policy;
(c) make any change in its instructions to Obligors
regarding payments to be made to MCF or payments to be deposited
to a Lockbox or a Lockbox Account other than (i) changes of a
purely administrative nature which do not alter any directions to
Obligors regarding the method, timing or place of payment, or
(ii) changes to the method or timing of payments which are in
accordance with the Credit and Collections Policy or (iii)
changes redirecting payments from one Lockbox or Lockbox Account
to another Lockbox Account in respect of which all actions
required under Section 6.01 of the Purchase Agreement have been
taken;
(d) merge with or into, consolidate with or into,
convey, transfer, lease or otherwise dispose of all or
substantially all of its assets (whether now owned or hereafter
acquired) to, or acquire all or substantially all of the assets
or capital stock or other ownership interest of, any Person
(whether in one transaction or in a series of transactions)
except where such action would not have a material adverse effect
on the business of the Originator or the ability of the
Originator to perform its obligations under this Agreement and
the Rating Agency Condition is satisfied;
(e) make statements or disclosures or prepare any
financial statements which shall account for the transactions
contemplated by this Agreement in any manner other than as a sale
or absolute assignment of the Transferred Receivables to MCF, or
in any other respect account for or treat the transactions
contemplated hereby (including but not limited to, for
accounting, tax and reporting purposes) in any manner other than
as a sale or absolute assignment of the Transferred Receivables;
(f) (i) take any action, or fail to take any action,
with respect to the Transferred Receivables, if such action or
failure to take action may interfere with the enforcement of any
rights under this Agreement or the Related Documents that are
material to the rights, benefits or obligations of MCF or any
assignee (however, nothing herein shall be construed to
constitute a guarantee of collectibility by the Originator); (ii)
take any action, with respect to the Transferred Receivables, or
fail to take any action, if such action or failure to take action
may materially interfere with the enforcement of any rights with
respect to the Transferred Receivables; or (iii) fail to pay any
tax, assessment, charge, fee or other obligation of the
Originator with respect to the Transferred Receivables, or fail
to defend any action, if such failure to pay or defend may
adversely affect the priority or enforceability of the first
priority perfected interest of MCF in the Transferred Receivables
or the Originator's right, title or interest in the Transferred
Receivables;
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(g) neither the Originator nor any Commonly Controlled
Entity will:
(i) terminate any Plan so as to incur any
material liability to the PBGC;
(ii) knowingly participate in any "prohibited
transaction" (as defined in ERISA) involving any Plan or
Multiemployer Plan or any trust created thereunder which
would subject any of them to a material tax or penalty on
prohibited transactions imposed under Section 4975 of the
Internal Revenue Code or ERISA;
(iii) fail to pay to any Plan or Multiemployer Plan
any contribution which it is obligated to pay under the
terms of such Plan or Multiemployer Plan, if such failure
would cause such plan to have any material Accumulated
Funding Deficiency, whether or not waived; or
(iv) allow or suffer to exist any occurrence of a
Reportable Event, or any other event or condition, which
presents a material risk of termination by the PBGC on any
Plan or Multiemployer Plan, to the extent that the
occurrence or nonoccurrence of such Reportable Event or
other event or condition is within the control of it or any
Commonly Controlled Entity;
(h) make any material change to the Credit and
Collection Policies without the prior written consent of MCF and
each assignee;
(i) take or permit (other than with respect to actions
taken or to be taken solely by a Government Authority) to be
taken any action which would have the effect directly or
indirectly of subjecting interest on any of the Purchases or the
Commercial Paper to withholding taxation in the hands of,
respectively, MCF, Redwood or holders of the Commercial Paper
generally who are residents of the United States, and will
perform all of the Originator's obligations under this Agreement
and the Related Documents to prevent or cure any default by the
Originator which would have the effect, directly or indirectly,
of subjecting interest on any of the Purchases or the Commercial
Paper to withholding taxation; or
(j) amend the Services Agreement.
SECTION 4.04. Breach of Representations, Warranties or
Covenants. Upon discovery by the Originator, MCF, or any
assignee of MCF's rights hereunder, that any of the
representations, warranties or covenants described in
Sections 4.01(b), 4.02(b) or (c) or 4.03(a), (b) or (c) have been
breached such that they are or were untrue or incorrect in any
respect, which breach is reasonably likely to have a material
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adverse effect on the value of a Transferred Receivable or the
interests of MCF or any assignee therein, the party discovering
the same shall give prompt written notice to the other parties.
