RECEIVABLES PURCHASE AGREEMENT
Dated as of April 11, 1997
Among
KBK RECEIVABLES CORPORATION
AS SELLER
and
KBK FINANCIAL, INC.
AS INITIAL SERVICER
and
XXX RECEIVABLES CORPORATION
AS PURCHASER
and
XXX CORPORATION
AS ADMINISTRATOR
and
XXX
AS RELATIONSHIP BANK
TABLE OF CONTENTS
PAGE
ARTICLE I
PURCHASES AND REINVESTMENTS
SECTION 1.01. Commitment to Purchase; Limits on Purchaser's Obligations ..... 2
SECTION 1.02. Purchase Procedures; Assignment of Asset Interest ............. 3
SECTION 1.03. Reinvestments of Certain Collections; Payment of Remaining
Collections .................................................. 3
SECTION 1.04. Asset Interest ................................................ 4
SECTION 1.05. Voluntary Termination of Purchase and Reinvestment
Obligations or Reduction of Purchase Limit ................... 5
ARTICLE II
COMPUTATIONAL RULES
SECTION 2.01. Computation of Purchaser's Total Investment ................... 6
SECTION 2.02. Computation of Earned Discount ................................ 6
SECTION 2.03. Estimates of Earned Discount Rate, Fees, Etc .................. 6
ARTICLE III
SETTLEMENTS
SECTION 3.01. Settlement Procedures ........................................ 7
SECTION 3.02. Deemed Collections; Reduction of Purchaser's Total
Investment, Etc ............................................. 9
SECTION 3.03. Payments and Computations, Etc ............................... 11
SECTION 3.04. Treatment of Collections and Deemed Collections .............. 11
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.01. Fees ......................................................... 12
SECTION 4.02. Yield Protection ............................................. 12
SECTION 4.03. Funding Losses ............................................... 14
i
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01. Conditions Precedent to Initial Purchase ..................... 14
SECTION 5.02. Conditions Precedent to All Purchases and Reinvestments ...... 16
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties of Seller and Servicer ........ 17
SECTION 6.02. Additional Representations and Warranties of Seller .......... 19
SECTION 6.03. Additional Representations and Warranties of Servicer ........ 20
ARTICLE VII
GENERAL COVENANTS OF SELLER AND SERVICER
SECTION 7.01. Affirmative Covenants of Seller and Servicer. 21
SECTION 7.02. Reporting Requirements of Seller ............................. 23
SECTION 7.03. Negative Covenants of Seller and Servicer .................... 24
SECTION 7.04. Separate Existence ........................................... 26
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.01. Designation of Servicer ...................................... 29
SECTION 8.02. Duties of Servicer ........................................... 29
SECTION 8.03. Rights of the Administrator .................................. 31
SECTION 8.04. Responsibilities of Seller Parties ........................... 32
SECTION 8.05. Further Action Evidencing Purchases and Reinvestments ........ 32
SECTION 8.06. Application of Collections ................................... 34
ii
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE IX
SECURITY INTEREST
SECTION 9.01. Grant of Security Interest ................................... 34
SECTION 9.02. Further Assurances ........................................... 34
SECTION 9.03. Remedies ..................................................... 34
SECTION 9.04. Intention of the Parties ..................................... 34
ARTICLE X
LIQUIDATION EVENTS
SECTION 10.01. Liquidation Events .......................................... 35
SECTION 10.02. Remedies .................................................... 37
ARTICLE XI
THE ADMINISTRATOR; RELATIONSHIP BANK
SECTION 11.01. Authorization and Action .................................... 38
SECTION 11.02. Administrator's and Relationship Bank's Reliance, Etc ....... 38
SECTION 11.03. XXX Capital and XXX and Affiliates ................. 38
ARTICLE XII
ASSIGNMENTS
SECTION 12.01. Restrictions on Assignments ................................. 39
SECTION 12.02. Rights of Assignee .......................................... 40
SECTION 12.03. Terms and Evidence of Assignment ............................ 40
SECTION 12.04. Rights of Collateral Agent .................................. 40
iii
TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE XIII
INDEMNIFICATION
SECTION 13.01. Indemnities by Seller ....................................... 40
SECTION 13.02. Indemnities by Servicer ..................................... 42
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01. Amendments, Etc ............................................. 43
SECTION 14.02. Notices, Etc ................................................ 43
SECTION 14.03. No Waiver; Remedies ......................................... 44
SECTION 14.04. Binding Effect; Survival .................................... 44
SECTION 14.05. Costs, Expenses and Taxes ................................... 44
SECTION 14.06. No Proceedings .............................................. 45
SECTION 14.07. Confidentiality of Seller Information ....................... 45
SECTION 14.08. Confidentiality of Program Information ...................... 47
SECTION 14.09. Captions and Cross References ............................... 49
SECTION 14.10. Integration ................................................. 49
SECTION 14.11. Governing Law ............................................... 49
SECTION 14.12. Waiver Of Jury Trial ........................................ 50
SECTION 14.13. Consent To Jurisdiction; Waiver Of Immunities 50
SECTION 14.14. Execution in Counterparts ................................... 50
SECTION 14.15. Recourse to Directors or Officers ........................... 51
iv
APPENDICES
APPENDIX A Definitions
APPENDIX B Excluded Obligors and Obligees
SCHEDULES
SCHEDULE 6.02(i) List of Lock-Box Banks and Accounts
SCHEDULE 6.02(j)-1 Description of Credit and Collection Policy
SCHEDULE 6.02(j)-2 Forms of Factoring Agreements
SCHEDULE 6.02(j)-3 Forms of Inventory Financing Agreements
SCHEDULE 6.02(j)-4 Form of Revolving Account Transfer and Purchase
Agreement (Batch)
SCHEDULE 6.02(j)-5 Form of Recourse Account Transfer Agreement
SCHEDULE 6.02(k) Trade Names
EXHIBITS
EXHIBIT 1.02(a) Form of Notice of Purchase
EXHIBIT 3.01(a) Form of Information Package
EXHIBIT 5.01(e) Form of UCC Financing Statement
EXHIBIT 5.01(g)(i) Form of Lock-Box Agreement
EXHIBIT 5.01(g)(ii) Form of Collection Account Agreement
EXHIBIT 5.01(h)-1 Form of Opinion of Special Counsel for Seller Parties
EXHIBIT 5.01(h)-2 Form of Opinion of General Counsel for Seller Parties
EXHIBIT 5.01(i) Form of Limited Power of Attorney
v
RECEIVABLES PURCHASE AGREEMENT
Dated as of April 11, 1997
THIS IS A RECEIVABLES PURCHASE AGREEMENT among:
(1) KBK RECEIVABLES CORPORATION, a Delaware corporation (together with its
successors and permitted assigns, "SELLER"),
(2) KBK FINANCIAL, INC., a Delaware corporation (together with its
successors and permitted assigns, "KBK"), as initial servicer hereunder (in such
capacity, together with any successor servicer appointed pursuant to SECTION
8.01, "SERVICER"),
(3) XXX RECEIVABLES CORPORATION, a Delaware corporation (together with its
successors and permitted assigns, "PURCHASER"),
(4) XXX CORPORATION, a Massachusetts corporation ("XXX CAPITAL"),
as administrator for Purchaser (in such capacity, together with any successors
thereto in such capacity, the "ADMINISTRATOR"), and
(5) XXX, a bank organized under the laws of the Commonwealth of
Massachusetts ("XXX"), as a referral agent for Purchaser (in such capacity,
together with any successors thereto in such capacity, the "RELATIONSHIP BANK").
Unless otherwise indicated, capitalized terms used in this Agreement are defined
in APPENDIX A.
BACKGROUND
1. Seller is a wholly-owned Subsidiary of KBK.
2. KBK is primarily engaged in the business of providing asset-based and
working capital financing to businesses.
3. Concurrently herewith, KBK is entering into the Sale Agreement with
Seller, pursuant to which KBK will transfer to Seller all of its right, title
and interest in and to the Pool Receivables and certain related property.
4. Seller and KBK have requested Purchaser, and Purchaser has agreed,
subject to the terms and conditions contained in this Agreement, to purchase
from Seller from time to time during the term of this Agreement an undivided
percentage ownership interest, referred to herein as the Asset Interest, in Pool
Receivables and related property.
5. Seller and Purchaser also desire that, subject to the terms and
conditions of this Agreement, certain of the daily Collections in respect of the
Asset Interest be reinvested in Pool Receivables, which reinvestment shall
constitute part of the Asset Interest.
6. XXX Capital has been requested, and is willing, to act as the
Administrator.
7. XXX has been requested, and is willing, to act as the Relationship
Bank.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
PURCHASES AND REINVESTMENTS
SECTION 1.01. COMMITMENT TO PURCHASE; LIMITS ON PURCHASER'S OBLIGATIONS.
(a) Upon the terms and subject to the conditions of this Agreement (including,
without limitation, ARTICLE V), from time to time prior to the Termination Date,
Seller may request that Purchaser purchase from Seller ownership interests in
Pool Receivables and Related Assets, and Purchaser shall make such purchase
(each being a "PURCHASE"); PROVIDED that no Purchase shall be made by Purchaser
if, after giving effect thereto, either
(i) the then Purchaser's Total Investment would exceed the Purchase
Limit (as defined in SUBSECTION (B)) then in effect, or
(ii) the Asset Interest, expressed as a percentage of Net Pool
Balance, would exceed XXX (the "ALLOCATION LIMIT"); and
PROVIDED, FURTHER that each Purchase made pursuant to this SECTION 1.01 shall
have a purchase price equal to at least $500,000 (or at least $2 million in the
case of any purchase not made on a Settlement Date) and shall be an integral
multiple of $100,000.
(b) The maximum amount of the Purchaser's Total Investment hereunder (the
"PURCHASE LIMIT") shall be $50,000,000 (PROVIDED, HOWEVER, that the Purchase
Limit shall be increased automatically to $75,000,000 upon the increase, if any,
of the Liquidity Commitment Account (as defined in the Liquidity Agreement) to
$76,500,000), or such lesser amount to which it may be reduced from time to time
pursuant to SECTION 1.05.
2
SECTION 1.02. PURCHASE PROCEDURES; ASSIGNMENT OF ASSET INTEREST.
(a) NOTICE OF PURCHASE. Each Purchase from Seller by Purchaser shall be
made on notice from Seller to the Administrator received by the Administrator
not later than 1:00 p.m. (New York City time) on the Business Day next preceding
the date of such proposed Purchase. Each such notice of a proposed Purchase
shall be substantially in the form of EXHIBIT 1.02(A) and shall specify the
desired amount and date of such Purchase.
(b) FUNDING OF PURCHASE. On the date of each Purchase, Purchaser shall,
upon satisfaction of the applicable conditions set forth in ARTICLE V, make
available to the Administrator at the Administrator's Office the amount of its
Purchase in same day funds, and after receipt by the Administrator of such
funds, the Administrator will make such funds immediately available to Seller at
such office.
(c) COLLECTION ACCOUNT. Seller hereby agrees to establish the Collection
Account on or before the date of the initial Purchase hereunder. The Collection
Account shall be used to receive Collections and for other purposes described in
the Transaction Documents. No funds other than those transferred in accordance
with ARTICLES I and III shall be transferred to or deposited into the Collection
Account. Funds on deposit in the Collection Account shall be invested only in
Permitted Investments that shall mature on the Business Day prior to the next
Settlement Date. The income (net of losses) from such Permitted Investments
shall be added to the balance of the Collection Account. On each Business Day,
the Servicer shall transfer from each post-office box to a Lock-Box Account all
Collections of Pool Receivables on deposit in such post-office box. On each
Business Day, the Servicer shall transfer from the Lock-Box Accounts to the
Collection Account, all Collections of Pool Receivables on deposit in the
Lock-Box Accounts. All amounts on deposit in the Collection Account shall be
applied in accordance with ARTICLE I and ARTICLE III, as applicable.
(d) ASSIGNMENT OF ASSET INTEREST. Seller hereby sells, assigns and
transfers to Purchaser, effective on and as of the date of each Purchase by the
Purchaser hereunder, the Asset Interest in the Pool Receivables and Related
Assets.
SECTION 1.03. REINVESTMENTS OF CERTAIN COLLECTIONS; PAYMENT OF REMAINING
COLLECTIONS.
(a) On the close of business on each day during the period from the date
hereof to the Termination Date, Servicer will, out of all Collections from Pool
Receivables received on such day and on deposit in the Collection Account:
(i) determine the portion of Collections attributable on any day to
the Asset Interest by multiplying (x) the amount of all Collections in
respect of the Pool Receivables TIMES (y) the Asset Interest (expressed as
a percentage of the Net Pool Balance);
3
(ii) out of the portion of Collections allocated to the Asset
Interest pursuant to CLAUSE (I), set aside in the Collection Account an
amount equal to the sum of (A) the estimated amount of Earned Discount to
accrue in respect of the Purchaser's Total Investment (based on rate
information provided by the Administrator pursuant to SECTION 2.03 for the
then-current Settlement Period), (B) all other amounts due to Purchaser,
the Administrator or the Relationship Bank hereunder (other than the
Purchaser's Total Investment), and (C) the Purchaser's Share of the
Servicer's Fee (in each case, accrued through such day) and not so
previously set aside;
(iii) determine the Collections allocated to the Asset Interest
pursuant to CLAUSE (I) and not set aside in the Collection Account
pursuant to CLAUSE (II) (the "REINVESTMENT COLLECTIONS") to be held for
the purchase from Seller of ownership interests in Pool Receivables and
Related Assets in accordance with SECTION 1.03(B) (each such purchase
being a "REINVESTMENT");
(iv) pay to Seller the portion of Collections not allocated to the
Asset Interest pursuant to CLAUSE (I), less the Seller's Share of the
Servicer's Fee; and
(v) out of the portion of Collections not allocated to the Asset
Interest pursuant to CLAUSE (I), pay to the Servicer the Seller's Share of
the Servicer's Fee accrued through such day.
(b) REINVESTMENT. The Reinvestment Collections that are currently held in
the Collection Account shall be available to complete Reinvestments; PROVIDED,
HOWEVER, if the then Asset Interest exceeds the Allocation Limit or the then
Purchaser's Total Investment exceeds the Purchase Limit, the Servicer shall hold
in the Collection Account for distribution to the Purchaser on the next
Settlement Date pursuant to SECTION 3.01(C)(4), a portion of Reinvestment
Collections equal to the amount necessary to reduce the Purchaser's Total
Investment to the Purchase Limit and the Asset Interest to the Allocation Limit.
If the conditions precedent to Reinvestment set forth in SECTION 5.02 are
satisfied, then the Servicer may apply the remaining Reinvestment Collections
(to the extent that, as a result of such application, the condition precedent in
CLAUSE (III) of SECTION 5.02 is satisfied) to the making of a Reinvestment.
(c) REDUCTION OF PURCHASER'S TOTAL INVESTMENT. The Purchaser's Total
Investment shall not be reduced by the amount of Collections set aside pursuant
to this Section unless and until such Collections are actually delivered to the
Administrator pursuant hereto.
SECTION 1.04. ASSET INTEREST.
(a) COMPONENTS OF ASSET INTEREST. On any date the Asset Interest will
represent Purchaser's combined undivided percentage ownership interest in all
then outstanding Pool Receivables and all Related Assets with respect to such
Pool Receivables as at such date.
4
(b) COMPUTATION OF ASSET INTEREST. On any date, the Asset Interest will be
equal to a percentage, expressed as the following fraction:
PTI + ACR + LCR + LR + DR
-------------------------
NPB
where:
PTI = the then Purchaser's Total Investment;
ACR = the then Accrued Cost Reserve;
LCR = the then Liquidation Cost Reserve;
LR = the then Loss Reserve;
DR = the then Dilution Reserve; and
NPB = the then Net Pool Balance;
PROVIDED, HOWEVER, that the Asset Interest shall not exceed XXX (except
for purposes of determining whether, and to what extent, the Asset Interest
exceeds the Allocation Limit); and PROVIDED, FURTHER, that the Asset Interest,
as computed as of the day immediately preceding the Termination Date, will
remain constant at all times on and after the Termination Date until the Final
Payout Date, unless at any time the Administrator requests a recalculation of
the Asset Interest, in which case the Asset Interest shall remain constant
following such recalculation until the Final Payout Date, or, if earlier, until
the date of the next such recalculation.
(c) FREQUENCY OF COMPUTATION. The Asset Interest shall be computed as of
the Cut-Off Date for each Settlement Period. In addition, the Administrator may
require Servicer to provide an Information Package for purposes of computing the
Asset Interest as of any other date, and the Servicer agrees to do so within two
Business Days of its receipt of the Administrator's request.
SECTION 1.05. VOLUNTARY TERMINATION OF PURCHASE AND REINVESTMENT
OBLIGATIONS OR REDUCTION OF PURCHASE LIMIT. Seller may, upon at least 90 days'
prior written notice to the Administrator and the Relationship Bank, either (a)
terminate Purchaser's obligations to make Purchases and Reinvestments hereunder,
or (b) reduce the Purchase Limit to an amount not less than $25,000,000;
PROVIDED, HOWEVER, that (i) each partial reduction of the Purchase Limit shall
be in an amount equal to $5,000,000 or an integral multiple thereof, and (ii)
after giving effect to such reduction, the Purchaser's Total Investment will not
exceed the Purchase Limit as so reduced.
5
ARTICLE II
COMPUTATIONAL RULES
SECTION 2.01. COMPUTATION OF PURCHASER'S TOTAL INVESTMENT. In making any
determination of Purchaser's Total Investment, the following shall apply:
(a) Purchaser's Total Investment shall not be considered reduced by
any allocation, setting aside or distribution of any portion of
Collections unless such Collections shall have been actually delivered to
the Administrator pursuant hereto; and
(b) Purchaser's Total Investment shall not be considered reduced by
any distribution of any portion of Collections if at any time such
distribution is rescinded or must otherwise be returned for any reason.
SECTION 2.02. COMPUTATION OF EARNED DISCOUNT. In making any determination
of Earned Discount, the following shall apply:
(a) the Administrator shall determine the Earned Discount accruing
with respect to Purchaser's Total Investment, in accordance with the
definition of Earned Discount;
(b) no provision of this Agreement shall require the payment or
permit the collection of Earned Discount in excess of the maximum
permitted by applicable law; and
(c) Earned Discount for any period shall not be considered paid by
any distribution if at any time such distribution is rescinded or must
otherwise be returned for any reason.
SECTION 2.03. ESTIMATES OF EARNED DISCOUNT RATE, FEES, ETC. For purposes
of determining the amounts required to be set aside by Servicer pursuant to
SECTION 1.03, the Administrator shall notify Servicer from time to time of the
Purchaser's Total Investment and the rates at which fees and other amounts are
accruing hereunder. It is understood and agreed that (i) the Earned Discount
Rate will change from time to time, (ii) certain rate information provided by
the Administrator to Servicer shall be based upon the Administrator's good faith
estimate, (iii) the amount of Earned Discount actually accrued with respect to
Purchaser's Total Investment during any Settlement Period may exceed, or be less
than, the amount set aside with respect thereto by Servicer, and (iv) the amount
of fees or other payables accrued hereunder with respect to any Settlement
Period may exceed, or be less than, the amount set aside with respect thereto by
Servicer. Failure to set aside any amount so accrued shall not relieve Servicer
of its obligation to remit Collections to the
6
Administrator with respect to such accrued amount, as and to the extent provided
in SECTION 3.01.
ARTICLE III
SETTLEMENTS
SECTION 3.01. SETTLEMENT PROCEDURES. The parties hereto will take the
following actions with respect to each Settlement Period:
(a) INFORMATION PACKAGE. On the Reporting Date for each Settlement Period,
Servicer shall deliver to the Relationship Bank a diskette containing the
information described in EXHIBIT 3.01 with such modifications as the
Administrator or the Relationship Bank may reasonably request or which may be
satisfactory to them (each, an "INFORMATION PACKAGE").
(b) EARNED DISCOUNT; OTHER AMOUNTS DUE. On the Business Day prior to the
Reporting Date for each Settlement Period, the Administrator shall notify
Servicer of (i) the amount of Earned Discount that will have accrued in respect
of the Purchaser's Total Investment as of the next Settlement Date, and (ii) all
fees and other amounts that will have accrued and be payable by the Seller under
this Agreement as of such Settlement Date (other than Purchaser's Total
Investment).
(c) SETTLEMENT DATE PROCEDURE - REINVESTMENT PERIOD. On each Settlement
Date prior to the Termination Date, the Servicer shall distribute from
Collections of Pool Receivables set aside and deposited into the Collection
Account pursuant to SECTION 1.03(A)(I) - (III) during the immediately preceding
Settlement Period the following amounts in the following order:
(1) to the Administrator, an amount equal to the Earned Discount
accrued during such Settlement Period, plus any previously accrued Earned
Discount not paid on a prior Settlement Date, which amount shall be
distributed by the Administrator to the Purchaser for application to such
Earned Discount;
(2) to the Administrator, an amount equal to the Program Fee and the
Unused Fee accrued during such Settlement Period, plus any previously
accrued Program Fee and Unused Fee not paid on a prior Settlement Date;
(3) to the Servicer, an amount equal to the Purchaser's Share of the
Servicer's Fee accrued during such Settlement Period, plus any previously
accrued Purchaser's Share of the Servicer's Fee not paid on a prior
Settlement Date;
7
(4) to the Administrator, an amount equal to the greater of (i) the
excess, if any, of the Purchaser's Total Investment over the Purchase
Limit and (ii) the excess, if any, of the sum of the Purchaser's Total
Investment PLUS the then Required Reserves over the Net Pool Balance
(calculated as of the most recent Cut-Off Date), which amount shall be
distributed by the Administrator to the Purchaser for application to the
Purchaser's Total Investment; and
(5) to the Administrator, all other amounts then due under this
Agreement to the Administrator, the Relationship Bank, the Purchaser, the
Affected Parties or the Indemnified Parties;
(6) to the Seller, any remaining amounts in addition to amounts paid
to the Seller as part of any Reinvestment.