Thereafter, if requested by notice from MCF or any assignee, or
if the Originator so desires, the Originator shall, on the next
succeeding Business Day, either (i) repurchase such Transferred
Receivable from MCF in consideration of cash or a reduction of
the outstanding indebtedness under the Subordinated Note or both,
(ii) transfer ownership of a new Eligible Receivable or new
Eligible Receivables on such Business Day; or (iii) make a
capital contribution of the Rejected Amount in cash to MCF by
remitting the amount of such capital contribution to the
Collection Account in accordance with the terms of the Purchase
Agreement, in the case of clauses (i), (ii) and (iii) in an
amount equal to the Billed Amount of such Transferred Receivable
less Collections received in respect thereof. Notwithstanding
the foregoing, if any Receivable is not paid in full on account
of any Dilution Factors, the Originator's repurchase obligation
under this Section 4.04 shall be reduced by the amount of any
such Dilution Factors taken into account in the Sale Price.
ARTICLE V
INDEMNIFICATION
SECTION 5.01. Indemnification. (a) Without limiting
any other rights that MCF, any of its shareholders, officers or
agents, or any assignee of MCF's rights hereunder or such
assignee's shareholders, officers, employees or agents (each, an
"Indemnified Party") may have hereunder or under applicable law,
the Originator hereby agrees to indemnify each Indemnified Party
from and against any and all claims, losses, liabilities,
obligations, damages, penalties, actions, judgments, suits, and
costs and expenses of any nature whatsoever related thereto,
including reasonable attorneys' fees and disbursements (all of
the foregoing being collectively referred to as "Indemnified
Amounts") which may be imposed on, incurred by or asserted
against an Indemnified Party in any way arising out of or
resulting from this Agreement or the use by the Originator of
proceeds of any purchase or assignment hereunder or in respect of
any Transferred Receivable or any Contract, excluding, however,
(A) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of such Indemnified
Party, (B) recourse for uncollectible or uncollected Transferred
Receivables or (C) consequential, indirect, punitive or exemplary
damages; provided, however, that if a court of competent
jurisdiction in a final non-appealable order determines that such
Indemnified Amounts arose in part from such Indemnified Party's
gross negligence or wilful misconduct, the Originator shall
reimburse such Indemnified Party for the portion of such Claim
not resulting from such Indemnified Party's gross negligence or
wilful misconduct. To the extent such a determination of gross
negligence or wilful misconduct is made, after payment of any
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Indemnified Amounts related thereto, the Originator shall be
repaid any amounts reimbursed under the preceding clause that due
to such determination it should not have paid. Without limiting
or being limited by the foregoing, the Originator shall pay on
demand to each Indemnified Party any and all Indemnified Amounts
necessary to indemnify such Indemnified Party from and against
any and all Indemnified Amounts relating to or resulting from:
(i) reliance on any representation or warranty
made or deemed made by the Originator (or any of its
officers) under or in connection with this Agreement or any
Related Document, any report or any other information
delivered by the Originator pursuant hereto, which shall
have been incorrect in any material respect when made or
deemed made or delivered;
(ii) the failure by the Originator to comply with
any term, provision or covenant contained in this Agreement,
any Related Document or any agreement executed in connection
with this Agreement, with any applicable law, rule or
regulation with respect to any Transferred Receivable or the
related Contract, or the nonconformity of any Transferred
Receivable or the related Contract with any such applicable
law, rule or regulation; or
(iii) the failure to vest and maintain vested in
MCF, or to transfer to MCF, legal and equitable title to and
ownership of the Receivables which are, or are purported to
be, Transferred Receivables, together with all Collections
and Proceeds in respect thereof, free and clear of any
Adverse Claim (except as permitted hereunder) whether
existing at the time of the proposed sale of such Receivable
or at any time thereafter;
excluding, however, (A) Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part
of such Indemnified Party or (B) recourse for uncollectible or
uncollected Transferred Receivables or (C) consequential,
indirect, punitive or exemplary damages; provided, however, that
if a court of competent jurisdiction in a final non-appealable
order determines that such Indemnified Amounts arose in part from
such Indemnified Party's gross negligence or wilful misconduct,
the Originator shall reimburse such Indemnified Party for the
portion of such Claim not resulting from such Indemnified Party's
gross negligence or wilful misconduct. To the extent such a
determination of gross negligence or wilful misconduct is made,
after payment of any Indemnified Amounts related thereto, the
Originator shall be repaid any amounts reimbursed under the
preceding clause that due to such determination it should not
have paid.