(d) SETTLEMENT DATE PROCEDURE - LIQUIDATION PERIOD. On each Settlement
Date during the Liquidation Period, the Servicer shall distribute from
Purchaser's Share of Collections of Pool Receivables received or deemed received
pursuant to SECTION 3.02 during the immediately preceding Settlement Period
(including, without limitation all Collections then on deposit in the Collection
Account) the following amounts in the following order:
(1) to the Servicer, if the Servicer is not KBK or any Affiliate
thereof, an amount equal to the Servicer's Fee accrued during such
preceding Settlement Period, plus any previously accrued Servicer's Fee
not paid on a prior Settlement Date;
(2) to the Administrator, an amount equal to the Earned Discount
accrued during such Settlement Period, plus any previously accrued Earned
Discount not paid on a prior Settlement Date, which amount shall be
distributed by the Administrator to the Purchaser for application to such
Earned Discount;
(3) to the Administrator, an amount equal to the Program Fee and
Unused Fee accrued during such Settlement Period, plus any previously
accrued Program Fee and Unused Fee not paid on a prior Settlement Date;
(4) to the Administrator, an amount equal to the remaining
Collections until the Purchaser's Total Investment is reduced to zero,
which amount shall be distributed by the Administrator to the Purchaser
for application to the Purchaser's Total Investment;
(5) to the Administrator, all other amounts then due under this
Agreement to the Administrator, the Relationship Bank, the Purchaser, the
Affected Parties or the Indemnified Parties;
8
(6) to the Servicer, if the Servicer is KBK or any Affiliate
thereof, an amount equal to the Servicer's Fee accrued during such
Settlement Period, plus any previously accrued Servicer's Fee not paid on
a prior Settlement Date; and
(7) to the Seller, any remaining amounts.
(e) ORDER OF APPLICATION OF PURCHASER'S TOTAL INVESTMENT. Upon receipt by
the Administrator of funds distributed pursuant to this SECTION 3.01 with
respect to any Settlement Period on account of Purchaser's Total Investment, the
Administrator shall apply them to the items specified in the subclauses below,
in the order of priority of such subclauses:
(i) to that portion of the Purchaser's Total Investment funded by
Liquidity Fundings until reduced to zero;
(ii) to that portion of the Purchaser's Total Investment funded by
Commercial Paper Notes until reduced to zero; and
(iii) to that portion of the Purchaser's Total Investment funded by
a Credit Draw until reduced to zero.
(f) DELAYED PAYMENT. If on any day described in this SECTION 3.01, because
Collections during the relevant Settlement Period were less than the aggregate
amounts payable, Servicer does not make any payment otherwise required, the next
available Collections in respect of the Asset Interest shall be applied to such
payment, and no Reinvestment shall be permitted hereunder until such amount
payable has been paid in full.
SECTION 3.02. DEEMED COLLECTIONS; REDUCTION OF PURCHASER'S TOTAL
INVESTMENT, ETC.
(a) DEEMED COLLECTIONS. If on any day
(i) the Unpaid Balance of any Pool Receivable is
(A) reduced or cancelled as a result of any defective,
rejected or returned goods or services, any cash discount, or any
adjustment by any Seller Party or any Affiliate of any thereof, or
(B) reduced or cancelled as a result of a setoff in respect of
any claim by the Obligor thereof against any Seller Party or any
Affiliate of any thereof (whether such claim arises out of the same
or a related or an unrelated transaction), or
9
(C) reduced on account of the obligation of any Seller Party
to pay to the related Obligor any rebate or refund, or
(D) less than the amount included in calculating the Net Pool
Balance for purposes of any Information Package (for any reason
other than such Receivable becoming a Defaulted Receivable), or
(ii) any of the representations or warranties of Seller set forth in
SECTION 6.02(D) or (J) were not true when made with respect to any Pool
Receivable, or any of the representations or warranties of Seller set
forth in SECTION 6.02(D) are no longer true with respect to any Pool
Receivable,
then, on such day, Seller shall be deemed to have received a Collection of such
Pool Receivable
(I) in the case of CLAUSE (I) above, in the amount of such
reduction or cancellation or the difference between the actual
Unpaid Balance and the amount included in calculating such Net Pool
Balance, as applicable; and
(II) in the case of CLAUSE (II) above, in the amount of the
Unpaid Balance of such Pool Receivable.
Collections deemed received by Seller under this SECTION 3.02(A) are herein
referred to as "DEEMED COLLECTIONS".
(b) SELLER'S OPTIONAL REDUCTION OF PURCHASER'S TOTAL INVESTMENT. Seller
may, at any time, with written approval of the Relationship Bank, elect to
reduce the Purchaser's Total Investment as follows:
(i) Seller shall give the Administrator at least five Business Days'
prior written notice of such reduction (including the amount of such
proposed reduction and the proposed date on which such reduction will
commence),
(ii) on the proposed date of commencement of such reduction and on
each day thereafter, Servicer shall refrain from reinvesting Collections
pursuant to SECTION 1.03 until the amount thereof not so reinvested shall
equal the desired amount of reduction, and
(iii) Servicer shall hold such Collections in trust for Purchaser,
pending payment to the Administrator, as provided in SECTION 1.03;
PROVIDED that:
10
(A) the amount of any such reduction shall be not less than
$5,000,000 and shall be an integral multiple of $1,000,000, and the
Purchaser's Total Investment after giving effect to such reduction
shall be not less than $25,000,000 (unless Purchaser's Total
Investment shall thereby be reduced to zero), and
(B) Seller shall use reasonable efforts to attempt to choose a
reduction amount, and the date of commencement thereof, so that such
reduction shall commence and conclude in the same Settlement Period.
SECTION 3.03. PAYMENTS AND COMPUTATIONS, ETC.
(a) PAYMENTS. All amounts to be paid or deposited by Seller or Servicer to
the Administrator or any other Person hereunder (other than amounts payable
under SECTION 4.02) shall be paid or deposited in accordance with the terms
hereof no later than noon (New York City time) on the day when due in lawful
money of the United States of America in same day funds (i) in the case of
amounts to be paid or deposited in respect of accrued and unpaid Earned Discount
or in reduction of Purchaser's Total Investment, to the Collateral Agent at The
XXX, and (ii) in the case of all fees, expenses and other amounts (other than
amounts payable under SECTION 4.02), to the Administrator in care of XXX & Trust
Company, XXX XXX.
(b) LATE PAYMENTS. Seller or Servicer, as applicable, shall, to the extent
permitted by law, pay to Purchaser interest on all amounts not paid or deposited
when due hereunder at XXX PER ANNUM above the Alternate Base Rate, payable on
demand, PROVIDED, HOWEVER, that such interest rate shall not at any time exceed
the maximum rate permitted by applicable law.
(c) METHOD OF COMPUTATION. All computations of interest, Earned Discount,
any fees payable under SECTION 4.01 and any other fees payable by Seller to
Purchaser, the Administrator or the Relationship Bank in connection with
Purchases hereunder shall be made on the basis of a year of 360 days for the
actual number of days (including the first day but excluding the last day)
elapsed.
SECTION 3.04. TREATMENT OF COLLECTIONS AND DEEMED COLLECTIONS. Seller
shall forthwith deliver to Servicer all Deemed Collections, and Servicer shall
hold or distribute such Deemed Collections as Earned Discount, accrued
Servicer's Fee, repayment of Purchaser's Total Investment, etc. to the same
extent as if such Deemed Collections had actually been received on the date of
such delivery to Servicer. If Collections are then being paid to the
Administrator or its designee, or lock boxes or accounts directly or indirectly
owned or controlled by the Administrator, Servicer shall forthwith cause such
Deemed Collections to be paid to the Administrator or its designee or to such
lock boxes or accounts,
11
as applicable, or as the Administrator shall request. So long as Seller shall
hold any Collections (including Deemed Collections) required to be paid to
Servicer, the Administrator or Collateral Agent, it shall hold such Collections
in trust and shall clearly ▇▇▇▇ its records to reflect such trust; PROVIDED that
unless the Administrator or the Relationship Bank shall have requested it in
writing to do so, Seller shall not be required to hold such Collections in a
separate deposit account containing only such Collections.
ARTICLE IV
FEES AND YIELD PROTECTION
SECTION 4.01. FEES. Seller shall pay to Purchaser the fees from time to
time in amounts and payable on such dates as are set forth in a separate fee
letter dated on or about the date hereof among Seller, Purchaser, the
Relationship Bank and the Administrator (as amended or supplemented from time to
time, the "FEE LETTER").
SECTION 4.02. YIELD PROTECTION.
(a) If any Regulatory Change occurring after the date hereof
(A) shall subject an Affected Party to any tax, duty or other charge
with respect to any Asset Interest owned by or funded by it, or any
obligations or right to make Purchases or Reinvestments or to provide
funding therefor, or shall change the basis of taxation of payments to the
Affected Party of any Purchaser's Total Investments or Earned Discount
owned by, owed to or funded in whole or in part by it or any other amounts
due under this Agreement in respect of the Asset Interest owned by or
funded by it or its obligations or rights, if any, to make Purchases or
Reinvestments or to provide funding therefor (except for changes in the
rate of tax on or determined by reference to the overall net income of
such Affected Party imposed by the United States of America, by the
jurisdiction in which such Affected Party's principal executive office is
located and, if such Affected Party's principal executive office is not in
the United States of America, by the jurisdiction where such Affected
Party's principal office in the United States is located); or
(B) shall impose, modify or deem applicable any reserve (including,
without limitation, any reserve imposed by the Federal Reserve Board, but
excluding any reserve included in the determination of Earned Discount),
special deposit or similar requirement against assets of any Affected
Party, deposits or obligations with or for the account of any Affected
Party or with or for the account of any affiliate (or entity deemed by the
Federal Reserve Board to be an affiliate) of any Affected Party, or credit
extended by any Affected Party; or
12
(C) shall change the amount of capital maintained or required or
requested or directed to be maintained by any Affected Party; or
(D) shall change the rate for, or the manner in which the Federal
Deposit Insurance Corporation (or a successor thereto) assesses, deposit
insurance premiums or similar charges;
and the result of any of the foregoing is or would be
(x) to increase the cost to (I) an Affected Party of funding, making
or maintaining any Purchases of or Reinvestments in the Asset Interest or
any portion thereof, any Liquidity Funding or any Credit Draw (in each
case to the extent such increased cost is not reflected in the rate used
to calculate Earned Discount or interest with respect to the Asset
Interest (or such portion) or such Liquidity Funding or Credit Draw, as
applicable), or any commitment of such Affected Party with respect to any
of the foregoing, or (II) the Administrator for continuing its
relationship with Purchaser,
(y) to reduce the amount of any sum received or receivable by an
Affected Party under this Agreement, or under the Liquidity Agreement or
the Credit Agreement with respect thereto, or
(z) in the sole determination of such Affected Party, to reduce the
rate of return on the capital of an Affected Party as a consequence of its
obligations hereunder or arising in connection herewith to a level below
that which such Affected Party would otherwise have achieved (taking into
consideration the policies of such Affected Party with respect to capital
adequacy) by an amount deemed by such Affected Party to be material,
then, within thirty days after demand by such Affected Party (which demand shall
be accompanied by a statement setting forth the basis of such demand), Seller
shall pay directly to such Affected Party such additional amount or amounts as
will compensate such Affected Party for such additional or increased cost or
such reduction.
(b) Each Affected Party will promptly notify Seller and the Administrator
of any event of which it has actual knowledge which will entitle such Affected
Party to compensation pursuant to this SECTION 4.02; PROVIDED, HOWEVER, no
failure to give or delay in giving such notification shall adversely affect the
rights of any Affected Party to such compensation.
(c) In determining any amount provided for or referred to in this SECTION
4.02, an Affected Party may use any reasonable averaging and attribution methods
that it (in its sole discretion) shall deem applicable. Any Affected Party when
making a claim under this SECTION 4.02 shall submit to Seller a statement as to
such increased cost or reduced return
13
(including a calculation thereof in reasonable detail), which statement shall in
the absence of demonstrable error, be conclusive and binding upon Seller.
SECTION 4.03. FUNDING LOSSES. In the event that any Liquidity Bank shall
incur any loss or expense (including any loss or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Liquidity Bank to make any Liquidity Funding or maintain any Liquidity Funding)
as a result of (i) any settlement with respect to any portion of Purchaser's
Total Investment funded by a Liquidity Funding being made on any day other than
the scheduled last day of an applicable Settlement Period with respect thereto,
or (ii) any Purchase not being made in accordance with a request therefore under
SECTION 1.02, then, upon written notice from the Administrator to Seller and
Servicer, Seller shall pay to Servicer, and Servicer shall pay to the
Administrator for the account of such Liquidity Bank, the amount of such loss or
expense. Such written notice (which shall include calculations in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding upon
the Seller and Servicer.
ARTICLE V
CONDITIONS PRECEDENT
SECTION 5.01. CONDITIONS PRECEDENT TO INITIAL PURCHASE. The initial
Purchase hereunder is subject to the condition precedent that the Administrator
shall have received, on or before the date of such Purchase, the following, each
(unless otherwise indicated) dated such date or another recent date acceptable
to the Administrator and in form and substance satisfactory to the
Administrator:
(a) This Agreement, duly executed by each of the parties hereto;
(b) The Sale Agreement, duly executed by KBK and Seller, together with (i)
the closing documents required to be delivered thereunder, and (ii) evidence
reasonably satisfactory to the Administrator that Seller shall have received
from KBK capital contributions in an aggregate amount of not less than
$5,000,000 in exchange for common stock of Seller;
(c) A certificate of the Secretary or Assistant Secretary of Seller
certifying (i) the names and the signatures of the incumbent officers of Seller
authorized to sign this Agreement and the other Transaction Documents to be
delivered by it (on which certificate the Administrator and Purchaser may
conclusively rely until such time as the Administrator shall receive a revised
certificate meeting the requirements of this subsection (c)), (ii) that the copy
of the articles or certificate of incorporation of Seller attached thereto and
duly certified by the Secretary of State of Delaware as of a recent date
acceptable to the Administrator is a complete and correct copy thereof and that
the same has not been amended, modified or
14
supplemented and is in full force and effect as of the date thereof, (iii) that
the copy of the by-laws of Seller attached thereto is a complete and correct
copy thereof and that such by-laws have not been amended, modified or
supplemented and are in full force and effect as of the date thereof, and (iv)
the resolutions of Seller's board of directors approving and authorizing the
execution, delivery and performance by Seller of this Agreement and the other
Transaction Documents to which it is a party, and that such resolutions have not
been amended, modified or rescinded and are in full force and effect as of the
date thereof;
(d) Copies of good standing certificates for Seller issued by the
Secretary of State of Delaware and by the appropriate official of each other
jurisdiction where such qualification is required under SECTION 6.01(B);
(e) Acknowledgment copies (or other evidence of filing reasonably
acceptable to the Administrator) of (i) proper financing statements (Form
UCC-1), filed on or prior to the date of the initial Purchase in the State of
Texas and in such other jurisdictions as the Administrator may reasonably
request, substantially in the form of EXHIBIT 5.01(E) or in such other form as
the Administrator may reasonably request (with such changes, if any, as the
Administrator may find acceptable in its discretion), naming Seller as the
debtor and seller of an undivided percentage interest in the Pool Receivables
and Related Assets and Purchaser as the secured party and purchaser; and (ii)
such other similar instruments or documents, if any, as may be necessary or, in
the opinion of the Administrator, desirable under the UCC or any comparable law
of all appropriate jurisdictions to perfect Purchaser's undivided percentage
interest in the Pool Receivables and Related Assets;
(f) Search reports provided in writing to the Administrator by ▇▇▇▇▇▇ &
▇▇▇▇▇▇ L.L.P., (i) listing all effective financing statements or other, similar
instruments or documents that name Seller as debtor and that are filed in the
jurisdictions in which filings were made pursuant to SUBSECTION (E) above and in
such other jurisdictions as the Administrator shall reasonably request, together
with copies of such financing statements (none of which, other than (1) any of
the financing statements or other instruments or documents described in CLAUSE
(E) above, and (2) any financing statements which shall have been terminated
(and of which the Administrator shall have received satisfactory evidence of
termination), shall cover any Receivables or Related Assets), and (ii) listing
all tax liens and judgment liens (if any) filed against any debtor referred to
in CLAUSE (I) above in the jurisdictions described therein and showing no such
Liens;
(g) Duly executed copies of (i) Lock-Box Agreements with each of the
Lock-Box Banks, covering the Lock-Box Accounts described in SECTION 7.01(I),
(ii) post-office box assignments for each post-office box into which Collections
on the Pool Receivables may be deposited and (iii) the Collection Account
Agreement with the Collection Account Bank;
15
(h) A favorable opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P., special counsel to KBK
and Seller, in substantially the form of EXHIBIT 5.01(H)-1 and a favorable
opinion of general counsel to KBK and Seller, in substantially the form of
EXHIBIT 5.01(H)-2;
(i) Such powers of attorney, substantially in the form of EXHIBIT 5.01(I)
(or in such other form as the Administrator may reasonably request), as the
Administrator shall reasonably request to enable the Administrator to collect
all amounts due under any and all Pool Receivables;
(j) A PRO FORMA Information Package, prepared in respect of the proposed
initial Purchase, as of the initial Cut-Off Date of April 11, 1997;
(k) Written approval by the Credit Bank of this Agreement and the
transactions contemplated hereby;
(l) Letters from each of Standard & Poor's Ratings Services and ▇▇▇▇▇'▇
Investors Service, Inc. confirming that the existing ratings of the Commercial
Paper Notes will remain in effect after giving effect to the transactions
contemplated hereby;
(m) A computer file containing all account information related to the
Receivables; and
(n) Such other agreements, instruments, certificates, opinions and other
documents as the Administrator may reasonably request.
SECTION 5.02. CONDITIONS PRECEDENT TO ALL PURCHASES AND REINVESTMENTS.
Each Purchase (including the initial Purchase) and each Reinvestment hereunder
shall be subject to the further conditions precedent that:
(a) on the date of such Purchase or Reinvestment the following statements
shall be true (and Seller, by accepting the amount of such Purchase or by
receiving the proceeds of such Reinvestment, shall be deemed to have certified
that):
(i) the representations and warranties contained in ARTICLE VI are
correct in all material respects on and as of such date as though made on
and as of such date (and shall be deemed to have been made on such date),
(ii) no event has occurred and is continuing, or would result from
such Purchase or Reinvestment, that constitutes a Liquidation Event or
Unmatured Liquidation Event,
16
(iii) after giving effect to such Purchase or Reinvestment,
Purchaser's Total Investment will not exceed the Purchase Limit and the
Asset Interest, expressed as a percentage of Net Pool Balance, will not
exceed the Allocation Limit;
(b) the Termination Date shall not have occurred; and
(c) in the case of a Purchase, the Administrator shall have timely
received an appropriate notice of the proposed Purchase in accordance with
SECTION 1.02(A).
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. REPRESENTATIONS AND WARRANTIES OF SELLER AND SERVICER.
Seller and Servicer each severally represents and warrants with respect to
itself as follows:
(a) ORGANIZATION AND GOOD STANDING. Such party has been duly organized and
is validly existing as a corporation in good standing under the laws of the
state of its incorporation, with power and authority to own its properties and
to conduct its business as such properties are presently owned and such business
is presently conducted.
(b) DUE QUALIFICATION. Such party is duly qualified to do business as a
foreign corporation in good standing, and has obtained all necessary licenses
and approvals, in all jurisdictions in which (i) the ownership or lease of
property or the conduct of its business requires such qualification, licenses or
approvals and (ii) failure so to qualify or to obtain such licenses or approvals
could reasonably be expected to have a Material Adverse Effect.
(c) POWER AND AUTHORITY; DUE AUTHORIZATION. Such party (i) has all
necessary power, authority and legal right to execute and deliver this Agreement
and the other Transaction Documents to which it is a party, and to carry out the
terms of the Transaction Documents to which it is a party, and (ii) has duly
authorized by all necessary corporate action the execution, delivery and
performance of this Agreement and the other Transaction Documents to which it is
a party.
(d) BINDING OBLIGATIONS. This Agreement constitutes, and each other
Transaction Document to be signed by such party when duly executed and delivered
will constitute, a legal, valid and binding obligation of such party,
enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, or other similar laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability is considered in
a proceeding in equity or at law.
17
(e) NO VIOLATION. The execution and delivery of this Agreement and the
other Transaction Documents to which it is a party and the performance by such
party of the terms hereof and thereof will not (i) conflict with, result in any
breach of any of the terms and provisions of, or constitute (with or without
notice or lapse of time or both) a default under, the articles or certificate of
incorporation or by-laws of such party, or any indenture, loan agreement,
receivables purchase agreement, mortgage, deed of trust, or other agreement or
instrument to which such party is a party or by which it or any of its
properties is bound, (ii) result in the creation or imposition of any Lien upon
any of such party's properties pursuant to the terms of any such indenture, loan
agreement, receivables purchase agreement, mortgage, deed of trust, or other
agreement or instrument, other than this Agreement and the other Transaction
Documents, or (iii) violate any law or any order, rule, or regulation applicable
to such party of any court or of any federal or state regulatory body,
administrative agency, or other governmental instrumentality having jurisdiction
over such party or any of its properties.
(f) NO PROCEEDINGS. There are no proceedings or investigations pending, or
to such party's knowledge threatened, against or involving such party before any
court, regulatory body, administrative agency, or other tribunal or governmental
instrumentality (i) asserting the invalidity of this Agreement or any other
Transaction Document, (ii) seeking to prevent the sale and assignment of the
Receivables under the Sale Agreement or of the Asset Interest under this
Agreement or the consummation of any of the other transactions contemplated by
this Agreement or any other Transaction Document, (iii) seeking any
determination or ruling that could reasonably be expected to have a Material
Adverse Effect or (iv) seeking to adversely affect the federal income tax
attributes of the Purchases or Reinvestments hereunder.
(g) GOVERNMENT APPROVALS. 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, delivery and performance by such party of
this Agreement and each other Transaction Document to which it is a party,
EXCEPT for (i) the filing of the UCC financing statements and UCC termination
statements referred to in ARTICLE V, and (ii) the filing of any UCC continuation
statements and amendments from time to time required in relation to any UCC
financing statements filed in connection with this Agreement, as provided in
SECTION 8.05, all of which, at the time required in ARTICLE V or SECTION 8.05,
as applicable, shall have been duly made and shall be in full force and effect.
(h) ACCURATE REPORTS. No Information Package (if prepared by such party,
or to the extent information therein was supplied by such party) or other
information, exhibit, financial statement, document, book, record or report
furnished or to be furnished, in each case in writing, by or on behalf of such
party to the Administrator, Purchaser or the Relationship Bank in connection
with this Agreement, in each case as of the date it was or will be dated or
certified, was or will be inaccurate in any material respect, or contained or
will contain any material misstatement of fact or omitted or will omit to state
any fact
18
necessary to make the statements contained therein, in the context in which they
are made, not materially misleading.
SECTION 6.02. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SELLER. In
addition to the representations and warranties of Seller set forth in SECTION
6.01, Seller hereby represents and warrants as follows:
(a) OWNERSHIP. On and after the date of the initial Purchase hereunder,
all the issued and outstanding capital stock (including all warrants, options,
conversion rights, and other rights to purchase or convert into such stock) of
Seller is owned by KBK, free and clear of all Liens.
(b) POWER AND AUTHORITY. Seller has had at all relevant times, and now
has, all necessary power, authority and legal right to acquire and own the
Receivables and to sell and assign the Asset Interest on the terms and
conditions herein provided, and such sale and assignment has been duly
authorized by all necessary corporate action on the part of Seller.
(c) VALID SALE. Subject to the provisions of SECTION 9.04, this Agreement
constitutes a valid sale, transfer, and assignment of the Asset Interest to
Purchaser, enforceable against creditors of and purchasers from Seller.
(d) QUALITY OF TITLE. (i) Each Pool Receivable, together with the related
Contract and all purchase orders and other agreements related to such Pool
Receivable, is owned by Seller free and clear of any Lien (other than any
Permitted Lien); (ii) when Purchaser makes a Purchase or Reinvestment, it shall
have acquired and shall at all times thereafter continuously maintain a valid
and perfected first priority undivided percentage ownership interest to the
extent of the Asset Interest in each Pool Receivable, each related Contract, the
Related Security and Collections with respect thereto, free and clear of any
Lien (other than any Permitted Lien); and (iii) no financing statement or other
instrument similar in effect covering any Pool Receivable, any interest therein,
the related Contracts, the Related Security or Collections with respect thereto
is on file in any recording office except such as may be filed (1) in favor of
the Originator or Seller in accordance with the Contracts, (2) in favor of
Seller in connection with the Sale Agreement, (3) in favor of Purchaser or the
Administrator in accordance with this Agreement or (4) otherwise in connection
with any Permitted Lien.
(e) BULK SALES ACT. No transaction contemplated hereby requires compliance
with any bulk sales act or similar law.
(f) LITIGATION. No injunction, decree or other decision has been issued or
made by any court, Governmental Authority or instrumentality thereof that
prevents, and to the knowledge of any Seller Party, no threat by any person has
been made to attempt to obtain
19
any such decision that would prevent, Seller from conducting a material part of
its business operations.
(g) MARGIN REGULATIONS. The use of all funds obtained by Seller under this
Agreement will not conflict with or contravene any of Regulations G, T, U and X
promulgated by the Board of Governors of the Federal Reserve System from time to
time.
(h) OFFICES. The principal place of business and chief executive office of
Seller is located at the address of Seller referred to in SECTION 14.02, and the
offices where Seller Parties keep all their books, records and documents
evidencing Pool Receivables, the related Contracts and all purchase orders and
other agreements related to such Pool Receivables are located at such address of
Seller and the other addresses specified in Schedule 5.1(m) to the Sale
Agreement (or at such other locations, notified to the Administrator in
accordance with SECTION 7.01(F), in jurisdictions where all action required by
SECTION 8.05 has been taken and completed).
(i) LOCK-BOX ACCOUNTS. The names and addresses of all the Lock-Box Banks,
together with the account numbers of the Lock-Box Accounts of each Seller Party
at such Lock-Box Banks, are specified in SCHEDULE 6.02(I) (or have been notified
to and approved by the Administrator and the Relationship Bank in writing in
accordance with SECTION 7.03(D)).
(j) ELIGIBLE RECEIVABLES. Each Receivable included in the Net Pool Balance
as an Eligible Receivable on the date of any Purchase or Reinvestment shall be
an Eligible Receivable on such date.
(k) LEGAL NAMES. Neither the Seller nor KBK has (i) been known by any
legal name other than its corporate name as of the date hereof, except to the
extent permitted otherwise pursuant to SECTION 7.03(K) or (ii) has been the
subject of any merger or other corporate reorganization that resulted in a
change of name, identity or corporate structure. Each of the Seller and KBK use
no trade names (except as set forth on SCHEDULE 6.02(K)) other than their
respective actual corporate names.
(l) INVESTMENT COMPANY ACT. Seller is not, and is not controlled by, an
"investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended.
SECTION 6.03. ADDITIONAL REPRESENTATIONS AND WARRANTIES OF SERVICER. In
addition to the representations and warranties of servicer set forth in SECTION
6.01, Servicer represents and warrants that no license or approval is required
for the Administrator's use of any program used by Servicer in the servicing of
the Receivables, other than those which have been obtained and granted to a
potential substitute Servicer as provided hereby and are in full force and
effect.
20
ARTICLE VII
GENERAL COVENANTS OF SELLER AND SERVICER
SECTION 7.01. AFFIRMATIVE COVENANTS OF SELLER AND SERVICER. From the date
hereof until the Final Payout Date, Seller and Servicer each severally agrees
that it will, unless the Administrator shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with all
applicable laws, rules, regulations and orders with respect to the Pool
Receivables and related Contracts.
(b) PRESERVATION OF CORPORATE EXISTENCE. Preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
its incorporation and qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualification could reasonably be
expected to have a Material Adverse Effect.
(c) AUDITS. (i) At any time and from time to time upon reasonable notice
during regular business hours, permit the Administrator, the Relationship Bank
or any of their agents or representatives, including any certified public
accountants or other auditors acceptable to the Administrator and Relationship
Bank, (A) to examine and make copies of and abstracts from all books, records
and documents (including, without limitation, computer tapes and disks) in the
possession or under the control of such party relating to Pool Receivables,
including, without limitation, the related Contracts and purchase orders and
other agreements, and (B) to visit the offices and properties of such party for
the purpose of examining such materials described in CLAUSE (I)(A) next above,
and to discuss matters relating to Pool Receivables or any such party's
performance hereunder with any of the officers or employees of such party having
knowledge of such matters; (ii) permit the Administrator, the Relationship Bank
or any of their agents or representatives, upon the reasonable prior request of
the Administrator or the Relationship Bank, to meet with the independent
auditors of such party, to review such auditors' work papers (including, without
limitation, work papers relating to any audit report or audit opinion described
in SECTION 7.02(G)) and otherwise to review with such auditors the books and
records of such party with respect to the Pool Receivables and Related Assets;
and (iii) without limiting the provisions of CLAUSE (I) next above, from time to
time (A) upon reasonable notice during regular business hours, not more than
four times in any calendar year, or (B) on request of Administrator or the
Relationship Bank at any time when a Liquidation Event or Unmatured Liquidation
Event shall have occurred and be continuing, permit certified public accountants
or other auditors acceptable to the Administrator and Relationship Bank to
conduct a review of such party's books and records with respect to the Pool
Receivables and Related Assets.
21
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. In the case of Servicer,
maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing Pool 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 Pool Receivables (including,
without limitation, records adequate to permit the daily identification of
outstanding Unpaid Balances by Obligor and related debit and credit details of
the Pool Receivables and all Collections of and adjustments to Pool
Receivables).
(e) LOCATION OF RECORDS. In the case of Seller, keep its chief place of
business and chief executive office, and the offices where it keeps its records
concerning the Receivables, all related Contracts and all purchase orders and
other agreements related to such Receivables (and all original documents
relating thereto), at the address of Seller referred to in SECTION 14.02 or,
upon 30 days' prior written notice to the Administrator, at such other locations
in jurisdictions where all action required by SECTION 8.05 shall have been taken
and completed.
(f) TRANSACTION DOCUMENTS. Perform and comply in all material respects
with all of its covenants and agreements set forth in the Sale Agreement and the
other Transaction Documents to which it is a party, and, in the case of Seller,
enforce the covenants and agreements of KBK under the Sale Agreement and the
other Transaction Documents to which it is a party, unless instructed otherwise
by the Administrator.
(g) LOCK-BOX ACCOUNTS. Instruct all Obligors to cause all Collections on
Receivables to be (i) deposited in Lock-Box Accounts which are covered by
Lock-Box Agreements, (ii) deposited in the Collection Account or (iii) deposited
to certain post-office boxes designated by the Servicer; PROVIDED, HOWEVER, that
in the case of Collections on Pool Receivables deposited to such post office
boxes, the Servicer shall deposit such Collections in Lock-Box Accounts which
are covered by Lock-Box Agreements within one (1) Business Day of receipt.
(h) FINANCIAL COVENANTS. In the case of the Servicer, (i) maintain a
Tangible Net Worth of at least $10,000,000.00; (ii) maintain a ratio of Funded
Debt to Capital of not greater than 4.0 to 1.0; and (iii) maintain an Interest
Coverage Ratio of at least 1.50 to 1.0.
(i) INSTRUMENTS. If any Receivable is or becomes evidenced by an
"instrument" (as defined in the applicable UCC), the Servicer shall deliver such
"instrument" to the Administrator or a custodian designated by the
Administrator.
(j) Within 30 days of the Closing Date, the Seller shall provide a letter
from an external auditor verifying the accuracy of the Receivables Pool data.
22
SECTION 7.02. REPORTING REQUIREMENTS OF SELLER. From the date hereof until
the Final Payout Date, unless the Administrator and the Relationship Bank shall
otherwise consent in writing, Seller will furnish or cause to be furnished to
the Administrator and the Relationship Bank:
(a) QUARTERLY FINANCIAL STATEMENTS. As soon as available and in any event
within 45 days after the end of each of the first three quarters of each fiscal
year of Seller, copies of the quarterly financial statements of Seller, prepared
in conformity with GAAP, duly certified by the chief financial officer of
Seller;
(b) ANNUAL FINANCIAL STATEMENTS. As soon as available and in any event
within 90 days after the end of each fiscal year of Seller, copies of the
audited annual financial statements of Seller, in conformity with GAAP, duly
certified by independent certified public accountants of recognized national
standing selected by Seller;
(c) REPORTS UNDER SALE AGREEMENT. Promptly upon the Administrator's or
Relationship Bank's request, copies of any reports which KBK has furnished to
Seller under the Sale Agreement and which has not been furnished directly to the
Administrator or the Relationship Bank;
(d) ERISA. Promptly after the filing or receiving thereof, copies of all
reports and notices with respect to any Reportable Event defined in Article IV
of ERISA which Seller files under ERISA with the Internal Revenue Service, the
Pension Benefit Guaranty Corporation or the U.S. Department of Labor or receives
from the Pension Benefit Guaranty Corporation;
(e) LIQUIDATION EVENTS, ETC. As soon as possible and in any event within
two days after obtaining actual knowledge of the occurrence of any Liquidation
Event or Unmatured Liquidation Event or any "Purchase Termination Event" or
"Unmatured Purchase Termination Event" under the Sale Agreement, a written
statement of the chief financial officer or chief accounting officer of Seller
setting forth details of such event and the action that Seller proposes to take
with respect thereto;
(f) LITIGATION. As soon as possible and in any event within five Business
Days of Seller's actual knowledge thereof, notice of (i) any litigation,
investigation or proceeding which may exist at any time which could reasonably
be expected to have a Material Adverse Effect and (ii) any development in
previously disclosed litigation which development could reasonably be expected
to have a Material Adverse Effect;
(g) AUDIT OF POOL RECEIVABLES. Within one year of the date of this
Agreement, and at least once during each calendar year thereafter, provided that
no more than one year elapses between each audit report, an audit report,
prepared by KPMG Peat Marwick LLP or other nationally recognized independent
certified public accountants, selected by Seller and
23
reasonably acceptable to the Administrator and the Relationship Bank, as of a
date no more than 90 days prior to the date of such audit report, substantially
in the form of the report delivered pursuant to SECTION 7.01(J) and covering
such other matters as the Administrator or the Relationship Bank may reasonably
request;
(h) CREDIT AND COLLECTION POLICY. At least ten Business Days' prior
written notice of any proposed material change in the Credit and Collection
Policy (whether or not permitted under SECTION 7.03(C)); and
(i) OTHER. Promptly, from time to time, such other information, documents,
records or reports respecting the Receivables or the condition or operations,
financial or otherwise, of Seller as the Administrator or the Relationship Bank
may from time to time reasonably request in order to protect the interests of
the Administrator or Purchaser under or as contemplated by this Agreement.
SECTION 7.03. NEGATIVE COVENANTS OF SELLER AND SERVICER. From the date
hereof until the Final Payout Date, Seller and Servicer each severally agrees
that it will not, without the prior written consent of the Administrator:
(a) SALES, LIENS, ETC. (i) In the case of Seller, except as otherwise
provided herein and in the other Transaction Documents, sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer to
exist any Lien (other than any Permitted Lien) upon or with respect to, any Pool
Receivable or related Contract or Related Security with respect thereto, or any
interest therein, or any Lock-Box Account to which any Collections of any Pool
Receivable are sent, or any right to receive income or proceeds from or in
respect of any of the foregoing, PROVIDED, that Seller shall be permitted to
sell and assign any Pool Receivable together with the Related Assets with
respect thereto provided that (A) Seller receives cash in an amount equal to the
Unpaid Balance of such Receivable from the purchaser or transferee thereof and
deposits the same in the Collection Account to be distributed as a Collection on
such Receivable and (B) immediately prior, and after giving effect, to such sale
and assignment no Liquidation Event or Unmatured Liquidation Event shall have
occurred and be continuing and (ii) in the case of Servicer, assert any interest
in the Pool Receivables, except as Servicer. The Seller shall take any and all
actions (and shall instruct XXX and the Administrator to take any and all
actions) reasonably requested by the purchaser or transferee of any Receivable
sold and assigned pursuant to clause (i) above, at the expense of such purchaser
or transferee, to assign to such purchaser or transferee all of the right, title
and interest in and to such Receivables and the Related Assets with respect
thereto.
(b) EXTENSION OR AMENDMENT OF RECEIVABLES. Except as otherwise permitted
in SECTION 8.02, extend, amend or otherwise modify the terms of any Pool
Receivable, or amend, modify or waive any material term or condition of any
Contract related thereto, or, in the case of Seller, permit Servicer to do any
of the foregoing.
24
(c) CHANGE IN CREDIT AND COLLECTION POLICY. Make any change in the Credit
and Collection Policy, or, in the case of Seller, permit Servicer to make any
change in the Credit and Collection Policy, which change would impair the
collectibility of any Pool Receivable or otherwise materially adversely affect
the interests or remedies of Purchaser under this Agreement or any other
Transaction Document.
(d) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS OR ACCOUNTS. Add or
terminate any bank as a Lock-Box Bank or as a Collection Account Bank from those
listed in SCHEDULE 6.02(I) or make any change in its instructions to Obligors
regarding payments to be made to Seller or Servicer or payments to be made to
any Lock-Box Bank, unless the Administrator and the Relationship Bank shall have
approved in writing such addition, termination or change and the Administrator
shall have received duly executed copies of Lock-Box Agreements with each new
Lock-Box Bank or the Collection Account Agreement with the new Collection
Account Bank, as the case maybe.
(e) DEPOSITS TO COLLECTIONS ACCOUNT. Deposit or otherwise credit, or cause
or permit to be so deposited or credited, to the Collection Account, any cash or
cash proceeds other than Collections of Pool Receivables.
(f) CHANGES TO TRANSACTION DOCUMENTS. Except as otherwise permitted herein
or in the Sale Agreement, enter into any amendment or modification of or
supplement to the Sale Agreement or the other Transaction Documents to which it
is a party, or, in the case of Seller, consent to any departure by the
Originator or KBK from the terms thereof.
(g) MERGERS, ACQUISITIONS, SALES, ETC. Be a party to any merger or
consolidation, or purchase or otherwise acquire all or substantially all of the
assets or any stock of any class of, or any partnership or joint venture
interest in, any other Person, or, except in the ordinary course of its
business, sell, transfer, convey or lease all or substantially all of its assets
(other than pursuant to this Agreement and the other Transaction Documents)
except, in the case of Servicer, for (i) any such merger or consolidation of or
by any wholly-owned Subsidiary (other than Seller) into Servicer, (ii) any such
purchase or other acquisition by the Servicer of the assets or stock of any
wholly-owned Subsidiary (other than Seller) or (iii) any such sale, transfer,
conveyance, lease or assignment by the Servicer to any wholly-owned Subsidiary.
(h) RESTRICTED PAYMENTS. In the case of the Seller, declare or make any
dividend or other distributions to any of its shareholders, redeem or purchase
any of its capital stock or make any loan or other payments to any of its
shareholders (other than (1) payments of the purchase price of Receivables as
set forth in the Sale Agreement and (2) payment of the Servicer's Fee so long as
KBK or any Affiliate thereof is the Servicer) unless, in each case, no
Liquidation Event or Unmatured Liquidation Event has occurred and is continuing
or would result therefrom and all amounts outstanding under the Purchaser Note
have been paid in full.
25
(i) INDEBTEDNESS. In the case of Seller, incur or permit to exist any
indebtedness or liability, direct or indirect, on account of deposits or
advances or for borrowed money or for the deferred purchase price of any
property or services, except (A) indebtedness of Seller to KBK incurred in
accordance with the Sale Agreement, (B) current accounts payable arising under
the Transaction Documents and not overdue and (C) other current accounts payable
arising in the ordinary course of business and not overdue, in an aggregate
amount at any time outstanding not to exceed $3,000.
(j) INVESTMENTS, ETC. In the case of Seller, except as contemplated in the
Sale Agreement in connection with Seller's purchases of Receivables and Related
Assets from KBK, (i) make, incur or suffer to exist an investment in or equity
contribution to, any Person or (ii) create any direct or indirect Subsidiary or
otherwise acquire direct or indirect ownership of any equity interests in any
other Person.
(k) CHANGE IN NAME. In the case of Seller, change its corporate name or
the name under or by which it does business, or permit KBK to change its
corporate name or the name under or by which it does business, unless Seller
shall have given Servicer, the Administrator and the Relationship Bank 30 days'
prior written notice thereof and unless, prior to any such change in name,
Seller or KBK shall have filed (or shall have caused to be filed) such financing
statements or amendments as the Servicer or the Administrator determines may be
necessary to continue the perfection of the Purchaser's interest in the
Receivables and Related Assets.
(l) AMENDMENT OF CERTIFICATE OF INCORPORATION; CHANGE IN SELLER'S
BUSINESS. In the case of Seller, amend its certificate of incorporation or
bylaws, or engage in any business other than as contemplated by the Transaction
Documents.
(m) NEGATIVE PLEDGES. Enter into or assume any agreement (other than this
Agreement and the other Transaction Documents) prohibiting the creation or
assumption of any Lien upon any Pool Receivables or Related Assets, whether now
owned or hereafter acquired by Seller, as contemplated by the Transaction
Documents, or otherwise prohibiting or restricting any transaction contemplated
hereby or by the other Transaction Documents.