(b) If indemnification is to be sought hereunder by an
Indemnified Party, then such Indemnified Party shall promptly
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notify the Originator of the commencement of any litigation,
proceeding or other action in respect thereof; provided, however,
that the failure to notify the Originator shall not relieve the
Originator from any liability or obligation that it may have
hereunder or otherwise to such Indemnified Party, except to the
extent the Originator is actually prejudiced thereby. Each
Indemnified Party shall have the right to control its own
defense, but shall consult from time to time with the Originator
and in no event shall the Originator, in connection with any one
action or proceeding or separate but substantially similar or
related actions or proceedings arising out of the same general
allegations or circumstances, be liable for the fees and expense
of more than one firm of attorneys (together with any appropriate
local counsel) at any time acting for GE Capital, GE Capital
Markets Group Inc. or their employees, directors or officers
(collectively "GE Persons"), unless any such GE Person has been
advised by legal counsel that (a) the representation of such GE
Person by legal counsel acting for other GE Persons would be
inappropriate due to actual or potential conflicts of interest or
(b) there may be legal defenses available to such GE Person that
are different from or additional to those available to any other
GE Person represented by such legal counsel; provided, that any
Indemnified Party other than any GE Person shall not be
restricted from hiring separate legal counsel the fees and
expenses for which the Originator shall be liable as provided
herein. Notwithstanding anything to the contrary contained
herein, the Originator shall not have any obligation to hold
harmless or indemnify any Indemnified Party for the amount of any
cash settlement if any Indemnified Party enters into any such
cash settlement of a claim without the prior written consent of
the Originator, which consent will not be unreasonably withheld
or delayed and in the event the Originator shall not consent to
any proposed settlement, then the Originator shall notify such
Indemnified Party in writing of the amount which the Originator
is willing to pay (and if no such written notification is
provided, the Originator will be deemed to consent to the entire
cash settlement); provided that the Originator shall in any event
continue to be obligated to hold harmless and indemnify such
Indemnified Party for legal costs in relation to such Indemnified
Amount as provided herein. If, for any reason, no settlement is
made, all indemnity obligations under this Article V shall
continue.
SECTION 5.02. Assignment of Indemnities. The
Originator acknowledges that, to the extent permitted under the
Purchase Agreement, MCF may assign its rights of indemnity
granted hereunder and upon such assignment, such assignee shall
have all rights of MCF hereunder and may in turn assign such
rights. The Originator agrees that, upon such assignment, such
assignee may enforce directly, without joinder of MCF, the
indemnities set forth in this Article V.
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ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise
stated herein, be in writing (including facsimile, telex and
express mail) and mailed or telecommunicated, or delivered as to
each party hereto, at its address set forth under its name on the
signature page hereof or at such other address as shall be
designated by such party in a written notice to the other parties
hereto. All such notices and communications shall not be
effective until received by the party to whom such notice or
communication is addressed.
SECTION 6.02. No Waiver; Remedies. No failure on the
part of an Originator or MCF or any assignee of MCF to exercise,
and no delay in exercising, any right hereunder or under any
Assignment shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not
exclusive of any other remedies provided by law.
SECTION 6.03. Binding Effect; Assignability. This
Agreement shall be binding upon and inure to the benefit of the
Originator and MCF, and their respective successors and permitted
assigns. Except as contemplated herein, none of the parties may
assign any of its rights and obligations hereunder or any
interest herein without the prior written consent of the other
parties. 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 its
termination; provided, that the rights and remedies pursuant to
Section 4.04 with respect to any breach of any representation,
warranty or covenants made by the Originator pursuant to
Sections 4.01, 4.02 and 4.03 and the indemnification and payment
provisions of Article V shall be continuing and shall survive any
termination of this Agreement.