SECTION 7.04. SEPARATE EXISTENCE. Each of Seller and KBK hereby
acknowledges that Purchaser, the Liquidity Banks and the Administrator are
entering into the transactions contemplated by this Agreement and the other
Transaction Documents in reliance upon Seller's identity as a legal entity
separate from KBK. Therefore, from and after the date hereof, each of Seller and
KBK shall take all steps specifically required by this Agreement or by the
Purchaser or Administrator to continue Seller's identity as a separate legal
entity and to make it apparent to third Persons that Seller is an entity with
assets and liabilities distinct from those of KBK and any other Person, and is
not a division of KBK or any other Person. Without limiting the generality of
the foregoing and in addition to and
26
consistent with the other covenants set forth herein, each of Seller and KBK
shall take such actions as shall be required in order that:
(a) Seller will be a limited purpose corporation whose primary activities
are restricted in its certificate of incorporation to purchasing or otherwise
acquiring from KBK, owning, holding, granting security interests, or selling
interests, in Pool Receivables, entering into agreements for the selling and
servicing of the Receivables Pool, and conducting such other activities as it
deems necessary or appropriate to carry out its primary activities;
(b) Seller shall not engage in any business or activity, or incur any
indebtedness or liability other than as expressly permitted by the Transaction
Documents;
(c) Not less than one member of Seller's Board of Directors (the
"INDEPENDENT DIRECTOR") shall be an individual who is not a direct, indirect or
beneficial stockholder, officer, director, employee, affiliate, associate, or
supplier of KBK or any of its Affiliates. The certificate of incorporation of
Seller shall provide that (i) Seller's Board of Directors shall not approve, or
take any other action to cause the filing of, a voluntary bankruptcy petition
with respect to Seller unless the Independent Director shall approve the taking
of such action in writing prior to the taking of such action and (ii) such
provision cannot be amended without the prior written consent of the Independent
Director;
(d) The Independent Director shall not at any time serve as a trustee in
bankruptcy for Seller, KBK or any Affiliate thereof;
(e) Any employee, consultant or agent of Seller will be compensated from
Seller's funds for services provided to Seller. Seller will not engage any
agents other than its attorneys, auditors and other professionals, and a
servicer and any other agent contemplated by the Transaction Documents for the
Receivables Pool, which servicer will be fully compensated for its services by
payment of the Servicer's Fee;
(f) Seller will contract with Servicer to perform for Seller all
operations required on a daily basis to service the Receivables Pool. Seller
will pay Servicer the Servicer's Fee pursuant hereto. Seller will not incur any
material indirect or overhead expenses for items shared with KBK (or any other
Affiliate thereof) which are not reflected in the Servicer's Fee. To the extent,
if any, that Seller (or any other Affiliate thereof) share items of expenses not
reflected in the Servicer's Fee, such as legal, auditing and other professional
services, such expenses will be allocated to the extent practical on the basis
of actual use or the value of services rendered, and otherwise on a basis
reasonably related to the actual use or the value of services rendered, it being
understood that KBK shall pay all expenses relating to the preparation,
negotiation, execution and delivery of the Transaction Documents, including,
without limitation, legal, agency and other fees;
27
(g) Seller's operating expenses will not be paid by KBK or any other
Affiliate thereof;
(h) Seller will have its own stationery;
(i) Seller's books and records will be maintained separately from those of
KBK and any other Affiliate thereof;
(j) All financial statements of KBK or any Affiliate thereof that are
consolidated to include Seller will contain detailed notes clearly stating that
(A) all of Seller's assets are owned by Seller, and (B) Seller is a separate
entity with creditors who have received security interests in Seller's assets;
(k) Seller's assets will be maintained in a manner that facilitates their
identification and segregation from those of KBK or any Affiliate thereof;
(l) Seller will strictly observe corporate formalities in its dealings
with KBK or any Affiliate thereof, and funds or other assets of Seller will not
be commingled with those of KBK or any Affiliate thereof except as permitted by
this Agreement in connection with servicing the Receivables Pool. Seller shall
not maintain joint bank accounts or other depository accounts to which KBK or
any Affiliate thereof (other than KBK in its capacity as Servicer) has
independent access. Seller is not named, and has not entered into any agreement
to be named, directly or indirectly, as a direct or contingent beneficiary or
loss payee on any insurance policy with respect to any loss relating to the
property of KBK or any subsidiary or affiliate of KBK. Seller will pay to the
appropriate affiliate the marginal increase or, in the absence of such increase,
the market amount of its portion of the premium payable with respect to any
insurance policy that covers Seller and such affiliate; and
(m) Seller will maintain arm's-length relationships with KBK (and any
Affiliate thereof). Any Person that renders or otherwise furnishes services to
Seller will be compensated by Seller at market rates for such services it
renders or otherwise furnishes to Seller. Neither Seller nor KBK will be or will
hold itself out to be responsible for the debts of the other or the decisions or
actions respecting the daily business and affairs of the other. Seller and KBK
will immediately correct any known misrepresentation with respect to the
foregoing, and they will not operate or purport to operate as an integrated
single economic unit with respect to each other or in their dealing with any
other entity.
28
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.01. DESIGNATION OF SERVICER.
(a) KBK AS INITIAL SERVICER. The servicing, administering and collection
of the Pool Receivables shall be conducted by the Person designated as Servicer
hereunder from time to time in accordance with this SECTION 8.01. Until the
Administrator or the Relationship Bank gives to Seller a Successor Notice (as
defined in SECTION 8.01(B)), KBK is hereby designated as, and hereby agrees to
perform the duties and obligations of, Servicer pursuant to the terms hereof.
(b) SUCCESSOR NOTICE; SERVICER TRANSFER EVENTS. Upon KBK's receipt of a
notice from the Administrator or Relationship Bank of the Administrator's or
Relationship Bank's designation of a new Servicer (a "SUCCESSOR NOTICE"), KBK
agrees that it will terminate its activities as Servicer hereunder in a manner
that the Administrator believes will facilitate the transition of the
performance of such activities to the new Servicer, and the new Servicer (which
may be the Administrator at the Administrator's option) shall assume each and
all of KBK's obligations to service and administer such Receivables, on the
terms and subject to the conditions herein set forth, and KBK shall use its best
efforts to assist the new Servicer in assuming such obligations. The
Administrator and Relationship Bank agree not to give KBK a Successor Notice
until after the occurrence of any Liquidation Event (any such Liquidation Event
being herein called a "SERVICER TRANSFER EVENT"), in which case such Successor
Notice may be given at any time in the Administrator's or the Relationship
Bank's discretion. If KBK disputes the occurrence of a Servicer Transfer Event,
KBK may take appropriate action to resolve such dispute; PROVIDED that KBK must
terminate its activities hereunder as Servicer and allow the newly designated
Servicer to perform such activities on the date provided by the Administrator or
Relationship Bank as described above (including the use of any program used by
the Servicer in servicing the Receivables), notwithstanding the commencement or
continuation of any proceeding to resolve the aforementioned dispute.
(c) SUBCONTRACTS. Servicer may, with the prior consent of the
Administrator, subcontract with any other Person for servicing, administering or
collecting the Pool Receivables, provided that Servicer shall remain liable for
the performance of the duties and obligations of Servicer pursuant to the terms
hereof and that any such subcontract may be terminated upon the occurrence of a
Servicer Transfer Event.
SECTION 8.02. DUTIES OF SERVICER.
(a) APPOINTMENT; DUTIES IN GENERAL. Each of Seller, Purchaser and the
Administrator hereby appoints as its agent Servicer, as from time to time
designated pursuant to SECTION 8.01, to enforce its rights and interests in and
under the Pool Receivables, the
29
Related Security and the related Contracts. Servicer shall take or cause to be
taken all such actions as may be necessary or advisable to collect each Pool
Receivable from time to time, all in accordance with applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the
Credit and Collection Policy.
(b) ALLOCATION OF COLLECTIONS; SEGREGATION. Servicer shall set aside for
the account of Seller and Purchaser their respective allocable shares of the
Collections of Pool Receivables in accordance with SECTION 1.03 but except as
required herein shall not be required (unless required under SECTION 1.03 or
ARTICLE III or otherwise reasonably requested by the Administrator or the
Relationship Bank) to segregate the funds constituting such portions of such
Collections prior to the remittance thereof in accordance with said Sections. If
instructed by the Administrator or the Relationship Bank, Servicer shall
segregate and deposit with a bank designated by the Administrator the
Purchaser's Share of Collections of Pool Receivables, on the Business Day of
deposit by Servicer of such Collections in the Collection Account.
(c) MODIFICATION OF RECEIVABLES. So long as no Liquidation Event and no
Unmatured Liquidation Event shall have occurred and be continuing, KBK while it
is Servicer, may, in accordance with the Credit and Collection Policy, (i)
extend the maturity or adjust the Unpaid Balance of any Defaulted Receivable as
KBK may determine to be appropriate to maximize Collections thereof, (ii) adjust
the Unpaid Balance of any Receivable to reflect the reductions or cancellations
described in the first sentence of SECTION 3.02(A), (iii) amend, modify or waive
any provision of any Inventory Financing Agreement with the consent of the
Administrator and KBK, and (iv) amend, modify or waive any of the terms of any
Factoring Agreement described in clause (iv) of the definition of "Related
Security," or terminate financing under any Factoring Agreement or Inventory
Financing Agreement provided that (A) following such amendment, modification or
waiver such Factoring Agreement is substantially in one of the forms set forth
in SCHEDULE 6.02(J)-2 and (B) such amendment, modification, waiver or
termination shall not affect or modify any Pool Receivable created prior to such
amendment, modification, waiver or termination. Nothing herein shall prevent KBK
from making or engaging in any amendments, modifications, waivers or
terminations permitted pursuant to SECTION 6.3 of the Sale Agreement.
(d) DOCUMENTS AND RECORDS. KBK shall deliver to Servicer, and Servicer
shall hold in trust for Seller and Purchaser in accordance with their respective
interests, all documents, instruments and records (including, without
limitation, computer tapes or disks) that evidence or relate to Pool
Receivables.
(e) TERMINATION. Servicer's authorization under this Agreement shall
terminate upon the Final Payout Date.
(f) POWER OF ATTORNEY. Seller hereby grants to Servicer an irrevocable
power of attorney, with full power of substitution, coupled with an interest, to
take in the name of
30
Seller all steps which are necessary or advisable to endorse, negotiate or
otherwise realize on any writing or other right of any kind held or transmitted
by Seller or transmitted or received by Purchaser (whether or not from Seller)
in connection with any Receivable.
(g) If in any enforcement suit or legal proceeding it is held that
Servicer may not enforce any Receivable on the grounds that it is not a real
party in interest or a Person entitled to enforce such Receivable, the Seller
and XXX may assign such Receivable to Servicer for purposes of collection
only.
SECTION 8.03. RIGHTS OF THE ADMINISTRATOR.
(a) NOTICE TO OBLIGORS AND OBLIGEES. At any time when a Liquidation Event
has occurred and is continuing, the Administrator may notify or cause the
Servicer to notify the Obligors and the Obligees of Pool Receivables, or any of
them, of the ownership of the Asset Interest by Purchaser.
(b) NOTICE TO LOCK-BOX BANKS AND COLLECTION ACCOUNT BANK. The
Administrator is hereby authorized at any time in its discretion to give notice
to the Lock-Box Banks, as provided in the Lock-Box Agreements, and the
Collection Account Bank, as provided in the Collection Account Agreements, as
applicable, of the transfer to the Administrator of dominion and control over
(i) the lock-boxes and related accounts to which the Obligors of Pool
Receivables make payments and (ii) the Collection Account. Seller and Servicer
hereby transfer to the Administrator, effective when the Administrator shall
give notice to the Lock- Box Banks or the Collection Account Bank as provided in
the Lock-Box Agreements or the Collection Account Agreements, the exclusive
dominion and control over such lock-boxes and accounts, and shall take any
further action that the Administrator may reasonably request to effect such
transfer.
(c) RIGHTS ON SERVICER TRANSFER EVENT. At any time following the
designation of a Servicer other than KBK pursuant to SECTION 8.01:
(i) The Administrator may direct the Obligors of Pool Receivables,
or any of them, to pay all amounts payable under any Pool Receivable
directly to the Administrator or its designee.
(ii) Servicer shall, at the Administrator's or Relationship Bank's
request and at Servicer's expense, give notice of Purchaser's ownership
and security interests in the Pool Receivables to each said Obligor and
direct that payments be made directly to the Administrator or its
designee.
(iii) Each of Servicer and Seller shall at the Administrator's or
Relationship Bank's request, (A) assemble all of the documents,
instruments and other records (including, without limitation, computer
programs, tapes and disks) which evidence
31
the Pool Receivables, and the related Contracts and Related Security, or
which are otherwise necessary or desirable to collect such Pool
Receivables, and make the same available to the successor Servicer at a
place selected by the Administrator or the Relationship Bank, and (B)
segregate all cash, checks and other instruments received by it from time
to time constituting Collections of Pool Receivables in a manner
consistent with the procedures in this Agreement or such added procedures
as are acceptable to the Administrator and promptly upon receipt, remit
all such cash, checks and instruments, duly endorsed or with duly executed
instruments of transfer, to the successor Servicer.
(iv) Each of Seller and Purchaser hereby authorizes the
Administrator, and grants to the Administrator an irrevocable power of
attorney (which shall terminate on the Final Payout Date), to take any and
all steps in Seller's or KBK's name and on behalf of Seller, KBK and
Purchaser which are necessary or desirable, in the determination of the
Administrator, to collect all amounts due under any and all Pool
Receivables, including, without limitation, endorsing Seller's, Servicer's
or KBK's name on checks and other instruments representing Collections and
enforcing such Pool Receivables and the related Contracts; PROVIDED that
the Administrator shall not exercise its rights under such power of
attorney unless a Liquidation Event shall have occurred and be continuing.
SECTION 8.04. RESPONSIBILITIES OF SELLER PARTIES. Anything herein to the
contrary notwithstanding:
(a) CONTRACTS. Each of Seller and KBK shall perform all of its obligations
(if any) under the Contracts related to the Pool Receivables and under the
related purchase orders and other agreements to the same extent as if the Asset
Interest had not been sold hereunder, and the exercise by the Administrator or
its designee of its rights hereunder shall not relieve any Seller Party from
such obligations.
(b) LIMITATION OF LIABILITY. The Administrator, the Relationship Bank and
Purchaser shall not have any obligation or liability with respect to any Pool
Receivables, Contracts related thereto or any other related purchase orders or
other agreements, nor shall any of them be obligated to perform any of the
obligations of any Seller Party thereunder.
SECTION 8.05. FURTHER ACTION EVIDENCING PURCHASES AND REINVESTMENTS.
(a) FURTHER ASSURANCES. Each of Seller and KBK agrees that from time to
time, at its expense, it will, and KBK will cause each other Seller Party to,
promptly execute and deliver all further instruments and documents, and take all
further action that the Administrator or its designee may reasonably request in
order to perfect, protect or more fully evidence the Purchases hereunder and the
resulting Asset Interest, or to enable Purchaser or the Administrator or its
designee to exercise or enforce any of their respective
32
rights hereunder or under any Transaction Document in respect thereof. Without
limiting the generality of the foregoing, each of Seller and KBK will, and KBK
will cause each other Seller Party to, upon the request of the Administrator or
its designee:
(i) execute 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;
(ii) ▇▇▇▇ conspicuously each Contract evidencing each Pool
Receivable with a legend, acceptable to the Administrator, evidencing that
the Asset Interest has been sold in accordance with this Agreement; and
(iii) ▇▇▇▇ its master data processing records evidencing such Pool
Receivables and related Contracts with such legend.
(b) ADDITIONAL FINANCING STATEMENTS; PERFORMANCE BY ADMINISTRATOR. Seller
hereby authorizes the Administrator or its designee to file one or more
financing or continuation statements, and amendments thereto and assignments
thereof, relative to all or any of the Pool Receivables and the Related Assets
now existing or hereafter arising in the name of Seller. If Seller fails to
perform any of its agreements or obligations under this Agreement, the
Administrator or its designee may (but shall not be required to) itself perform,
or cause performance of, such agreement or obligation, and the reasonable
expenses of the Administrator or its designee incurred in connection therewith
shall be payable by Seller as provided in SECTION 14.05.
(c) CONTINUATION STATEMENTS; OPINION. Without limiting the generality of
SUBSECTION (A), Seller will, not earlier than six (6) months and not later than
three (3) months prior to the fifth anniversary of the date of filing of the
financing statements referred to in SECTION 5.01(G) or any other financing
statement filed pursuant to this Agreement or in connection with any Purchase
hereunder, if the Final Payout Date shall not have occurred:
(i) execute and deliver and file or cause to be filed an appropriate
continuation statement with respect to such financing statement; and
(ii) deliver or cause to be delivered to the Administrator an
opinion of the counsel for KBK and Seller referred to in SECTION 5.01(H)
(or other counsel for Seller Parties reasonably satisfactory to the
Administrator), in form and substance reasonably satisfactory to the
Administrator, confirming and updating the opinion delivered pursuant to
SECTION 5.01(H) with respect to the matters set forth in PARAGRAPHS 7
through 10 of EXHIBIT 5.01(H) and otherwise to the effect that the Asset
Interest hereunder continues to be a valid and perfected ownership or
security interest, subject to no other Liens of record except as provided
herein or otherwise permitted hereunder.
33
SECTION 8.06. APPLICATION OF COLLECTIONS. Any payment by an Obligor in
respect of any indebtedness owed by it to any Obligee, Originator or Seller
shall, except as otherwise specified by such Obligor or required by the
underlying Contract or law or unless the Administrator instructs otherwise, be
applied, FIRST, as a Collection of any Pool Receivable or Receivables then
outstanding of such Obligor in the order of the age of such Pool Receivables,
starting with the oldest of such Pool Receivables and, SECOND, to any other
indebtedness of such Obligor.
ARTICLE IX
SECURITY INTEREST
SECTION 9.01. GRANT OF SECURITY INTEREST. To secure all obligations of
Seller and Servicer arising in connection with this Agreement and each other
Transaction Document, whether now or hereafter existing, due or to become due,
direct or indirect, or absolute or contingent, including, without limitation,
all Indemnified Losses, payments on account of Collections received or deemed to
be received and fees, in each case pro rata according to the respective amounts
thereof, Seller hereby assigns and pledges to Purchaser, for the benefit of the
Secured Parties, and hereby grants to Purchaser, for the benefit of the Secured
Parties, a security interest in, all of Seller's right, title and interest now
or hereafter existing in, to and under (a) all the Pool Receivables and Related
Assets (including specifically any undivided interest therein retained by Seller
hereunder), (b) the Lock-Box Accounts, the Collection Account and all other
accounts of the Seller, and all funds therein, together with all certificates
and instruments, if any, from time to time evidencing such accounts, and funds
on deposit and all investments made with such funds, all claims thereunder or in
connection therewith, and interest, dividends, moneys, instruments, securities
and other property from time to time received, receivable or otherwise
distributed in respect of any or all of the foregoing; and (c) all proceeds of
any of the foregoing.
SECTION 9.02. FURTHER ASSURANCES. The provisions of SECTION 8.05 shall
apply to the security interest granted under SECTION 9.01 as well as to the
Purchases, Reinvestments and all the Asset Interests hereunder.
SECTION 9.03. REMEDIES. Upon the occurrence of a Liquidation Event,
Purchaser shall have, with respect to the collateral granted pursuant to SECTION
9.01, and in addition to all other rights and remedies available to Purchaser or
the Administrator under this Agreement and the other Transaction Documents or
other applicable law, all the rights and remedies of a secured party upon
default under the UCC.
SECTION 9.04. INTENTION OF THE PARTIES. It is the express intent of the
parties hereto that the sale of ownership interests in the Pool Receivables and
Related Assets by Seller to Purchaser, as contemplated by this Agreement, be,
and be treated as, sales and not
34
as secured loans secured by the Pool Receivables and Related Assets. If,
however, notwithstanding the intent of the parties, such transactions are deemed
to be loans, or if for any reason and to the extent that title in the Asset
Interest is not vested in Purchaser, the Seller hereby grants to Purchaser a
present, continuing security interest in all of the Seller's right, title and
interest in and to the Pool Receivables and the Related Assets now existing and
hereafter created, to the extent of the Asset Interest.
ARTICLE X
LIQUIDATION EVENTS
SECTION 10.01. LIQUIDATION EVENTS. The following events shall be
"LIQUIDATION EVENTS" hereunder:
(a) Servicer (if KBK or any Affiliate of KBK is Servicer) (i) shall fail
to perform or observe any term, covenant or agreement that is an obligation of
Servicer hereunder (other than as referred to in CLAUSE (II) below) and such
failure shall remain unremedied for one Business Day or (ii) shall fail to make
any payment or deposit to be made by it hereunder when due (and, in the case of
payments under SECTION 13.02, such failure shall remain unremedied for ten (10)
days); or
(b) Any representation or warranty made or deemed to be made by KBK or
Seller (or any of its officers) under or in connection with this Agreement or
any Information Package or other information or report delivered pursuant hereto
shall prove to have been false or incorrect in any material respect when made
(other than a breach of the representations set forth in SECTION 6.02(D) or (J)
for which the Originator has satisfied its payment obligation under SECTION 3.5
of the Sale Agreement); or
(c) Seller or KBK (individually or as Servicer) shall fail to perform or
observe any other term, covenant or agreement contained in this Agreement or any
of the other Transaction Documents on its part to be performed or observed and
any such failure shall remain unremedied for five Business Days (or, in the case
of the Seller with respect to obligations under SECTION 13.01 and 14.05, ten
(10) days) after (A) written notice thereof shall have been given to Seller or
KBK by the Administrator or the Relationship Bank or (B) Seller or KBK has
actual knowledge; or
(d) (i) A default shall have occurred and be continuing under any
instrument or agreement evidencing, securing or providing for the issuance of
indebtedness for borrowed money in excess of $500,000 of, or guaranteed by, any
Seller Party which default if unremedied, uncured, or unwaived (with or without
the passage of time or the giving of notice or both) would permit acceleration
of the maturity of such indebtedness and such default shall have continued
unremedied, uncured or unwaived for a period long enough to
35
permit such acceleration and any notice of default required to permit
acceleration shall have been given; or (ii) a "Purchase Termination Event" shall
have occurred and be continuing under the Sale Agreement; or (iii) any default
under any other agreement or instrument relating to the purchase of receivables
of any Seller Party, or any other event, shall occur and shall continue after
the applicable grace period, if any, specified in such agreement or instrument,
if the effect of such default is to terminate, or permit the termination of, the
commitment of any party to such agreement or instrument to purchase receivables
or the right of any Seller Party to reinvest in receivables the principal amount
paid by any party to such agreement or instrument for its interest in
receivables; or
(e) An Event of Bankruptcy shall have occurred and remain continuing with
respect to KBK or Seller; or
(f) (i) Any litigation (including, without limitation, derivative
actions), arbitration proceedings or governmental proceedings not disclosed in
writing by KBK or Seller to the Administrator and Purchaser prior to the date of
execution and delivery of this Agreement is pending against KBK or Seller or any
Affiliate thereof, or (ii) any material development not so disclosed has
occurred in any litigation (including, without limitation, derivative actions),
arbitration proceedings or governmental proceedings so disclosed, which, in the
case of CLAUSE (I) or (II), in the opinion of the Administrator, has a
reasonable likelihood of having a Material Adverse Effect; or
(g) the Default Ratio at any Cut-Off Date exceeds XXX; or
(h) the Delinquency Ratio at any Cut-Off Date exceeds XXX; or
(i) Servicer (if any Seller Party or Affiliate thereof is Servicer) shall
make any material change in the Credit and Collection Policy without the prior
written consent of the Administrator and the Relationship Bank; or
(j) On any Settlement Date, after giving effect to the payments made under
SECTION 3.01(C), (i) the Asset Interest exceeds the Allocation Limit, and the
Asset Interest is not reduced below the Allocation Limit within a period of one
Business Day, or (ii) the Purchaser's Total Investment exceeds the Purchase
Limit; or
(k) There shall exist any event or occurrence that would reasonably be
expected to have a Material Adverse Effect; or
(l) There shall have occurred any event which materially adversely impairs
the ability of Seller or the Originator to originate Receivables of a credit
quality which are at least of the credit quality of the Receivables included in
the initial Purchase; or
(m) KBK or Seller is subject to a Change in Control; or
36
(n) The Internal Revenue Service shall file notice of a lien pursuant to
Section 6323 of the Internal Revenue Code with regard to any assets of Seller or
Servicer and such lien shall not have been released within five days, or the
Pension Benefit Guaranty Corporation shall file notice of a lien pursuant to
Section 4068 of the Employee Retirement Income Security Act of 1974 with regard
to any assets of Seller or Servicer and such lien shall not have been released
within five days; or
(o) Failure to obtain a Liquidity Agreement in substitution for the then
existing Liquidity Agreement on or before 30 days prior to the expiration of the
commitments of the Liquidity Banks thereunder, or the early termination of the
Liquidity Agreement as a result of default by Purchaser or a change in law; or
(p) (i) A Downgrading Event with respect to a Liquidity Bank shall have
occurred and been continuing for not less than 45 days, (ii) the Downgraded
Liquidity Bank shall not have been replaced by a Qualifying Liquidity Bank
pursuant to a Liquidity Agreement in form and substance acceptable to Purchaser
and the Administrator, and (iii) the commitment of such Downgraded Liquidity
Bank under the Liquidity Agreement shall not have been funded or collateralized
in such a manner that such Downgrading Event will not result in a reduction or
withdrawal of the credit rating applied to the Commercial Paper Notes by any of
the rating agencies then rating the Commercial Paper Notes;
(q) Purchaser shall become an "investment company" within the meaning of
the Investment Company Act of 1940, as amended;
(r) Seller shall fail to grant or maintain valid and perfected ownership
and security interests in favor of Purchaser; or
(s) An Event of Bankruptcy shall have occurred and remain continuing with
respect to an Affiliate of KBK or the Seller.
SECTION 10.02. REMEDIES.
(a) OPTIONAL LIQUIDATION. Upon the occurrence of a Liquidation Event
(other than a Liquidation Event described in SUBSECTION (E) of SECTION 10.01),
the Administrator shall, at the request, or may with the consent, of Purchaser,
by notice to Seller declare the Termination Date to have occurred and the
Liquidation Period to have commenced.
(b) AUTOMATIC LIQUIDATION. Upon the occurrence of a Liquidation Event
described in SUBSECTION (E) of SECTION 10.01, the Termination Date shall occur
and the Liquidation Period shall commence automatically.
(c) ADDITIONAL REMEDIES. Upon any Termination Date pursuant to this
SECTION 10.02, no Purchases or Reinvestments thereafter will be made, and the
Administrator,
37
Purchaser and the Relationship Bank shall have, in addition to all other rights
and remedies under this Agreement or otherwise, all other rights and remedies
provided under the UCC of each applicable jurisdiction and other applicable
laws, which rights shall be cumulative.
ARTICLE XI
THE ADMINISTRATOR; RELATIONSHIP BANK
SECTION 11.01. AUTHORIZATION AND ACTION. Pursuant to agreements entered
into with the Administrator and the Relationship Bank, Purchaser has appointed
and authorized the Administrator and the Relationship Bank (or their respective
designees) to take such action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to the Administrator or the
Relationship Bank by the terms hereof, together with such powers as are
reasonably incidental thereto.
SECTION 11.02. ADMINISTRATOR'S AND RELATIONSHIP BANK'S RELIANCE, ETC. The
Administrator, the Relationship Bank and their directors, officers, agents or
employees shall not be liable for any action taken or omitted to be taken by it
or them under or in connection with the Transaction Documents (including,
without limitation, the servicing, administering or collecting of Pool
Receivables as Servicer pursuant to SECTION 8.01), except for its or their own
gross negligence or willful misconduct. Without limiting the generality of the
foregoing, each of the Administrator and the Relationship Bank: (a) may consult
with legal counsel (including counsel for Seller), independent certified public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (b) makes no warranty or
representation to Purchaser or any other holder of any interest in Pool
Receivables and shall not be responsible to Purchaser or any such other holder
for any statements, warranties or representations made by any Seller Party in or
in connection with any Transaction Document; (c) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of any Transaction Document on the part of any Seller
Party or to inspect the property (including the books and records) of any Seller
Party; (d) shall not be responsible to Purchaser or any other holder of any
interest in Pool Receivables for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of any Transaction Document;
and (e) shall incur no liability under or in respect of this Agreement by acting
upon any notice (including notice by telephone where permitted herein), consent,
certificate or other instrument or writing (which may be by facsimile or telex)
in good faith believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 11.03. XXX CAPITAL AND XXX AND AFFILIATES. XXX
Capital and XXX and any of their respective Affiliates may generally engage in
any kind of business with any Seller Party or any Obligor, any of their
respective
38
Affiliates and any Person who may do business with or own securities of any
Seller Party or any Obligor or any of their respective Affiliates, all as if
XXX Capital and XXX were not the Administrator and the Relationship
Bank, respectively, and without any duty to account therefor to Purchaser or any
other holder of an interest in Pool Receivables.
ARTICLE XII
ASSIGNMENTS
SECTION 12.01. RESTRICTIONS ON ASSIGNMENTS.
(a) None of Seller, KBK or XXX, individually or as the Relationship Bank
(except, in the case of the Relationship Bank, as otherwise agreed among the
parties hereto), may assign its rights, or delegate its duties hereunder or any
interest herein without the prior written consent of the Administrator.
Purchaser may not assign its rights hereunder (although it may delegate its
duties hereunder as expressly indicated herein) or the Asset Interest (or any
portion thereof) to any Person without the prior written consent of Seller,
which consent shall not be unreasonably withheld; PROVIDED, HOWEVER, that
(i) Purchaser may assign all (but not part) of its rights and
interests in the Transaction Documents, together with all (but not part)
of its interest in the Asset Interest, to XXX Capital, the
Liquidity Agent, the Liquidity Banks or XXX, or any Affiliate of either of
them, or to any "bankruptcy remote" special purpose entity the business of
which is administered by XXX Capital or any Affiliate of State
Street Capital; and
(ii) Purchaser may assign all or a portion of the Asset Interest to
the Liquidity Banks in connection with any Liquidity Funding, and
Purchaser may assign and grant a security interest in all of its rights in
the Transaction Documents, together with all of its rights and interest in
the Asset Interest, to the Collateral Agent, to secure Purchaser's
obligations under or in connection with the Commercial Paper Notes, the
Liquidity Agreement, the Credit Agreement and any letter of credit issued
thereunder, and certain other obligations of Purchaser incurred in
connection with the funding of the Purchases and Reinvestments hereunder,
which assignments and/or grant of a security interest (and any subsequent
assignment by the Collateral Agent) shall not be considered an
"assignment" for purposes of SECTION 12.01(B) or, prior to the enforcement
of such security interest, for purposes of any other provision of this
Agreement (other than SECTION 12.03).
(b) Seller agrees to advise the Administrator within five Business Days
after notice to Seller of any proposed assignment by Purchaser of the Asset
Interest (or any portion thereof), not otherwise permitted under SUBSECTION (A),
of Seller's consent or non-consent to
39
such assignment, and if it does not consent, the reasons therefor. If Seller
does not consent to such assignment, Purchaser may immediately or at any time
thereafter assign such Asset Interest (or portion thereof) to any Person or
Persons permitted under CLAUSE (I) of SECTION 12.01(A).
SECTION 12.02. RIGHTS OF ASSIGNEE. Upon any assignment by Purchaser in
accordance with this ARTICLE XII and notice thereof given by Purchaser, the
Administrator or the Relationship Bank to Seller and Servicer, the assignee
receiving such assignment shall have all of the rights of Purchaser with respect
to the Transaction Documents and the Asset Interest.
SECTION 12.03. TERMS AND EVIDENCE OF ASSIGNMENT. Any assignment of the
Asset Interest (or any portion thereof) to any Person which is otherwise
permitted under this ARTICLE XII shall be upon such terms and conditions as
Purchaser and the assignee may mutually agree, and may be evidenced by such
instrument(s) or document(s) as may be satisfactory to Purchaser, the
Administrator and the assignee.
SECTION 12.04. RIGHTS OF COLLATERAL AGENT. Seller hereby agrees that, upon
notice to Seller, the Collateral Agent may exercise all the rights of the
Administrator hereunder, with respect to the Asset Interest (or any portions
thereof), and Collections with respect thereto, which are owned by Purchaser,
and all other rights and interests of Purchaser in, to or under this Agreement
or any other Transaction Document. Without limiting the foregoing, upon such
notice or at any time thereafter (but subject to any conditions applicable to
the exercise of such rights by the Administrator), the Collateral Agent may
request Servicer to segregate Purchaser's allocable shares of Collections from
Seller's allocable share, may give a Successor Notice pursuant to and in
accordance with SECTION 8.01(B), may give or require the Administrator or
Relationship Bank to give notice to the Lock-Box Banks or the Collection Account
Bank as referred to in SECTION 8.03(B) and may direct the Obligors of Pool
Receivables to make payments in respect thereof directly to an account
designated by them, in each case, to the same extent as the Administrator might
have done.
ARTICLE XIII
INDEMNIFICATION
SECTION 13.01. INDEMNITIES BY SELLER.
(a) GENERAL INDEMNITY. Without limiting any other rights which any such
Person may have hereunder or under the Sale Agreement or any other Transaction
Documents or under applicable law, but subject to SUBSECTION (C), Seller hereby
agrees to indemnify each of the Administrator, Purchaser, the Liquidity Banks,
the Credit Bank, the Relationship Bank,
40
the Liquidity Agent, each of their respective Affiliates, and all successors,
transferees, participants and assigns and all officers, directors, shareholders,
controlling persons, employees and agents of any of the foregoing (each an
"INDEMNIFIED PARTY"), forthwith on demand, from and against any and all damages,
losses, claims, liabilities and related costs and expenses, including reasonable
attorneys' fees and disbursements (all of the foregoing being collectively
referred to as "INDEMNIFIED LOSSES") awarded against or incurred by any of them
arising out of or relating to the Transaction Documents or the ownership or
funding of the Asset Interest or in respect of any Receivable or any Contract,
including, without limitation, any breach by Seller of any representation,
warranty, covenant or agreement of Seller contained herein or in the other
Transaction Documents and any matters described in clauses (i) through (xi) of
Section 9.1(a) of the Sale Agreement, but EXCLUDING, HOWEVER, (A) Indemnified
Losses to the extent determined by a court of competent jurisdiction to have
resulted from gross negligence or willful misconduct on the part of such
Indemnified Party, (B) recourse for Defaulted Receivables and (C) taxes upon or
measured by the overall net income of any Indemnified Party. Without limiting
the foregoing (but subject to the exclusions set forth in clauses (A) - (C) of
this SECTION 13.01(A)), Seller shall indemnify each Indemnified Party for
Indemnified Amounts arising out of or relating to:
(i) the transfer by Seller of any interest in any Pool Receivable
other than the transfer of an Asset Interest to Purchaser pursuant to this
Agreement and the grant of a security interest to Purchaser pursuant to
SECTION 9.01;
(ii) any representation or warranty made by Seller under or in
connection with any Transaction Document, any Information Package or any
other information or report delivered by or on behalf of Seller pursuant
hereto, which shall have been false, incorrect or misleading in any
material respect when made or deemed made;
(iii) the failure by Seller to comply with any applicable law, rule
or regulation with respect to any Pool Receivable or the related
Transaction Documents, or the nonconformity of any Pool Receivable or the
related Contract with any such applicable law, rule or regulation;
(iv) the failure to vest and maintain vested in Purchaser an
undivided percentage ownership interest, to the extent of the Asset
Interest, in the Receivables in, or purporting to be in, the Receivables
Pool, free and clear of any Lien, other than a Lien arising solely as a
result of an act of Purchaser (or any assignee thereof), the Administrator
or the Relationship Bank, or in favor of the Collateral Agent, whether
existing at the time of any Purchase or Reinvestment of such Asset
Interest or at any time thereafter;
(v) the failure to file, or any delay in filing, financing
statements, mortgages, assignments of mortgages or other similar
instruments or documents under the UCC of any applicable jurisdiction or
other applicable laws with respect to any Receivables
41
in, or purporting to be in, the Receivable Pool, whether at the time of
any Purchase or Reinvestment or at any time thereafter;
(vi) any dispute, claim, offset or defense (other than discharge in
bankruptcy or payment) of the Obligor to the payment of any Receivable
included in the Net Pool Balance (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 services related to such Receivable or the furnishing
or failure to furnish such merchandise or services;
(vii) any failure of Seller to perform its duties or obligations in
accordance with this Agreement;
(viii) any products liability claim arising out of or in connection
with merchandise or services that are the subject of any Receivables Pool;
(ix) any litigation, proceedings or investigation against Seller; or
(x) any tax or governmental fee or charge (but not including taxes
upon or measured by net income), all interest and penalties thereon or
with respect thereto, and all out-of-pocket costs and expenses, including
the reasonable fees and expenses of counsel in defending against the same,
which may arise by reason of the purchase or ownership of any Asset
Interest, or any other interest in the Pool Receivables or in any goods
which secure any such Pool Receivables.
(b) CONTRIBUTION. If for any reason the indemnification provided above in
SUBSECTION (A) (and subject to the exceptions set forth therein) is unavailable
to an Indemnified Party (other than by reason of a final adjudication by a court
of competent jurisdiction that a claim is not within the scope of such
indemnification) or is insufficient to hold an Indemnified Party harmless, then
Seller shall contribute to the amount paid or payable by such Indemnified Party
as a result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect not only the relative benefits received by such
Indemnified Party on the one hand and Seller on the other hand but also the
relative fault of such Indemnified Party as well as any other relevant equitable
considerations.
SECTION 13.02 INDEMNITIES BY SERVICER.
(a) Without limiting any other rights which any such Person may have
hereunder or under applicable law, Servicer hereby agrees to indemnify each
Indemnified Party, forthwith on demand, from and against any and all Indemnified
Amounts awarded against or incurred by any of them arising out of or relating to
(i) any representation or warranty made by Servicer under or in connection with
any Transaction Document, any Information Package
42
or any other information or report delivered by or on behalf of Servicer
pursuant hereto, which shall have been false, incorrect or misleading in any
material respect when made or deemed made, (ii) the failure by Servicer to
comply with any applicable law, rule or regulation with respect to any Pool
Receivable or the related Transaction Document, or (iii) the failure of Servicer
to perform its duties or obligations in accordance with this Agreement.
(b) If for any reason the indemnification provided above in this SECTION
13.02 is unavailable to an Indemnified Party or is insufficient to hold an
Indemnified Party harmless, then the Servicer shall contribute to the amount
paid by such Indemnified Party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect not only the relative
benefits received by such Indemnified Party on the one hand, but also the
relative fault of such Indemnified Party (if any) and the Servicer and any other
relevant equitable considerations.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.01. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement nor consent to any departure by Seller and or Servicer therefrom
shall in any event be effective unless the same shall be in writing and signed
by (a) Seller, Servicer, the Administrator, the Relationship Bank and Purchaser
(with respect to an amendment), or (b) the Administrator and Purchaser (with
respect to a waiver or consent by them) or Seller or Servicer (with respect to a
waiver or consent by it), as the case may be, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given. The parties acknowledge that, before entering into such an
amendment or granting such a waiver or consent, Purchaser may also be required
to obtain the approval of some or all of the Liquidity Banks or the Credit Bank
or to obtain confirmation from certain rating agencies that such amendment,
waiver or consent will not result in a withdrawal or reduction of the ratings of
the Commercial Paper Notes.
SECTION 14.02. NOTICES, ETC. All notices and other communications provided
for hereunder shall, unless otherwise stated herein, be in writing (including
facsimile communication) and shall be personally delivered or sent by express
mail or courier or by certified mail, postage prepaid, or by facsimile, to the
intended party at the address or facsimile number of such party set forth under
its name on the signature pages hereof or at such other address or facsimile
number as shall be designated by such party in a written notice to the other
parties hereto. All such notices and communications shall be effective, (a) if
personally delivered or sent by express mail or courier or if sent by certified
mail, when received, and (b) if transmitted by facsimile, when sent, receipt
confirmed by telephone or electronic means.
43
SECTION 14.03. NO WAIVER; REMEDIES. No failure on the part of the
Administrator, the Relationship Bank, any Affected Party, any Indemnified Party,
Purchaser or any other holder of the Asset Interest (or any portion thereof) to
exercise, and no delay in exercising, any right hereunder 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
remedies provided by law. Without limiting the foregoing, each of XXX
Capital, individually and as Administrator, XXX, individually and as
Relationship Bank, the Collateral Agent, the Credit Bank and each Liquidity Bank
is hereby authorized by Seller at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by XXX Capital, the Collateral Agent and
such Liquidity Bank to or for the credit or the account of Seller, now or
hereafter existing under this Agreement, to the Administrator, any Affected
Party, any Indemnified Party or Purchaser, or their respective successors and
assigns.
SECTION 14.04. BINDING EFFECT; SURVIVAL. This Agreement shall be binding
upon and inure to the benefit of Seller, Servicer, the Administrator, the
Relationship Bank, Purchaser and their respective successors and assigns, and
the provisions of SECTION 4.02 and ARTICLE XIII shall inure to the benefit of
the Affected Parties and the Indemnified Parties, respectively, and their
respective successors and assigns; PROVIDED, HOWEVER, nothing in the foregoing
shall be deemed to authorize any assignment not permitted by SECTION 12.01. 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 the Final Payout Date. The rights and remedies with respect to any breach
of any representation and warranty made by Seller pursuant to ARTICLE VI and the
indemnification and payment provisions of ARTICLE XIII and SECTIONS 4.02, 14.05,
14.06, 14.07, 14.08 and 14.15 shall be continuing and shall survive any
termination of this Agreement.
SECTION 14.05. COSTS, EXPENSES AND TAXES. In addition to its obligations
under ARTICLE XIII, Seller agrees to pay on demand (subject to the availability
of funds following payments of amounts under SECTION 3.01):
(a) all reasonable costs and expenses incurred by the Administrator, the
Relationship Bank, the Credit Bank, the Collateral Agent and the Purchaser and
their respective Affiliates in connection with
(i) the negotiation, preparation, execution and delivery of this
Agreement and the other Transaction Documents, any increase in the
Purchase Limit above $75,000,000, any amendment of or consent or waiver
under any of the Transaction Documents which is requested or proposed by
any Seller Party (whether or not consummated), or the enforcement of, or
any actual or claimed breach of, this
44
Agreement or any of the other Transaction Documents, including, without
limitation, the reasonable fees and expenses of counsel to any of such
Persons incurred at or before any trial or on appeal or otherwise in
connection with any of the foregoing or in advising such Persons as to
their respective rights and remedies under any of the Transaction
Documents in connection with any of the foregoing, and
(ii) the administration (including periodic auditing as provided for
herein) of this Agreement and the other Transaction Documents, including,
to the extent provided in SECTION 7.01(C), all reasonable out-of-pocket
expenses (including reasonable fees and expenses of independent
accountants and of the Relationship Bank with respect to audits conducted
thereby), incurred in connection with any review of any Seller Party's
books and records either prior to the execution and delivery hereof or
pursuant to 7.01(C) or SECTION 7.02(H); and
(b) all stamp and other taxes and fees payable or determined to be payable
in connection with the execution, delivery, filing and recording of this
Agreement or the other Transaction Documents (and Seller agrees to indemnify
each Indemnified Party against any liabilities with respect to or resulting from
any delay in paying or omission to pay such taxes and fees).
SECTION 14.06. NO PROCEEDINGS. Servicer hereby agrees that it will not
institute against Seller, or join any Person in instituting against Seller, and
each of Seller, Servicer, XXX Capital (individually and as
Administrator) and XXX (individually and as Relationship Bank)
each hereby agrees that it will not institute against Purchaser, or join any
other Person in instituting against Purchaser, any insolvency proceeding
(namely, any proceeding of the type referred to in the definition of Event of
Bankruptcy) so long as (in relation to the Seller), the Final Payout Date shall
not have occurred or there shall not have elapsed one year plus one day since
the Final Payout Date or (in relation to the Purchaser) any Commercial Paper
Notes issued by Purchaser shall be outstanding or there shall not have elapsed
one year plus one day since the last day on which any such Commercial Paper
Notes shall have been outstanding.
SECTION 14.07. CONFIDENTIALITY OF SELLER INFORMATION.
(a) CONFIDENTIAL SELLER INFORMATION. Each party hereto (other than Seller
and KBK) acknowledges that certain of the information provided to such party by
or on behalf of Seller Parties in connection with this Agreement and the
transactions contemplated hereby is or may be confidential, and each such party
severally agrees that, unless KBK shall otherwise agree in writing, and except
as provided in SUBSECTION (B), such party will not disclose to any other person
or entity:
(i) any information regarding, or copies of, any non-public
financial statements, reports, schedules and other information furnished
by any Seller Party to
45
Purchaser, the Administrator or the Relationship Bank (A) prior to the
date hereof in connection with such party's due diligence relating to the
Seller Parties and the transactions contemplated hereby, or (B) pursuant
to SECTION 3.01, 5.01, 6.01(F), 7.01(C), 7.02 or 8.02(H), or
(ii) any other information regarding any Seller Party which is
designated by any Seller Party to such party in writing as confidential
(the information referred to in CLAUSES (I) and (II) above, whether furnished by
any Seller Party or any attorney for or other representative thereof (each a
"SELLER INFORMATION PROVIDER"), is collectively referred to as the "SELLER
INFORMATION"; PROVIDED, HOWEVER, "SELLER INFORMATION" shall not include any
information which is or becomes generally available to the general public or to
such party on a nonconfidential basis from a source other than any Seller
Information Provider, or which was known to such party on a nonconfidential
basis prior to its disclosure by any Seller Information Provider.