SECTION 6.04. No Proceedings. The Originator hereby
agrees that it will not, directly or indirectly, institute, or
cause to be instituted, against MCF any proceeding of the type
referred to in Section 9.01(c) of the Purchase Agreement so long
as there shall not have elapsed one year plus one day since the
latest maturing commercial paper issued by Redwood and allocated
to MCF has been paid in full in cash.
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SECTION 6.05. Amendments; Consents and Waivers. No
modification, amendment or waiver of, or with respect to, any
provision of this Agreement, the Purchase Agreement and any
exhibits or schedules hereto or thereto, nor consent to any
departure by the Originator or MCF from any of the terms or
conditions hereof or thereof, shall be effective unless it shall
be in writing and signed by each of the parties hereto, and prior
written consent is given by Redwood and the Collateral Agent.
Any waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No consent or
demand in any case shall, in itself, entitle any party to any
other consent or further notice or demand in similar or other
circumstances. This Agreement and the documents referred to
herein embody the entire agreement of the Originator and MCF with
respect to the Transferred Receivables and supersede all prior
agreements and understandings relating to the subject hereof.
SECTION 6.06. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS (AS OPPOSED
TO CONFLICT OF LAWS PROVISIONS) OF THE STATE OF CALIFORNIA.
(b) THE ORIGINATOR AND MCF HEREBY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA,
AND EACH WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT
AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE BY
REGISTERED MAIL DIRECTED TO THE ADDRESS SET FORTH ON THE
SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN
THE U.S. MAILS, POSTAGE PREPAID. THE ORIGINATOR AND MCF HEREBY
WAIVE ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY
OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND
CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION SHALL
AFFECT THE RIGHT OF THE ORIGINATOR OR MCF TO SERVE LEGAL PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW.
(c) THE ORIGINATOR AND MCF HEREBY WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH THIS AGREEMENT.
INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
SECTION 6.07. Execution in Counterparts; Severability.
This Agreement may be executed by the parties hereto in separate
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counterparts, each of which when so executed shall be deemed to
be an original and both of which when taken together shall
constitute one and the same agreement. In case any provision in
or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions or obligations in any
jurisdiction, or of such provision or obligation in any
jurisdiction, shall not in any way be affected or impaired
thereby.
SECTION 6.08. Descriptive Headings. The descriptive
headings of the various sections of this Agreement are inserted
for convenience of reference only and shall not be deemed to
affect the meaning or construction of any of the provisions
hereof.
SECTION 6.09. No Setoff. The Originator's obligations
under this Agreement shall not be affected by any right of
setoff, counterclaim, recoupment, defense or other right the
Originator might have against MCF, Redwood, the Operating Agent,
the Collateral Agent or any assignee, all of which rights are
hereby waived by the Originator.
SECTION 6.10. Further Assurances. The Originator
agrees to do such further acts and things and to execute and
deliver to MCF, Redwood, the Operating Agent or any assignee such
additional assignments, agreements, powers and instruments as
MCF, Redwood, the Operating Agent or any assignee may require or
deem advisable to carry into effect the purposes of this
Agreement or to better assure and confirm unto any such party its
respective rights, powers and remedies hereunder.
SECTION 6.11. Confidentiality. (a) The Originator and
MCF agree to maintain the confidentiality of this Agreement (and
all drafts of this agreement and documents ancillary to this
Agreement) in their communications with third parties other than
any Affected Party or any Indemnified Party and otherwise and not
to disclose, deliver or otherwise make available to any third
party (other than its directors, officers, employees, accountants
or counsel) the original or any copy of all or any part of this
Agreement (or any draft of this Agreement and documents ancillary
to this Agreement) except to an Affected Party or an Indemnified
Party.
(b) Notwithstanding Section 6.11(a), (i) the general
terms of the transactions contemplated by this Agreement and the
Related Documents may be disclosed to any existing lender to or
potential investor in the Parent that has agreed in writing not
to disclose such terms, and (ii) this Agreement and the Related
Documents may be disclosed (A) if required to be filed publicly
with the Securities and Exchange Commission, (B) to the certified
public accountants of the Parent to the extent necessary, (C) to
the extent otherwise required by applicable law, rule or
regulation,
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(D) to the extent required under a valid and
appropriately limited subpoena or equivalent legal process or (E)
if the Affected Party otherwise consents in writing.