(b) DISCLOSURE. Notwithstanding SUBSECTION (A), each party may disclose
any Seller Information:
(i) to any of such party's independent attorneys, consultants and
auditors, and to each Liquidity Bank, the Credit Bank, any dealer or
placement agent for Purchaser's commercial paper, and any actual or
potential assignees of, or participants in, any of the rights or
obligations of Purchaser, any Liquidity Bank, the Credit Bank, the
Administrator or the Relationship Bank under or in connection with this
Agreement, who (A) in the good faith belief of such party, have a need to
know such Seller Information, (B) are informed by such party of the
confidential nature of the Seller Information and the terms of this
SECTION 14.07, and (C) are subject to confidentiality restrictions
generally consistent with this SECTION 14.07,
(ii) to any rating agency that maintains a rating for Purchaser's
commercial paper or is considering the issuance of such a rating, for the
purposes of reviewing the credit of Purchaser in connection with such
rating,
(iii) to any other party to this Agreement (and any independent
attorneys, consultants and auditors of such party), for the purposes
contemplated hereby,
(iv) as may be required by any municipal, state, federal or other
regulatory body having or claiming to have jurisdiction over such party,
in order to comply with any law, order, regulation, regulatory request or
ruling applicable to such party, or
(v) subject to SUBSECTION (C), in the event such party is legally
compelled (by interrogatories, requests for information or copies,
subpoena, civil investigative demand or similar process) to disclose such
Seller Information.
46
In addition, Purchaser and the Administrator may disclose on a "no name" basis
to any actual or potential investor in Purchaser's Commercial Paper Notes
information regarding the nature of this Agreement, the basic terms hereof
(including without limitation the amount and nature of Purchaser's commitment
and Purchaser's Total Investment with respect to the Asset Interest and of Loss
Reserve and any other credit enhancement provided by any Seller Party
hereunder), the nature, amount and status of the Pool Receivables, and the
current and/or historical ratios of losses to liquidations and/or outstandings
with respect to the Receivables Pool.
(c) LEGAL COMPULSION. In the event that any party hereto (other than
Seller or KBK) or any of its representatives is requested or becomes legally
compelled (by interrogatories, requests for information or documents, subpoena,
civil investigative demand or similar process) to disclose any of the Seller
Information, such party will (or will cause its representative to)
(i) provide KBK with prompt written notice so that (A) KBK or any
other Seller Information Provider may seek a protective order or other
appropriate remedy, or (B) KBK may, if it so chooses, agree that such
party (or its representatives) may disclose such Seller Information
pursuant to such request or legal compulsion; and
(ii) unless KBK agrees that such Seller Information may be
disclosed, make a timely objection to the request or compulsion to provide
such Seller Information on the basis that such Seller Information is
confidential and subject to the agreements contained in this SECTION
14.07.
In the event such protective order or remedy is not obtained, or KBK agrees that
such Seller Information may be disclosed, such party will furnish only that
portion of the Seller Information which (in such party's good faith judgment) is
legally required to be furnished and will exercise reasonable efforts to obtain
reliable assurance that confidential treatment will be afforded the Seller
Information.
(d) This SECTION 14.07 shall survive termination of this Agreement.
SECTION 14.08. CONFIDENTIALITY OF PROGRAM INFORMATION.
(a) CONFIDENTIAL INFORMATION. Each party hereto acknowledges that State
Street Capital regards the structure of the transactions contemplated by this
Agreement to be proprietary, and each such party agrees that:
(i) it will not disclose without the prior written consent of State
Street Capital (other than to the directors, employees, auditors,
consultants, counsel or affiliates (collectively, "representatives") of
such party, each of whom shall be informed by such party of the
confidential nature of the Program Information (as
47
defined below) and of the terms of this SECTION 14.08), (A) any
information regarding the pricing in, or copies of, this Agreement any
other Transaction Document or any transaction contemplated hereby or
thereby, (B) any information regarding the organization, business or
operations of Purchaser generally or the services performed by the
Administrator or the Relationship Bank for Purchaser, or (C) any
information which is furnished by XXX Capital to such party and
which is designated by XXX Capital to such party in writing or
otherwise as confidential or not otherwise available to the general public
(the information referred to in CLAUSES (A), (B) and (C) is collectively
referred to as the "PROGRAM INFORMATION"); PROVIDED, HOWEVER, that such
party may disclose any such Program Information (I) to any other party to
this Agreement (and any independent attorneys, consultants and auditors of
any such party) for the purposes contemplated hereby, (II) as may be
required by any municipal, state, federal or other regulatory body having
or claiming to have jurisdiction over such party, (III) in order to comply
with any law, order, regulation, regulatory request or ruling applicable
to such party, or (IV) subject to SUBSECTION (C), in the event such party
is legally compelled (by interrogatories, requests for information or
copies, subpoena, civil investigative demand or similar process) to
disclose any such Program Information;
(ii) it will use the Program Information solely for the purposes of
evaluating, administering and enforcing the transactions contemplated by
this Agreement and making any necessary business judgments with respect
thereto; and
(iii) after the Final Payout Date, it will, upon demand, return (and
cause each of its representatives to return) to XXX Capital, all
documents or other written material received from XXX Capital, as
the case may be, in connection with (A)(I)(B) or (C) above and all copies
thereof made by such party which contain the Program Information.
(b) AVAILABILITY OF CONFIDENTIAL INFORMATION. This SECTION 14.08 shall be
inoperative as to such portions of the Program Information which are or become
generally available to the public or such party on a nonconfidential basis from
a source other than XXX Capital or were known to such party on a
nonconfidential basis prior to its disclosure by XXX Capital.
(c) LEGAL COMPULSION TO DISCLOSE. In the event that any party or anyone to
whom such party or its representatives transmits the Program Information is
requested or becomes legally compelled (by interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose any of the Program Information, such party will
(i) provide XXX Capital with prompt written notice so that
XXX Capital may seek a protective order or other appropriate
remedy and/or, if it so
48
chooses, agree that such party may disclose such Program Information
pursuant to such request or legal compulsion; and
(ii) unless XXX Capital agrees that such Program
Information may be disclosed, make a timely objection to the request or
confirmation to provide such Program Information on the basis that such
Program Information is confidential and subject to the agreements
contained in this SECTION 14.08.
In the event that such protective order or other remedy is not obtained, or
XXX Capital agrees that such Program Information may be disclosed, such
party will furnish only that portion of the Program Information which (in such
party's good faith judgment) is legally required to be furnished and will
exercise reasonable efforts to obtain reliable assurance that confidential
treatment will be accorded the Program Information. In the event any Seller
Party is required to file a copy of this Agreement with the Securities and
Exchange Commission or any other Governmental Authority, Seller will (A) provide
XXX Capital with prompt written notice of such requirement and (B)
exercise reasonable efforts to obtain reliable assurance that such Governmental
Authority will give confidential treatment to this Agreement.
(d) SURVIVAL. This SECTION 14.08 shall survive termination of this
Agreement.
SECTION 14.09. CAPTIONS AND CROSS REFERENCES. The various captions
(including, without limitation, the table of contents) in this Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement. Unless otherwise indicated,
references in this Agreement to any Section, Appendix, Schedule or Exhibit are
to such Section of or Appendix, Schedule or Exhibit to this Agreement, as the
case may be, and references in any Section, subsection, or clause to any
subsection, clause or subclause are to such subsection, clause or subclause of
such Section, subsection or clause.
SECTION 14.10. INTEGRATION. This Agreement, together with the letter
referenced in SECTION 4.01, contains a final and complete integration of all
prior expressions by the parties hereto with respect to the subject matter
hereof and shall constitute the entire understanding among the parties hereto
with respect to the subject matter hereof, superseding all prior oral or written
understandings.
SECTION 14.11. GOVERNING LAW. THIS AGREEMENT, INCLUDING THE RIGHTS AND
DUTIES OF THE PARTIES HERETO, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICTS OF LAW, EXCEPT TO THE EXTENT THAT THE PERFECTION OF THE INTERESTS
OF PURCHASER IN THE RECEIVABLES OR RELATED PROPERTY
49
IS GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
SECTION 14.12. WAIVER OF JURY TRIAL. SELLER HEREBY EXPRESSLY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY
RIGHTS UNDER THIS AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR UNDER ANY
AMENDMENT, INSTRUMENT OR DOCUMENT DELIVERED OR WHICH MAY BE IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY BANKING OR
OTHER RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL NOT BE
TRIED BEFORE A JURY.
SECTION 14.13. CONSENT TO JURISDICTION; WAIVER OF IMMUNITIES. SELLER
HEREBY ACKNOWLEDGES AND AGREES THAT:
(A) IT IRREVOCABLY (I) SUBMITS TO THE JURISDICTION, FIRST, OF ANY UNITED
STATES FEDERAL COURT, AND SECOND, IF FEDERAL JURISDICTION IS NOT AVAILABLE, OF
ANY NEW YORK STATE COURT, IN EITHER CASE SITTING IN NEW YORK, NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, (II) AGREES
THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED ONLY IN SUCH NEW YORK STATE OR FEDERAL COURT AND NOT IN ANY OTHER
COURT, AND (III) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING.
(B) TO THE EXTENT THAT IT HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
THE JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE
OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID TO EXECUTION,
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, IT HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER OR IN
CONNECTION WITH THIS AGREEMENT.
SECTION 14.14. EXECUTION IN COUNTERPARTS. This Agreement may be executed
in any number of counterparts and by the 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.
50
SECTION 14.15. RECOURSE TO DIRECTORS OR OFFICERS. The obligations of
Purchaser under this Agreement are solely the corporate obligations of
Purchaser. No recourse shall be had for the payment of any amount owing in
respect to this Agreement or for the payment of any fee hereunder or for any
other obligation or claim arising out of or based upon this Agreement against
any stockholder, employee, officer, director or incorporator of the Purchaser.
51
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.
KBK RECEIVABLES CORPORATION,
as Seller
By ____________________________
Name ________________________
Title ______________________
Address:
2200 City Center II
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
KBK FINANCIAL, INC.,
individually as initial Servicer
By ____________________________
Name ________________________
Title ______________________
Address:
2200 City Center II
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
XXX RECEIVABLES CORPORATION,
as Purchaser
By ____________________________
Name ________________________
Title ______________________
Address:
▇.▇. ▇▇▇ ▇▇▇▇
XXX
Facsimile No.: XXX
Attention: XXX
XXX
CORPORATION, as Administrator
By ____________________________
Name ________________________
Title ______________________
Address:
XXX
XXX
Facsimile No.: XXX
Attention: XXX Funds
XXX, as Relationship Bank
By ____________________________
Name ________________________
Title ______________________
Address:
XXX
XXX
Facsimile No.: XXX
Attention: XXX Funds
APPENDIX A
TO PURCHASE AND SALE AGREEMENT
AND RECEIVABLES PURCHASE AGREEMENT
DEFINITIONS
This is APPENDIX A to (I) the Purchase and Sale Agreement dated as of
April 11, 1997 among KBK Financial, Inc., individually and as initial Servicer,
and KBK Receivables Corporation, as Initial Purchaser, and (II) the Receivables
Purchase Agreement dated as of April 11, 1997 among KBK Receivables Corporation,
as Seller, KBK Capital Corporation, as initial Servicer, XXX Receivables
Corporation, as Purchaser, XXX Corporation, as Administrator, and XXX,
as Relationship Bank.
A. DEFINED TERMS. As used herein and in the Sale Agreement and the XXX
Purchase Agreement, unless the context requires a different meaning, the
following terms have the meanings indicated hereinbelow:
"ACCRUED COST RESERVE" means, on any day during a Settlement Period, an
amount equal to the product of:
(a) one twelfth (1/12th); TIMES
(b) the sum of (i) the weighted average Earned Discount Rate,
calculated as of the Cut-Off Date for the next preceding Settlement
Period, PLUS (ii) (A) the percentage used to calculate the Program Fee
with respect to the Purchaser's Total Investment, PLUS (B) the product of
(x) the percentage used to calculate the Unused Fee pursuant to the Fee
Letter, TIMES (y) a fraction, the numerator of which is the amount on
which such Unused Fee is calculated and the denominator of which is the
Purchaser's Total Investment, PLUS (iii) the product of (x) XXX (or if
greater, such other percentage as may be in effect for purposes of CLAUSE
(B)(X) of the definition of "Servicer's Fee") times (y) a fraction, the
numerator of which is the aggregate Unpaid Balance of Pool Receivables on
the first day of such Settlement Period and the denominator of which is
the Purchaser's Total Investment on the day for which the Liquidation Cost
Reserve is being calculated; TIMES
(c) the Purchaser's Total Investment on such day.
"ADJUSTED TURNOVER DAYS" means, on any day, a number of days equal to XX
TIMES the Turnover Days for such day.
"ADMINISTRATOR" means XXX Capital, in its capacity as Program
Administrator for XXX, or any successor to XXX Capital in such
capacity.
"ADMINISTRATOR'S OFFICE" means the office of the Administrator at XXX,
XXX, Attention: XXX Funds, or such other address as shall be designated by the
Administrator in writing to Seller and Purchaser.
"AFFECTED PARTY" means each of XXX, each Liquidity Bank, the Credit Bank,
any assignee or (subject to SECTION 4.02(E) of the XXX Purchase Agreement) any
participant of XXX, any Liquidity Bank or the Credit Bank, any holding company
of any Liquidity Bank or the Credit Bank or (subject to SECTION 4.02(E) of the
XXX Purchase Agreement) of any participant, XXX Capital, any successor
to XXX Capital as Administrator, XXX Bank, any successor to
XXX as Relationship Bank, any sub-agent of the Administrator, the Collateral
Agent and any co-agent or sub-agent of the Collateral Agent.
"AFFILIATE" when used with respect to a Person means any other Person
controlling, controlled by, or under common control with, such Person.
"AFFILIATED OBLIGOR" in relation to any Obligor means another Obligor
which is an Affiliate of such Obligor.
"ALLOCATION LIMIT" has the meaning set forth in SECTION 1.01 (A) of the
XXX Purchase Agreement.
"ALTERNATE BASE RATE" means, on any date, a fluctuating rate of interest
PER ANNUM equal to the higher of (a) the rate of interest most recently
announced by the Liquidity Agent as its prime rate for loans to corporate
borrowers; and (b) the Federal Funds Rate most recently determined by the
Liquidity Agent plus XXX per annum.
The Alternate Base Rate is not necessarily intended to be the lowest rate
of interest determined by the Liquidity Agent in connection with extensions of
credit.
"ASSET INTEREST" means an undivided percentage ownership interest,
determined from time to time as provided in SECTION 1.04(B) of the XXX
Purchase Agreement, in (i) all then outstanding Pool Receivables, and (ii) all
Related Assets.
"BANK RATE" for any Settlement Period means
(a) in the case of any Settlement Period other than a Settlement
Period described in CLAUSE (B), an interest rate PER ANNUM equal to the
sum of (x) XXX PER ANNUM, PLUS (y) the Eurodollar Rate (Reserve Adjusted)
for such Settlement Period; and
(b) in the case of
(i) any Settlement Period on or prior to the first day of
which XXX or any Liquidity Bank shall have notified the
Administrator that (A) the introduction of or any change in or in
the interpretation of any law or regulation makes it unlawful, or
any central bank or other Governmental
2
Authority asserts that it is unlawful, for such Person to fund any
portion of the Purchaser's Total Investment at the rate described in
CLAUSE (A), or (B) due to market conditions affecting the interbank
eurodollar market, funds are not reasonably available to such Person
in such market in order to enable it to fund any portion of the
Purchaser's Total Investment at the rate described in CLAUSE (A)
(and in the case of SUBCLAUSE (A) or (B), such Person shall not have
subsequently notified the Administrator that such circumstances no
longer exist), or
(ii) any Settlement Period as to which the Administrator does
not receive notice or determine, by no later than 12:00 noon (New
York City time) on the third Business Day preceding the first day of
such Settlement Period, that the Asset Interest will be funded by
Liquidity Fundings and not by the issuance of Commercial Paper
Notes,
an interest rate PER ANNUM equal to (x) XXX PER ANNUM, PLUS (y) the
Alternate Base Rate in effect from time to time during such Settlement
Period.
"BUSINESS DAY" means a day on which both (a) the Administrator at its
principal office in XXX is open for business and (b)
commercial banks in New York City and Chicago, Illinois are not authorized or
required to be closed.
"CAPITAL" means common equity, plus Subordinated Debt, plus the permitted
allowance for credit losses, less intangibles.
"CHANGE IN CONTROL" means:
(a) in relation to KBK, the acquisition by any Person or group of Persons
(within the meaning of Section 13 or 14 of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchange Commission under the
Exchange Act) of issued and outstanding shares of the capital stock of KBK
entitled (without regard to the occurrence of any contingency) to vote for the
election of members of the board of directors of KBK and having a then present
right to exercise XXX or more of the voting power for the election of members of
the board of directors of KBK attached to all such outstanding shares of capital
stock of KBK, unless otherwise agreed in writing by the Relationship Bank and
the Administrator, and
(b) in relation to KBK Receivables, the failure of KBK to own directly,
free and clear of all Liens, XXX of the issued and outstanding shares of the
capital stock (including all warrants, options, conversion rights, and other
rights to purchase or convert into such stock) of KBK Receivables on a fully
diluted basis.
"XXX" means XXX Receivables Corporation, a Delaware corporation,
its successors and assigns.
3
"XXX PARTIES" means XXX, the Administrator and the Relationship Bank.
"XXX PURCHASE AGREEMENT" means the Receivables Purchase Agreement
dated as of April 11, 1997 among KBK Receivables, as Seller, KBK, as initial
Servicer, XXX, as Purchaser, XXX Capital, as Administrator, and
XXX, as Relationship Bank, as amended, supplemented, restated or
otherwise modified from time to time.
"COLLATERAL AGENT" means The First National Bank of Chicago in its
capacity as collateral agent under the Security Agreement, and any successor to
The First National Bank of Chicago in such capacity.
"COLLECTION ACCOUNT" means that certain bank account with the number, and
maintained at the location, set forth on SCHEDULE 6.02(I), which is (i) in the
Seller's name, and (ii) pledged on a first-priority basis to the Purchaser
pursuant to SECTION 9.01.
"COLLECTION ACCOUNT BANK" means the bank holding the Collection Account.
"COLLECTION ACCOUNT AGREEMENT" means a letter agreement, substantially in
the form of EXHIBIT 5.01(G)(II), among Seller, Servicer, the Administrator and
the Collection Account Bank, as the same may be amended, modified or
supplemented from time to time in accordance with the XXX Purchase
Agreement.
"COLLECTIONS" means, with respect to any Receivable, all funds which
either (a) are received by the Originator, by KBK Receivables or by Servicer
from or on behalf of the related Obligor in payment of any amounts owed
(including, without limitation, purchase prices, finance charges, interest and
all other charges) in respect of such Receivable, or applied to such amounts
owed by such Obligor (including, without limitation, insurance payments that the
Originator, KBK Receivables or Servicer applies in the ordinary course of its
business to amounts owed in respect of such Receivable and net proceeds of sale
or other disposition of repossessed goods or other collateral or property of the
Obligor or any other party directly or indirectly liable for payment of such
Receivable and available to be applied thereon), or (b) are deemed to have been
received by the Originator or by KBK Receivables as a Collection pursuant to
SECTION 3.05 of the Sale Agreement or SECTION 3.02 of the XXX Purchase
Agreement.
"COMMERCIAL PAPER HOLDERS" means the holders from time to time of the
Commercial Paper Notes.
"COMMERCIAL PAPER NOTES" means short-term promissory notes issued or to be
issued by XXX to fund its investments in accounts receivable or other financial
assets.
"CONTRACT" means (i) a contract between an Obligee and any Person pursuant
to or under which such Person shall be obligated to make payments to such
Obligee with respect to the sale of goods or provision of services by such
Obligee from time to time and any and all other contracts, understandings,
agreements, invoices, notes or other writings pursuant thereto or (ii) an
Inventory Financing Agreement; PROVIDED, HOWEVER, the term "Contract"
4
shall not include prepayment penalties and fees and provisions providing for the
payment and enforcement thereof. A "related" Contract with respect to a
Receivable means a Contract under which such Receivable arose or which is
relevant to the collection or enforcement of such Receivable.
"CONTRIBUTED RECEIVABLES" means, all Receivables contributed by KBK to KBK
Receivables pursuant to SECTION 3.7 of the Sale Agreement.
"CP RATE" for any period means a rate PER ANNUM calculated by the
Administrator equal to the sum of (i) the rate or, if more than one rate, the
weighted average of the rates, determined by converting to an interest-bearing
equivalent rate PER ANNUM the discount rate (or rates) at which Commercial Paper
Notes on each day during such period have been sold by the commercial paper
placement agents selected by the Administrator, PLUS (ii) the commissions and
charges charged by such commercial paper placement agents with respect to such
Commercial Paper Notes, expressed as a percentage of such face amount and
converted to an interest-bearing equivalent rate PER ANNUM.
"CREDIT AGREEMENT" means and includes (a) the Credit Agreement dated as of
September 14, 1994 among XXX, the Administrator and the Credit Bank and (b)
any other agreement (other than the Liquidity Agreement) entered into by XXX
after the date of the XXX Purchase Agreement and providing for the issuance
of one or more letters of credit for the account of XXX, the making of loans
to XXX or any other extensions of credit to or for the account of XXX to
support all or any part of XXX's payment obligations under its Commercial
Paper Notes or to provide an alternate means of funding XXX's investments in
accounts receivable or other financial assets, in each case as amended,
supplemented, restated or otherwise modified from time to time.
"CREDIT AND COLLECTION POLICY" means those credit and collection policies
and practices of KBK relating to Factoring Agreements, Inventory Financing
Agreements and Receivables described in SCHEDULE 6.02(J)-1 of the XXX Purchase
Agreement, as modified without violating SECTION 6.3(C) of the Sale Agreement or
SECTION 7.03(C) of the XXX Purchase Agreement.
"CREDIT BANK" means and includes XXX, as lender to XXX and as issuer of a
letter of credit for XXX's account under the Credit Agreement, and any other or
additional bank or other financial institution from time to time extending
credit or having a commitment to extend credit to or for the account of XXX
under the Credit Agreement.
"CREDIT DRAW" means a loan made by the Credit Bank pursuant to the Credit
Agreement or a disbursement made by the Credit Bank under a letter of credit
issued pursuant to the Credit Agreement.
"CUT-OFF DATE" means the last Business Day of each calendar month. Each
reference to the Cut-Off Date "for" or "with respect to" any Reporting Period
shall mean and be a reference to the Cut-Off Date on which such Reporting Period
ends in accordance with the definition of "Reporting Period". Each reference to
the Cut-Off Date "for" or "with respect
5
to" a Settlement Period shall mean and be a reference to the Cut-Off Date next
preceding the last day of such Settlement Period.
"DEEMED COLLECTIONS" has the meaning set forth in SECTION 3.02(A) of the
XXX Purchase Agreement.
"DEFAULT RATIO" on any day during a Settlement Period means the ratio
(expressed as a percentage) calculated as of the Cut-Off Date for the next
preceding Settlement Period by dividing (a) the sum of (x) the aggregate Unpaid
Balance of all Pool Receivables that were XXX days past due as of such
Cut-Off Date and (y) the aggregate Unpaid Balance of all Pool Receivables that
were written off as uncollectible during the calendar month ending on such
Cut-Off Date prior to such Receivables becoming 121 days past due BY (b) the
aggregate Unpaid Balance of Pool Receivables arising during the calendar month
that occurred four calendar months prior to the current calendar month then
ended.
"DEFAULTED RECEIVABLE" means a Receivable: (a) as to which any payment, or
part thereof, remains unpaid for XXX days from the original due date for such
payment; (b) as to which an Event of Bankruptcy has occurred and remains
continuing with respect to the Obligor thereof.
"DELINQUENCY RATIO" means the ratio (expressed as a percentage) computed
as of each Cut-Off Date by dividing (x) the aggregate Unpaid Balance of Pool
Receivables that are Delinquent Receivables on such Cut-Off Date by (y) the
aggregate Unpaid Balance of all Pool Receivables on such Cut-Off Date.
"DELINQUENT RECEIVABLE" means a Pool Receivable (a) that is not a
Defaulted Receivable and (b) as to which any payment, or part thereof, remains
unpaid for XX days or more from the original due date for such payment (after
giving effect to any initial adjustment permitted under CLAUSE (II) of SECTION
8.02(C) of the XXX Purchase Agreement).
"DILUTION" means the amount of any reduction or cancellation of the Unpaid
Balance of a Pool Receivable as described in SECTION 3.02(A) of the XXX
Purchase Agreement.
"DILUTION ADJUSTMENT" has the meaning set forth in SECTION 3.5(B) of the
Sale Agreement.
"DILUTION RATIO" on any day during a Settlement Period means the ratio
(expressed as a percentage) calculated as of the Cut-Off Date for the next
preceding Settlement Period by dividing (x) the aggregate amount of Dilutions
during the related Reporting Period BY (y) the aggregate Unpaid Balance of Pool
Receivables as of such Cut-Off Date.
"DILUTION RESERVE" means, on any day in a Settlement Period, an amount
equal to the greater of (a) the product of (i) XXX TIMES (ii) the Net Pool
Balance on such day and (b) the product of (i) two times the highest monthly
reported Dilution Ratio occurring during the
6
immediately preceding twelve months as of the most recent Settlement Period
TIMES (ii) the Net Pool Balance on such day.
"DOLLARS" means dollars in lawful money of the United States of America.
"DOWNGRADED LIQUIDITY BANK" means a Liquidity Bank which has been the
subject of a Downgrading Event.
"DOWNGRADING EVENT" with respect to any Person means the lowering of the
rating with regard to the short-term securities of such Person to below (i) A-1
by Standard & Poor's Ratings Services or (ii) P-1 by ▇▇▇▇▇'▇ Investors Service,
Inc.
"EARNED DISCOUNT" means, for any Settlement Period:
PTI X ER X ED
-------------
360
WHERE:
PTI= the daily average (calculated at the close of business each day) of
the Purchaser's Total Investment during such Settlement Period,
ER = the Earned Discount Rate for such Settlement Period,
ED = the actual number of days elapsed during such Settlement Period, and
"EARNED DISCOUNT RATE" means for any Settlement Period:
(a) in the case of any portion of Purchaser's Total Investment
funded by a Liquidity Funding, the Bank Rate for such Settlement Period;
(b) in the case of any portion of Purchaser's Total Investment
funded by a Credit Draw, a rate PER ANNUM equal for each day during such
Settlement Period to the Alternate Base Rate in effect on such day plus
XXX PER ANNUM; and
(c) for any portion of Purchaser's Total Investment funded by
Commercial Paper Notes, the CP Rate for such Settlement Period;
PROVIDED, HOWEVER, that on any day when any Liquidation Event shall have
occurred and be continuing, the Earned Discount Rate for the Purchaser's Total
Investment shall mean a rate PER ANNUM equal to the Alternate Base Rate plus XXX
PER ANNUM.
7
"ELIGIBLE RECEIVABLE" means, at any time, a Receivable:
(a) which is a Pool Receivable free and clear of any Lien (other
than a Permitted Lien) or other claim or right of any Person (and, without
limiting the foregoing, does not arise out of a sale on consignment);
(b) which, if such Receivable constitutes an "instrument" as defined
in the Uniform Commercial Code, such instrument has been delivered to the
Administrator or a custodian designated by the Administrator and indorsed
to the satisfaction of the Administrator;
(c) the Obligor and Obligee (if any) of which are residents of the
United States or are subject to the jurisdiction of courts in the United
States with respect to such Receivable;
(d) the Obligor and Obligee (if any) of which are not Affiliates of
any of the XXX Parties or Seller Parties;
(e) which is not a Defaulted Receivable, a Delinquent Receivable or
a Receivable which has been written off the Originator's or the Seller's
books as uncollectible;
(f) with regard to which the warranty of Seller in SECTION 6.02(D)
of the XXX Purchase Agreement is true and correct;
(g) the sale of an undivided interest in which does not contravene
or conflict with any law;
(h) which is denominated and payable only in Dollars in the United
States;
(i) which arises under a Contract that has been duly authorized and
that, together with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the Obligor of such
Receivable enforceable against such Obligor in accordance with its terms
and is not subject to any dispute, offset, counterclaim or defense
whatsoever;
(j) which, together with the Contract related thereto, is freely
transferable, and does not contravene in any material respect any laws,
rules or regulations applicable thereto (including, without limitation,
laws, rules and regulations relating to usury, truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and with respect to which no party to
such Contract is in violation of any such law, rule or regulation in any
material respect if such violation would impair the collectibility of such
Receivable;
(k) which (i) satisfies in all material respects all applicable
requirements of the Credit and Collection Policy and (ii) complies with
such other reasonable
8
criteria and requirements as the Administrator may from time to time
specify to Seller following thirty days' notice;
(l) which, if such Receivable was purchased by the Originator under
a Factoring Agreement, is due and payable in full within 60 days from the
invoice date therefor;
(m) which has been fully earned by performance on the part of the
Obligee or the Originator and is not subject to any holdback or
contingency; PROVIDED, HOWEVER, that progress payments shall be permitted
provided that the Lien arising under the Contract evidencing such
Receivable is subject to the Mortgage Act, Chapter 46, Section 31342 of
the United States Code;
(n) as to which payments have not been extended, or the terms of
payment thereof rewritten, other than as permitted by SECTION 8.02 of the
XXX Purchase Agreement;
(o) which is owed by an Obligor as to which not more than XXX of the
Receivables of such Obligor (based on the Unpaid Balance of such
Receivables) are Defaulted Receivables;
(p) if the Obligor of such Receivable is a Governmental Authority,
the Unpaid Balance of which, together with the Unpaid Balances of all
Eligible Receivables which are owed by Governmental Authorities, does not
exceed XXX of all Eligible Receivables;
(q) which does not violate any other reasonable eligibility criteria
from time to time specified to the Seller by Purchaser following thirty
days' notice;
(r) if such Receivable was acquired by the Originator pursuant to a
Factoring Agreement, the related Obligee with respect to such Factoring
Agreement is not subject to any bankruptcy proceedings or, to the best of
the Originator's knowledge, unable to pay its debts as they become due as
of the date of the purchase of such Receivable under this Agreement
(except, after notice has been given to the Administrator by the Servicer,
under circumstances where (A) the Factoring agreement between the
Originator and such Obligee has been approved and ratified by an order of
the relevant bankruptcy court, (B) notice has been given and opportunity
for a hearing has occurred with respect to such order (provided that the
Administrator may determine what constitutes sufficient notice and
opportunity for hearing in its sole discretion) and (C) if the
Administrator requests a copy of such order, such order is in form and
substance satisfactory to the Administrator in its sole discretion);
(s) which was generated in the ordinary course of the business of
the related Obligee (if any) or of the Originator;
9
(t) if such Receivable was acquired by the Originator pursuant to a
Factoring Agreement, the relevant Factoring Agreement is in full force and
effect and constitutes the legal, valid and binding obligation of the
Originator and the related Obligee enforceable against each of them in
accordance with its terms and not subject to any offset, counterclaim or
other defense;
(u) if such Receivable was acquired by the Originator pursuant to a
Factoring Agreement, the relevant Factoring Agreement does not contravene
or violate in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, if applicable, 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
(v) if such Receivable arises under an Inventory Financing
Agreement, the Receivable is due and payable in full within XXX year from
its date of origination (or XXX) months in the case of
Receivables with respect to which the Obligor thereon is also an Obligee
with respect to a Factoring Agreement); PROVIDED, HOWEVER, that a
Receivable arising under an Inventory Financing Agreement may be due and
payable in full within XXX years from its date of origination if it is
sold to the Seller under the Sale Agreement on the Initial Purchase Date.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EURODOLLAR RATE (RESERVE ADJUSTED)" means, with respect to any Settlement
Period and any portion of Purchaser's Total Investment, a rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of XXX) determined pursuant
to the following formula:
Eurodollar Rate = Eurodollar Rate
(Reserve Adjusted) ---------------
1-Eurodollar Reserve Percentage
WHERE:
"EURODOLLAR RATE" means, with respect to any Settlement Period and any
portion of Purchaser's Total Investment, the rate per annum at which
Dollar deposits in immediately available funds are offered to the
Eurodollar Office of the Administrator two Eurodollar Business Days prior
to the beginning of such period by prime banks in the interbank eurodollar
market at or about 11:00 a.m., New York City time, for delivery on the
first day of such Settlement Period, for the number of days comprised
therein and in an amount equal or comparable to the applicable portion of
the Purchaser's Total Investment for such Settlement Period.
"EURODOLLAR BUSINESS DAY" means a Business Day on which dealings are
carried on in the eurodollar interbank market.
10
"EURODOLLAR RESERVE PERCENTAGE" means, with respect to any Settlement
Period, the then applicable percentage (expressed as a decimal) prescribed
by the Federal Reserve Board for determining reserve requirements
applicable to "Eurocurrency Liabilities" pursuant to Regulation D.
"EVENT OF BANKRUPTCY" shall be deemed to have occurred with respect to a
Person if either:
(a) a case or other proceeding shall be commenced, without the
application or consent of such Person, in any court, seeking the
liquidation, reorganization, debt arrangement, dissolution, winding up, or
composition or readjustment of debts of such Person, the appointment of a
trustee, receiver, custodian, liquidator, assignee, sequestrator or the
like for such Person or all or substantially all of its assets, or any
similar action with respect to such Person under any law relating to
bankruptcy, insolvency, reorganization, winding up or composition or
adjustment of debts, and such case or proceeding shall continue
undismissed, or unstayed and in effect, for a period of 30 consecutive
days; or an order for relief in respect of such Person shall be entered in
an involuntary case under the federal bankruptcy laws or other similar
laws from time to time in effect; or
(b) such Person shall commence a voluntary case or other proceeding
under any applicable bankruptcy, insolvency, reorganization, debt
arrangement, dissolution or other similar laws from time to time in
effect, or shall consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) for, such Person or for any substantial part of its
property, or shall make any general assignment for the benefit of
creditors, or shall fail to, or admit in writing its inability to, pay its
debts generally as they become due, or, (i) if such Person is a
corporation or similar entity, its board of directors shall vote to
implement, or (ii) if such Person is a partnership, any of its general
partners shall implement, any of the foregoing.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FACILITY" has the meaning set forth in SECTION 1.1 of the Sale Agreement.
"FACTORING AGREEMENT" means any agreement, substantially in one of the
forms set forth in SCHEDULE 6.02(J)-2, between the Originator and any Obligee,
pursuant to which the Originator has purchased or will purchase all or a portion
of the accounts, instruments, chattel paper or general intangibles arising from
the provision of goods and services originated by such Obligee.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate
PER ANNUM equal (for each day during such period) to
(a) the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds
11
brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of
Boston; or
(b) if such rate is not so published for any day which is a Business
Day, the average of the quotations for such day on such transactions
received by the Liquidity Agent from three federal funds brokers of
recognized standing selected by it.
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System, or any successor thereto or to the functions thereof.
"FEE LETTER" has the meaning set forth in SECTION 4.01 of the XXX Purchase
Agreement.
"FINAL PAYOUT DATE" means the date following the Termination Date on which
Purchaser's Total Investment shall have been reduced to zero and all other
amounts (excluding contingent obligations under indemnities and the like as to
which no present payment obligation exists) payable by any Seller Parties or
Servicer to XXX, the Administrator or the Relationship Bank under the
Transaction Documents shall have been paid in full.
"FUNDED DEBT" means all interest bearing liabilities of KBK.
"GAAP" shall mean generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such accounting profession, which are applicable to the
circumstances as of the date of determination.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state, local
or other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any body or entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including without limitation any governmental agency or
subdivision and court, and any Person owned or controlled, through stock or
capital ownership or otherwise, by any of the foregoing.
"INDEMNIFIED LOSSES" (a) for purposes of the Sale Agreement, has the
meaning set forth in SECTION 9.1 of the Sale Agreement, and (b) for purposes of
the XXX Purchase Agreement, has the meaning set forth in SECTION 13.01 of
the XXX Purchase Agreement.
"INDEMNIFIED PARTY" (a) for purposes of the Sale Agreement, has the
meaning set forth in SECTION 9.1 of the Sale Agreement, and (b) for purposes of
the XXX Purchase Agreement, has the meaning set forth in SECTION 13.01 of
the XXX Purchase Agreement.
"INFORMATION PACKAGE" has the meaning set forth in SECTION 3.01 of the
XXX Purchase Agreement.
12
"INITIAL PURCHASE DATE" means the date on which the initial Purchase under
the XXX Purchase Agreement is made.
"INITIAL PURCHASER" for purposes of the Sale Agreement, means KBK
Receivables.
"INTEREST COVERAGE RATIO" means the ratio of (i) the sum of net income of
the Servicer, expense for taxes and interest expense, all for the four previous
fiscal quarters of the Servicer, to (ii) interest expense of the Servicer during
the four previous fiscal quarters of the Servicer.
"INVENTORY FINANCING AGREEMENT" means a revolving inventory line of credit
evidenced by a promissory note issued by an Obligor in favor of the Originator
which conforms in all material respects to one of the forms set forth in
SCHEDULE 6.02(J)-3 or otherwise has been approved by the Administrator, together
with any and all contracts, understandings, instruments, agreements, invoices,
notes, or other writings related to or evidencing such revolving inventory line
of credit; PROVIDED, HOWEVER, the term "Inventory Financing Agreement" shall not
include prepayment penalties and fees and provisions providing for the payment
and enforcement thereof. For the avoidance of doubt, no term loans (i.e., single
advance loans or non-revolving multiple advance loans) shall constitute
"Inventory Financing Agreements".
"INVENTORY OBLIGOR CONCENTRATION LIMIT" means at any time, in relation to
the aggregate Unpaid Balance of Pool Receivables owed by any single Obligor and
its Affiliated Obligors (if any) arising under Inventory Financing Agreements,
(i) XXX times (ii) the aggregate Unpaid Balance of Eligible Receivables at such
time.
"KBK" means KBK Financial, Inc. a Delaware corporation, its successors and
permitted assigns.
"KBK RECEIVABLES" means KBK Receivables Corporation, a Delaware
corporation, its successors and permitted assigns.
"LIEN" means a lien, security interest, charge, or encumbrance, or other
right or claim of any Person, whether arising under a security agreement,
mortgage, deed of trust, assignment, pledge or financing statement or arising as
a matter of law, judicial process or otherwise.
"LIQUIDATION COST RESERVE" means, on any day during a Settlement Period,
an amount equal to the product of
(a) (x) the Adjusted Turnover Days of Pool Receivables, calculated
as of the Cut-Off Date for the next preceding Settlement Period, DIVIDED
BY (y) 360; TIMES
(b) the sum of (i) the product of Eurodollar Rate on such day times
1.5 PLUS (ii) XXX PLUS (iii) the Servicer's Fee Rate, PLUS the percentage
used to calculate the Program Fee; TIMES
13
(c) the Purchaser's Total Investment on such day.
"LIQUIDATION EVENT" has the meaning set forth in SECTION 10.01 of the XXX
Purchase Agreement.
"LIQUIDATION PERIOD" means the period commencing on the date on which the
conditions precedent to Purchases and Reinvestments set forth in SECTION 5.02 of
the XXX Purchase Agreement are not satisfied (and not expressly waived by
Purchaser) and the Administrator shall have notified Seller, Servicer and the
Relationship Bank in writing that the Liquidation Period has commenced, and
ending on the Final Payout Date.
"LIQUIDITY AGENT" means XXX, as agent for the Liquidity Banks under the
Liquidity Agreement, or any successor to XXX in such capacity.
"LIQUIDITY AGREEMENT" means and includes (a) the Liquidity Asset Purchase
Agreement dated as of April 11, 1997 among XXX, as borrower, XXX
Capital, as Program Administrator, XXX, as Liquidity Agent, and XXX and/or one
or more other banks or other financial institutions, as lenders, and (b) any
other agreement thereafter entered into by XXX providing for the making of loans
or other extensions of credit to XXX secured by a direct or indirect security
interest in the Asset Interest (or any portion thereof) or the purchase from XXX
of an undivided interest in the Asset Interest (or any portion thereof) to
support all or part of XXX's payment obligations under the Commercial Paper
Notes or to provide an alternate means of funding XXX's investments in accounts
receivable or other financial assets, and under which the amount available from
such extensions of credit is limited to an amount calculated by reference to the
value or eligible unpaid balance of such accounts receivable or other financial
assets or any portion thereof or the level of deal-specific credit enhancement
available with respect thereto, as such Liquidity Agreement or other agreement
may be amended, supplemented, restated or otherwise modified from time to time.
"LIQUIDITY BANK" means any one of, and "LIQUIDITY BANKS" means all of, XXX
and the other commercial lending institutions that are at any time parties to
the Liquidity Agreement.
"LIQUIDITY FUNDING" means a loan or a purchase made by the Liquidity Bank
(or simultaneous loans or purchases made by the Liquidity Banks) pursuant to the
Liquidity Agreement.
"LOCK-BOX ACCOUNT" means a bank account maintained by any Seller Party for
receiving Collections on Receivables from Obligors.
"LOCK-BOX AGREEMENT" means a letter agreement, in substantially the form
of EXHIBIT 5.01(G)(I) to the XXX Purchase Agreement, among KBK, KBK Receivables,
XXX, the Administrator and any Lock-Box Bank.
"LOCK-BOX BANK" means any of the banks holding one or more Lock-Box
Accounts.
14
"LOSS HORIZON FACTOR" means on any day during a Settlement Period, a ratio
(expressed as a percentage) computed as of the Cut-Off Date for the next
preceding Settlement Period by dividing (i) the aggregate original Unpaid
Balances of all Pool Receivables arising during the five (5) immediately
preceding calendar months ended on such Cut-Off Date by (ii) the Net Pool
Balance as of such Cut-Off Date.
"LOSS PERCENTAGE" means on any day during a Settlement Period the greater
of (i) XXX times the Standard Concentration Factor and (ii) XXX TIMES the Loss
Horizon Factor as of the Cut-Off Date for the next preceding Settlement Period
TIMES the highest three-month rolling average of the Default Ratios during the
preceding twelve (12) calendar months, inclusive of the month as of which such
determination is made; PROVIDED, HOWEVER, that the Loss Percentage shall not be
less than XXX.
"LOSS RESERVE" means, on any day during a Settlement Period, an amount
equal to the product of
(a) the Net Pool Balance on such day, TIMES
(b) the Loss Percentage for such Settlement Period.