(c) The Originator agrees that it shall not (and shall
not permit any of its Subsidiaries to) issue any news release or
make any public announcement pertaining to the transactions
contemplated by this Agreement and the Related Documents without
the prior written consent of MCF and its assignees (which consent
shall not be unreasonably withheld) unless such news release or
public announcement is required by law, in which case the
Originator shall consult with MCF and its assignees prior to the
issuance of such news release or public announcement.
SECTION 6.12. Assignment of Agreement. The Originator
acknowledges that, to the extent permitted under the Purchase
Agreement, MCF may assign its rights granted hereunder, including
any rights in the Collateral granted under Article VII, and upon
such assignment, such assignee shall have all rights of MCF
hereunder and, to the extent permitted under the Purchase
Agreement, may in turn assign such rights. The Originator agrees
that, upon such assignment, such assignee may enforce directly,
without joinder of MCF, the rights set forth in this Agreement.
SECTION 6.13. Amendment and Restatement. Upon the
execution and delivery of this Agreement by the parties hereto,
the Initial Receivables Transfer Agreement shall be amended and
restated in its entirety by this Agreement, effective as of the
date hereof, with all rights, obligations and ownership or
security interests created under or granted pursuant to the
Initial Receivables Transfer Agreement continuing from the date
thereof, through the date hereof including, without limitation,
rights of the parties with respect to representations and
indemnifications made pursuant to the Initial Receivables
Transfer Agreement. Each reference in the Assignment, the
Subordinated Note and any other agreement and document delivered
pursuant to the Initial Receivables Transfer Agreement to the
"Receivables Transfer Agreement dated as of October 2, 1995"
shall be deemed to refer to the Initial Receivables Transfer
Agreement for the period from the date thereof until the date of
this Agreement and shall be deemed to refer to this Agreement
from and after the date hereof.
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IN WITNESS WHEREOF, the parties have caused this
Receivables Transfer Agreement to be executed by their respective
officers thereunto duly authorized, as of the date first above
written.
MERISEL AMERICAS, INC.
By: _____________________________
Name: _______________________
Title: ______________________
Address: βββ βββββββββββ βββββββββ
ββ βββββββ, ββ βββββ
Attention: βββββββ ββββββ, Treasurer
Phone number: (βββ) βββ-ββββ
Telecopier number: (βββ) βββ-ββββ
MERISEL CAPITAL FUNDING, INC.
By: _____________________________
Name: _______________________
Title: ______________________
Address: βββ βββββββββββ βββββββββ
βββββ βββ
ββ βββββββ, ββ βββββ
Attention: βββββββ ββββββββ
Phone number: (βββ) βββ-ββββ
Telecopier number: (βββ) βββ-ββββ
Schedule 1 to
Transfer Agreement
LIST OF CHIEF EXECUTIVE
OFFICES OF THE ORIGINATOR
βββ βββββββββββ ββββ.