"MATERIAL ADVERSE EFFECT" with respect to any event or circumstance, a
material adverse effect on:
(i) the business, assets, financial condition, operations or
prospects of any Seller Party;
(ii) the ability of any Seller Party to perform its obligations
under any Transaction Document;
(iii) the validity or enforceability of any Transaction Document, or
the validity, enforceability or collectibility of the Receivables or the
related Contracts; or
(iv) the status, existence, perfection, priority or enforceability
of KBK Receivables' interest or, for purposes of the XXX Purchase
Agreement, of XXX's interest in the Pool Receivables and Related Assets.
"MOODY'S" means ▇▇▇▇▇'▇ Investors Service, Inc.
"NET POOL BALANCE" at any time means an amount equal to (a) the aggregate
Unpaid Balance of the Eligible Receivables in the Receivables Pool at such time,
MINUS the sum (without duplication) of (i) the sum with respect to all Obligors
of the amount, if any, by which the aggregate Unpaid Balance of Pool Receivables
owed by any Obligor and its
15
Affiliated Obligors, if any, exceeds the Standard Obligor Concentration Limit
for such Obligor, PLUS (ii) the sum with respect to all Obligors of the amount,
if any, by which the aggregate Unpaid Balance of Eligible Receivables owed by
any Obligor and its Affiliated Obligors, if any, arising under Inventory
Financing Agreements exceeds the Inventory Obligor Concentration Limit for such
Obligor, PLUS (iii) the sum with respect to all Obligees of the amount, if any,
by which the aggregate Unpaid Balance of Eligible Receivables owed by all
Obligors under Contracts with such Obligees exceeds XXX times the aggregate
Unpaid Balance of Eligible Receivables at such time, PLUS (iv) the amount by
which the aggregate Unpaid Balance of all Receivables arising under Inventory
Financing Agreements exceeds XXX of the aggregate Unpaid Balance of Eligible
Receivables at such time.
"NET WORTH" shall mean the sum of (i) par value of capital stock, (ii)
capital excess of par value, (iii) retained earnings, and (iv) Subordinated
Debt.
"NONCOMPLYING RECEIVABLE" has the meaning set forth in SECTION 3.5(A) of
the Sale Agreement.
"NONCOMPLYING RECEIVABLE ADJUSTMENT" has the meaning set forth in SECTION
3.5(A) of the Sale Agreement.
"OBLIGEE" means a Person to whom any Obligor is obligated to make payments
and who has entered into a Factoring Agreement with Originator.
"OBLIGOR" means, as the context may require, (a) a Person obligated to
make payments to any Obligee pursuant to any Contract or (b) a Person obligated
to make payments to the Originator pursuant to an Inventory Financing Agreement.
"ORIGINATOR" means KBK (individually and as Servicer).
"PERMITTED INVESTMENTS" means any one or more of the following obligations
or securities:
(i) direct non-callable obligations of, and non-callable obligations
fully guaranteed by, the United States of America, or any agency or
instrumentality of the United States of America the obligations of which
are backed by the full faith and credit of the United States of America;
(ii) demand and time deposits in, certificates of deposits of, and
bankers' acceptances issued by, any depository institution or trust
company incorporated under the laws of the United States of America or any
state thereof, having a combined capital and surplus of at least
$500,000,000, and subject to supervision and examination by federal and/or
state banking authorities, so long as at the time of such investment or
contractual commitment providing for such investment the commercial paper
or other short-term debt obligations of such depository institution or
trust company (or, in the case of a depository institution that is the
principal subsidiary of a holding company, the commercial paper or other
short-term debt obligations of such
16
holding company) have a "P-1" rating by Moody's and a "A-1" or higher
rating by S&P.
(iii) repurchase obligations with respect to and collateralized by (A)
any security described in CLAUSE (I) above or (B) any other security
issued or guaranteed by an agency or instrumentality of the United States
of America, in each case entered into with a depository institution or
trust company (acting as principal) of the type described in CLAUSE (II)
above, PROVIDED that the Administrator has taken delivery of such
security;
(iv) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations, but excluding commercial
paper payable on demand or on a specified date not more than one year
after the date of issuance thereof) having a "P-1" rating by Moody's and a
"A-1" or higher rating by S&P at the time of such investment; and
(v) shares in a mutual fund investing solely in short term
securities of the United States government and/or securities described in
CLAUSE (III) above where the mutual fund custodian has taken delivery of
the collateralizing securities, PROVIDED THAT (i) such fund shall have a
rating of "AAAm" or "AAAg" from S&P and the equivalent thereof from
Moody's, (ii) the S&P rating for such fund shall have no "(r)"
designation, and (iii) such shares shall be freely transferable by the
holder on a daily basis.
"PERMITTED LIEN" means (i) the rights and interests of KBK and the XXX
Parties under the Sale Agreement, the XXX Purchase Agreement and the other
Transaction Documents, (ii) any Lien created by, or arising solely or primarily
as a result of any action taken by, any XXX Party or Affected Party or, for
purposes of the Sale Agreement, by Initial Purchaser and (iii) any Lien on the
assets of any XXX Party or Affected Party securing obligations of such XXX Party
or Affected Party.
"PERSON" means an individual, partnership, 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.
"POOL RECEIVABLE" means a Receivable in the Receivables Pool.
"PROGRAM FEE" is the fee payable by KBK Receivables to the Administrator,
for the account of XXX, as the "Program Fee," pursuant to the Fee Letter.
"PROGRAM INFORMATION" has the meaning set forth in SECTION 14.08 of the
XXX Purchase Agreement.
"PURCHASE" (a) for purposes of the Sale Agreement, has the meaning set
forth in SECTION 1.1 of the Sale Agreement, and (b) for purposes of the XXX
Purchase Agreement, has the meaning set forth in SECTION 1.01(A) of the XXX
Purchase Agreement.
17
"PURCHASE LIMIT" has the meaning set forth in SECTION 1.01 (B) of the XXX
Purchase Agreement.
"PURCHASE PRICE" has the meaning set forth in SECTION 2.1 of the Sale
Agreement.
"PURCHASE PRICE ADJUSTMENTS" has the meaning set forth in SECTION 3.1(B)
of the Sale Agreement.
"PURCHASE TERMINATION DATE" means the date of termination of the Facility
under SECTION 8.1 or 8.2 of the Sale Agreement.
"PURCHASE TERMINATION EVENT" has the meaning set forth in SECTION 8.1 of
the Sale Agreement.
"PURCHASED ASSETS" has the meaning set forth in SECTION 1.1 of the Sale
Agreement.
"PURCHASER", for purposes of the XXX Purchase Agreement, means XXX.
"PURCHASER NOTE" has the meaning set forth in SECTION 3.2 of the Sale
Agreement.
"PURCHASER'S SHARE" of any amount means (a) at any time prior to the
Termination Date, the then Asset Interest, expressed as of percentage, TIMES
such amount,and (b) at any time on or after the Termination Date, XXX TIMES such
amount.
"PURCHASER'S TOTAL INVESTMENT" means at any time with respect to the Asset
Interest an amount equal to (a) the aggregate of the amounts theretofore paid to
Seller for Purchases pursuant to SECTION 1.01 of the XXX Purchase Agreement,
LESS (b) the aggregate amount of Collections theretofore received and actually
distributed to Purchaser on account of such Purchaser's Total Investment
pursuant to SECTION 3.01 of the XXX Purchase Agreement.
"QUALIFYING LIQUIDITY BANK" means a Liquidity Bank with a rating of its
short-term securities equal to or higher than (i) A-1 by Standard & Poor's
Ratings Services and (ii) P-1 by ▇▇▇▇▇'▇ Investors Service, Inc.
"RECEIVABLE" means (a) the indebtedness owed to the Originator (either
directly or by purchase or assignment from the Obligee) by any Obligor (without
giving effect to any transfer to KBK Receivables pursuant to the Sale Agreement
or any Purchase under the XXX Purchase Agreement) acquired by the Originator
pursuant to a Factoring Agreement, whether constituting an account, instrument,
chattel paper or general intangible, arising in connection with the sale of
goods or services by an Obligee, and includes the right to payment of any
finance charge and other obligations of such Obligor with respect thereto (but
excludes prepayment penalties and fees), and (b) the indebtedness owed to the
Originator by an Obligor (without giving effect to any transfer to KBK
Receivables pursuant to the Sale Agreement or the Purchaser under the XXX
Purchase Agreement) under an Inventory Financing Agreement and includes the
right to payment of any interest or finance charges
18
and other obligations of such Obligor with respect thereto (but excludes any
prepayment penalties and fees payable under such Inventory Financing Agreement),
whether constituting an instrument, chattel paper or general intangible;
PROVIDED, HOWEVER, that no account, instrument, chattel paper or general
intangible arising under a "Revolving Account Transfer and Purchase Agreement
(Batch)" or a "Recourse Account Transfer Agreement" shall constitute a
"Receivable" hereunder or under the Sale Agreement unless the Administrator and
the Initial Purchaser have approved the form of such agreement in writing in a
notice to KBK; PROVIDED FURTHER, that no account, instrument, chattel paper or
general intangible the Obligor or Obligee of which is listed on APPENDIX B prior
to the creation thereof in the case of clause (b) above or acquisition thereof
by the Originator in the case of clause (a) above (as such APPENDIX B is
supplemented from time to time in the sole discretion of the Administrator at
the request of the Originator) shall constitute a "Receivable" hereunder or
under the Sale Agreement.
"RECEIVABLES POOL" means at any time all then outstanding Receivables
which have been sold or contributed by the Originator to KBK Receivables under
the Sale Agreement; PROVIDED, HOWEVER, that Receivables sold by Seller pursuant
to the proviso to SECTION 7.03(A)(I) of the XXX Purchase Agreement shall, after
such sale, not be in the Receivables Pool.
"RECOURSE ACCOUNT TRANSFER AGREEMENT" means a Recourse Account Transfer
Agreement or Recourse Account Transfer and Purchase Agreement substantially in
one of the forms set forth in Schedule 6.02(J)-5.
"REGULATION D" means Regulation D of the Federal Reserve Board, or any
other regulation of the Federal Reserve Board that prescribes reserve
requirements applicable to nonpersonal time deposits or "Eurocurrency
Liabilities" as presently defined in such Regulation D, as in effect from time
to time.
"REGULATORY CHANGE" means, relative to any Affected Party
(a) any change in (or the adoption or commencement of effectiveness
of) any
(i) United States federal or state law or foreign law
applicable to such Affected Party;
(ii) regulation, interpretation, directive, requirement or
request (whether or not having the force of law) applicable to such
Affected Party of (A) any court, Government Authority charged with
the interpretation or administration of any law referred to in
CLAUSE (A)(I) or of (B) any fiscal, monetary or other authority
having jurisdiction over such Affected Party; or
(iii) GAAP or regulatory accounting principles applicable to such
Affected Party and affecting the application to such Affected Party
of any law,
19
regulation, interpretation, directive, requirement or request
referred to in CLAUSE (A)(I) or (A)(II) above; or
(b) any change in the application to such Affected Party of any
existing law, regulation, interpretation, directive, requirement, request
or accounting principles referred to in CLAUSE (A)(I), (A)(II) or (A)(III)
above.
"REINVESTMENT" has the meaning set forth in SECTION 1.03 of the XXX
Purchase Agreement.
"RELATED ASSETS" means, in relation to any Receivable, (a) all rights and
interests in and to, but not any obligations under, all Related Security with
respect to such Receivable, (b) all rights and interests in and to all books and
records evidencing or otherwise relating to such Receivable, (c) for purposes of
the XXX Purchase Agreement, all rights and interests of KBK Receivables
under the Sale Agreement and the other documents executed by the Originator
thereunder, and (d) all Collections in respect of, and other proceeds of, such
Receivable or any other Related Assets in respect thereof.
"RELATED SECURITY" means, with respect to any Receivable:
(i) all right, title and interest, if any, in the goods or
merchandise (including returned goods or merchandise), if any, the sale of
which by an Obligee or the Originator gave rise to such Receivable or any
goods or merchandise securing such Receivable,
(ii) all other security interests or liens and property subject
thereto from time to time, if any, purporting to secure payment of such
Receivable, whether pursuant to the Contract, the Factoring Agreement (if
any) or otherwise, together with all financing statements signed by an
Obligor describing any collateral securing such Receivable,
(iii) all guarantees, subordination agreements, insurance and other
agreements or arrangements of whatever character, if any, from time to
time supporting or securing payment of such Receivable whether pursuant to
the Contract or Factoring Agreement related to such Receivable or
otherwise,
(iv) with respect to a the Factoring Agreement (if any) pursuant to
which the Originator purchased such Receivable (A) any rights of the
Seller or the Originator to receive moneys due or to become due under or
pursuant to such Factoring Agreement (other than in respect of fees
payable thereunder and provisions providing for the payment and
enforcement thereof), (B) any rights of the Seller or the Originator to
receive proceeds of any insurance, indemnity payments, warranty or
guaranty payments with respect to such Factoring Agreement on the
Receivables acquired thereunder, (C) any claims of the Seller or the
Originator for damages arising out of or for breach of or default under
such Factoring Agreement, (D) any right of the Seller or the Originator to
compel performance and otherwise exercise all
20
remedies thereunder, including, without limitation, any right to require
the Obligee to repurchase any such Receivable and (E) any related
financing statements signed by the Obligee party to such Factoring
Agreement, and
(v) the Contract related to such Receivable, including, without
limitation, (A) any rights of the Seller or the Originator to receive
moneys due or to become due under or pursuant to such Contract (other than
prepayment penalties and fees thereunder), (B) any rights of Seller or the
Originator to receive proceeds of any insurance, indemnity payments,
warranty or guaranty payments with respect to such Contract, (C) any
claims of the Seller or Originator for damages arising out of or for
breach of or default under such Contract, (D) any right of Seller or the
Originator to compel performance and otherwise exercise all remedies
thereunder and (E) any related financing statements signed by the Obligor
party to such Contract.
"RELATIONSHIP BANK" means XXX, in its capacity as referral agent for XXX,
and any successor to XXX in such capacity.
"REPORTING DATE" means the fifth Business Day after a Cut-Off Date (other
than the initial Cut-Off Date). Each reference to a Reporting Date "for" or
"with respect to" any Reporting Period or Settlement Period means the fifth
Business Day after the Cut-Off Date for such Reporting Period or Settlement
Period.
"REPORTING PERIOD" means each period from a Cut-Off Date to the next
following CutOff Date. The "related" Reporting Period with respect to any
Settlement Period means the Reporting Period ending on the Cut-Off Date for such
Settlement Period.
"REQUIRED RESERVES" means, on any day during a Settlement Period, the sum
of each of (i) the Loss Reserve, (ii) the Accrued Cost Reserve, (iii) the
Liquidation Cost Reserve, and (iv) the Dilution Reserve.
"REVOLVING ACCOUNT TRANSFER AND PURCHASE AGREEMENT (BATCH)" means a
Revolving Account Transfer and Purchase Agreement (Batch) substantially in the
form set forth in SCHEDULE 6.02(J)-5.
"SALE AGREEMENT" means the Purchase and Sale Agreement dated as of April
11, 1997 among KBK, individually and as initial Servicer, and KBK Receivables,
as purchaser, as it may be amended, supplemented, restated or otherwise modified
in accordance with SECTION 7.03(F) of the XXX Purchase Agreement.
"SECURED PARTIES" means the XXX, the Indemnified Parties under the XXX
Purchase Agreement and the Affected Parties.
"SECURITY AGREEMENT" means the Security Agreement dated as of September
24, 1992 between XXX, as grantor, and the Collateral Agent, as secured party, as
the same may be amended, supplemented or otherwise modified from time to time.
21
"SELLER", for purposes of the XXX Purchase Agreement, means KBK
Receivables.
"SELLER INFORMATION" has the meaning set forth in SECTION 14.07(A) of the
XXX Purchase Agreement.
"SELLER INFORMATION PROVIDER" has the meaning set forth in SECTION
14.07(A) of the XXX Purchase Agreement.
"SELLER PARTIES" means KBK (individually and as Servicer) and KBK
Receivables.
"SERVICER" means, at any time, KBK, in its capacity as initial servicer on
behalf of KBK Receivables under the Sale Agreement and on behalf of KBK
Receivables and XXX under the XXX Purchase Agreement, or such other Person as
may have been appointed as successor Servicer in accordance with SECTION 8.01 of
the XXX Purchase Agreement.
"SERVICER TRANSFER EVENT" has the meaning set forth in SECTION 8.01(B) of
the XXX Purchase Agreement.
"SERVICER'S FEE" accrued as of any day in a Settlement Period means
(a) an amount equal to (x) the Servicer's Fee Rate, TIMES (y) the
aggregate Unpaid Balance of Pool Receivables on the first day of such
Settlement Period, TIMES (z) a fraction, the numerator of which is the
number of days elapsed from and including the first day of such Settlement
Period to but excluding the date of calculation and the denominator of
which is 360; or
(b) on and after Servicer's reasonable request made at any time when
KBK shall no longer be Servicer, an alternative amount specified by
Servicer not exceeding (x) XXX of Servicer's reasonable cost and expenses
of performing its obligations under the Agreement during such Settlement
Period;
PROVIDED, HOWEVER, each reference to accrued and unpaid Servicer's Fee shall
also include any Servicer's Fee accrued during a prior Settlement Period which
shall not have been paid in full to Servicer.
"SERVICER'S FEE RATE" shall mean XXX.
"SETTLEMENT DATE" means the second Business Day after a Reporting Date.
Each reference to a Settlement Date "for" or "with respect to" a Settlement
Period shall mean and be a reference to the Settlement Date on which such
Settlement Period ends in accordance with the definition of "Settlement Period".
"SETTLEMENT PERIOD" means
22
(a) the period from the date of the initial Purchase under the XXX
Purchase Agreement to the first Settlement Date thereafter; and
(b) thereafter, each period from the last day of the next preceding
Settlement Period to the next following Settlement Date;
PROVIDED, HOWEVER, that the last Settlement Period shall end on the Final Payout
Date.
"S&P" means Standard & Poor's Ratings Services.
"STANDARD CONCENTRATION FACTOR" shall mean XXX.
"STANDARD OBLIGOR CONCENTRATION LIMIT" means at any time, in relation to
the aggregate Unpaid Balance of Pool Receivables pursuant to any contract owed
by any single Obligor and its Affiliated Obligors (if any), an amount equal to
(i) the Standard Concentration Factor TIMES (ii) the aggregate Unpaid Balance of
Eligible Receivables at such time; PROVIDED, HOWEVER, that if such Obligor is
rated A-1 or higher by S&P and P-1 or higher by Moody's, the percentage in
clause (i) shall equal XXX.
"XXX CAPITAL" has the meaning set forth in the PREAMBLE to the
XXX Purchase Agreement.
"SUBORDINATED DEBT" means debt subordinated in a manner satisfactory to
Administrator.
"SUBSIDIARY" of any Person means (i) a corporation more than XXX of whose
stock of any class or classes having by the terms thereof ordinary voting power
to elect a majority of the directors of such corporation (irrespective of
whether or not at the time stock of any class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time owned or controlled by such Person, directly or
indirectly through Subsidiaries, and (ii) any partnership, association, joint
venture or other entity in which such Person, directly or indirectly through
Subsidiaries, has more than a XXX equity interest at the time.
"SUCCESSOR NOTICE" has the meaning set forth in SECTION 8.01(B) of the
XXX Purchase Agreement.
"TANGIBLE NET WORTH" means Net Worth (excluding the amount of any write-up
of any assets over their depreciated cost) less (i) all intangible assets such
as goodwill and patent rights and (ii) all notes or accounts receivable due from
Affiliates.
"TERMINATION DATE" means the earliest of
(a) March 31, 2002;
23
(b) the date of termination (whether by scheduled expiration,
termination on default or otherwise) of either the Liquidity Banks'
commitments under the Liquidity Agreement or the Credit Bank's commitment
under the Credit Agreement (unless such commitments are renewed, extended
or replaced on or before such date);
(c) the date on which a Liquidation Event has occurred and is
continuing and on which the Administrator declares a Termination Date in a
notice to Seller in accordance with SECTION 10.02(A) of the XXX Purchase
Agreement; and
(d) the date which becomes the Termination Date automatically under
SECTION 10.02(B) of the XXX Purchase Agreement.
"TRANSACTION DOCUMENTS" means the Sale Agreement, the XXX Purchase
Agreement, the Lock-Box Agreements, the Collection Account Agreement, each
Purchase Request delivered under the XXX Purchase Agreement, the Purchaser Note,
the Fee Letter and each agreement or instrument delivered under SECTION 5.01(N)
or 8.05 of the XXX Purchase Agreement or SECTION 7.3 of the Sale Agreement.
"TURNOVER DAYS" at any time during a Settlement Period means the product
of (a) the quotient of (i) the aggregate Unpaid Balance of Receivables as of the
first day of the next preceding Reporting Period, DIVIDED BY (ii) the aggregate
amount of Collections received on all Receivables during such Reporting Period,
TIMES (b) the number of days in such Reporting Period.
"UCC" means the Uniform Commercial Code as from time to time in effect in
the applicable jurisdiction or jurisdictions.
"UNMATURED LIQUIDATION EVENT" means any event which, with the giving of
notice or lapse of time, or both, would become a Liquidation Event.
"UNMATURED PURCHASE TERMINATION EVENT" means any event which, with the
giving of notice or lapse of time, or both, would become a Purchase Termination
Event.
"UNPAID BALANCE" of any Receivable means at any time the unpaid principal
amount thereof.
"UNUSED FEE" has the meaning set forth in the Fee Letter.
B. OTHER TERMS. All accounting terms not specifically defined herein or in
the Sale Agreement or the XXX Purchase Agreement 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 or therein, are used herein and
therein as defined in such Article 9.
C. COMPUTATION OF TIME PERIODS. Unless otherwise stated in the Sale
Agreement or the XXX Purchase Agreement, in the computation of a period of time
from a specified
24
date to a later specified date, the word "from" means "from and including" and
the words "to" and "until" each means "to but excluding".
25