ββ βββββββ, ββββββββββ βββββ
LIST OF OTHER OFFICES OF THE
ORIGINATOR WHERE RECORDS ARE KEPT
ATLANTA, GA ββββ ββββ ββββ βββββ ββ, βββββββ, ββ βββββ
CARY-N.C. βββ βββββββ βββββ, ββββ, ββ βββββ
CHICAGO, IL βββ ββββββ βββββ βββ. βββ βββββββ, ββ βββββ
CHICAGO, IL ββββ ββββ ββββ ββββ, βββββββ, ββ βββββ
DALLAS, TX ββββ ββββββββ ββ. βββββ βββ, βββββββββ,
ββ βββββ
HARTFORD, CT ββ ββββ ββ., ββββββββββ, ββ βββββ
βββ SUMMIT, MO ββββ β. ββββββββββββ βββ., βββ ββββββ, ββ
βββββ
MARLBORO, MA βββ ββββββ ββββ ββββ ββββ, ββββββββ ββ βββββ
PLEASANTON, CA ββββ β. βββ βββββββ ββββ., ββββββββββ, ββ
βββββ-ββββ
RICHMOND, VA ββββ ββββββββ ββββ., ββββββββ, ββ βββββ
βββ βββββββββ, ββ βββββ βββ ββββββββ ββ., βββββββ, ββ βββββ
HAYWARD, CA ββββ ββββ ββββββ, βββββββ, ββ βββββ
Schedule 2 to
Transfer Agreement
Employee Benefit Plans
Section 4.01(a)(xx)
A recent audit of the Merisel Inc. 401(k) Retirement Savings
Plan, which is sponsored by the Parent and covers eligible
employees of the Originator, disclosed the following operational
qualification defect: due to a deficiency in a prior payroll
system, during 1993 and 1994 salary deferral contributions
erroneously were not withheld from the portion of a participant's
compensation that was paid in the form of a supplemental
paycheck, i.e., bonuses, commissions, SPIFFs, retroactive pay or
vacation advances; the payroll system deficiency was corrected
effective January 1, 1995. The operational qualification defect
is eligible for correction under the Voluntary Compliance
Resolution (VCR) Program established by the Internal Revenue
Service (the "IRS"), and the Originator will take or will cause
the Parent to take whatever action is necessary to correct the
defect and retain the qualified status of the Plan, and to secure
a VCR compliance statement form the IRS. The Originator
represents and warrants that (1) the Parent will file a request
for a VCR compliance statement as soon as practicable, but no
later than January 1, 1996, and (2) the total amount that it will
have to pay to correct the defect, including any required Plan
contributions and interest thereon and any VCR fee payable to the
IRS (but excluding legal fees) will not exceed $200,000.
TRADE NAMES, FICTITIOUS NAMES, ASSUMED NAMES
AND "DOING BUSINESS AS" NAMES OF THE ORIGINATOR
1. Merisel Americas, Inc. dba Channel Services Group
2. E. Information Company, trade name of Merisel Americas, Inc.
3. Merchandising Solutions, trade name of Merisel Americas,
Inc.
EXHIBIT A
FORM OF ASSIGNMENT
ASSIGNMENT, dated as of October 2, 1995 between MERISEL
AMERICAS, INC. (the "Originator") and MERISEL CAPITAL FUNDING,
INC. ("MCF").
1. We refer to the Receivables Transfer Agreement
(the "Transfer Agreement") dated as of October 2, 1995 between
the Originator and MCF. All provisions of such Transfer
Agreement are incorporated herein by reference. All capitalized
terms shall have the meanings set forth in the Transfer
Agreement.
2. The Originator does hereby sell or contribute, to
MCF, without recourse, except as provided in Section 4.04 of the
Transfer Agreement, all right, title and interest of the
Originator in and to all Transferred Receivables transferred from
time to time from the Originator under the Transfer Agreement.
3. THIS CERTIFICATE OF ASSIGNMENT SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
MERISEL AMERICAS, INC. MERISEL CAPITAL FUNDING, INC.
By: ________________________ By: _________________________
Name: Name:
Title: Title:
EXHIBIT B
FORM OF SUBORDINATED NOTE
$300,000,000 October 2, 1995
FOR VALUE RECEIVED, MERISEL CAPITAL FUNDING, INC., a
Delaware corporation (the "MCF"), hereby promises to pay to the
order of MERISEL AMERICAS, INC., a Delaware corporation (the
"Originator"), for its account, the principal sum of THREE
HUNDRED MILLION DOLLARS ($300,000,000) (or such lesser amount as
shall equal the aggregate unpaid principal indebtedness owed by
MCF to the Originator under Section 2.01 of the Transfer
Agreement referred to below), in lawful money of the United
States of America and in immediately available funds immediately
on the demand of the Originator.
The date, amount and interest rate, of each amount owed
by MCF to the Originator, and each payment made on account of the
principal thereof, shall be recorded by the Originator on its
books and, prior to any transfer of this Note, endorsed by the
Originator on the schedule attached hereto or any continuation
thereof. MCF shall pay interest to the Originator at a rate
equal to the sum of 5% per annum plus the rate prevailing on the
25th day of the month preceding such first day established by the
Federal Reserve Bank of San Francisco on advances to member banks
under Section 13 and 13a of the Federal Reserve Act as now in
effect or hereafter from time to time amended, but in no event
shall such rate exceed the maximum rate permitted by law,