EXHIBIT 10.X
RECEIVABLES PURCHASE AGREEMENT
dated as of December 21, 1999
Among
AILIC RECEIVABLES CORPORATION,
as Seller,
AMERICAN INCOME LIFE INSURANCE COMPANY,
as Servicer,
PREFERRED RECEIVABLES FUNDING CORPORATION,
as Purchaser
and
BANK ONE, NA,
as a Financial Institution and Agent
1
TABLE OF CONTENTS
-----------------
PRELIMINARY STATEMENTS -1-
ARTICLE I
PURCHASE ARRANGEMENTS -1-
Section 1.1 Purchase Facility -1-
-----------------
Section 1.2 Increases -1-
---------
Section 1.3 Decreases -2-
---------
Section 1.4 Payment Requirements -2-
--------------------
ARTICLE II
PAYMENTS AND COLLECTIONS -5-
Section 2.1 Payments -5-
--------
Section 2.2 Collections Prior to Amortization -5-
---------------------------------
Section 2.3 Collections Following Amortization -6-
----------------------------------
Section 2.4 Application of Collections -6-
--------------------------
Section 2.5 Payment Recision -7-
----------------
Section 2.6 Aggregate Purchaser Interest -7-
----------------------------
ARTICLE III
PREFCO FUNDING -7-
Section 3.1 CP Costs -7-
--------
Section 3.2 CP Costs Payments -8-
-----------------
Section 3.3 Calculation of CP Costs -8-
-----------------------
ARTICLE IV
FINANCIAL INSTITUTION FUNDING -8-
Section 4.1 Financial Institution Funding -8-
-----------------------------
Section 4.2 Yield Payments -8-
--------------
Section 4.3 Selection and Continuation of Tranche Periods -8-
---------------------------------------------
Section 4.4 Financial Institution Discount Rates -8-
------------------------------------
Section 4.5 Suspension of the LIBO Rate -9-
---------------------------
ARTICLE V
REPRESENTATIONS AND WARRANTIES -9-
Section 5.1 Representations and Warranties of Seller Parties -9-
------------------------------------------------
Section 5.2 Financial Institution Representations and Warranties -14-
----------------------------------------------------
ARTICLE VI
CONDITIONS OF PURCHASES -14-
i
Section 6.1 Conditions Precedent to Initial Purchase -14-
----------------------------------------
Section 6.2 Conditions Precedent to All Purchases and Reinvestments -15-
-------------------------------------------------------
ARTICLE VII
COVENANTS -15-
Section 7.1 Affirmative Covenants of the Seller Parties -15-
-------------------------------------------
Section 7.2 Negative Covenants of the Seller Parties -24-
----------------------------------------
ARTICLE VIII
ADMINISTRATION AND COLLECTION -26-
Section 8.1 Designation of Servicer -26-
-----------------------
Section 8.2 Duties of Servicer -26-
------------------
Section 8.3 Collection Rights -27-
-----------------
Section 8.4 Responsibilities of Seller -28-
--------------------------
Section 8.5 Reports -28-
-------
Section 8.6 Servicing Fees -28-
--------------
ARTICLE IX
AMORTIZATION EVENTS -28-
Section 9.1 Amortization Events -28-
-------------------
Section 9.2 Remedies -31-
--------
ARTICLE X
INDEMNIFICATION -32-
Section 10.1 Indemnities by the Seller Parties -32-
---------------------------------
Section 10.2 Increased Cost and Reduced Return -35-
---------------------------------
Section 10.3 Other Costs and Expenses -35-
------------------------
Section 10.4 Allocations -36-
-----------
ARTICLE XI
THE AGENT -36-
Section 11.1 Authorization and Action -36-
------------------------
Section 11.2 Delegation of Duties -37-
--------------------
Section 11.3 Exculpatory Provisions -37-
----------------------
Section 11.4 Reliance by Agent -37-
-----------------
Section 11.5 Non-Reliance on Agent and Other Purchasers -38-
------------------------------------------
Section 11.6 Reimbursement and Indemnification -38-
---------------------------------
Section 11.7 Agent in its Individual Capacity -38-
--------------------------------
Section 11.8 Successor Agent -38-
---------------
ARTICLE XII
ASSIGNMENTS; PARTICIPATIONS -39-
Section 12.1 Assignments -39-
-----------
Section 12.2 Participations -40-
--------------
ii
ARTICLE XIII
LIQUIDITY FACILITY -40-
Section 13.1 Transfer to Financial Institutions -40-
----------------------------------
Section 13.2 Transfer Price Reduction Yield -40-
------------------------------
Section 13.3 Payments to PREFCO -40-
------------------
Section 13.4 Limitation on Commitment to Purchase from PREFCO -41-
------------------------------------------------
Section 13.5 Defaulting Financial Institutions -41-
---------------------------------
ARTICLE XIV
MISCELLANEOUS -42-
Section 14.1 Waivers and Amendments -42-
----------------------
Section 14.2 Notices -43-
-------
Section 14.3 Ratable Payments -43-
----------------
Section 14.4 Protection of Ownership Interests of the Purchasers -43-
---------------------------------------------------
Section 14.5 Confidentiality -44-
---------------
Section 14.6 Bankruptcy Petition -45-
-------------------
Section 14.7 Limitation of Liability -45-
-----------------------
Section 14.8 CHOICE OF LAW -46-
-------------
Section 14.9 CONSENT TO JURISDICTION -46-
-----------------------
Section 14.10 WAIVER OF JURY TRIAL -46-
--------------------
Section 14.11 Integration; Binding Effect; Survival of Terms -46-
----------------------------------------------
Section 14.12 Counterparts; Severability; Section References -47-
----------------------------------------------
Section 14.13 Bank One Roles -47-
--------------
Section 14.14 Characterization -47-
----------------
EXHIBIT I
DEFINITIONS -51-
EXHIBIT II
FORM OF PURCHASE NOTICE -71-
EXHIBIT III
PLACES OF BUSINESS OF THE SELLER PARTIES;
LOCATIONS OF RECORDS;
FEDERAL EMPLOYER IDENTIFICATION NUMBER(S) -73-
iii
EXHIBIT IV
FORM OF COMPLIANCE CERTIFICATE -74-
EXHIBIT V
FORM OF ASSIGNMENT AGREEMENT -77-
EXHIBIT VI
CREDIT AND COLLECTION POLICY -84-
EXHIBIT VII
FORM OF CONTRACT(S) -85-
EXHIBIT VIII
FORM OF MONTHLY REPORT -86-
SCHEDULE A
COMMITMENTS OF FINANCIAL INSTITUTIONS -90-
SCHEDULE B
LIST OF CLOSING DOCUMENTS -91-
iv
RECEIVABLES PURCHASE AGREEMENT
This Receivables Purchase Agreement dated as of December 21, 1999 is among
AILIC RECEIVABLES CORPORATION, a Delaware corporation ("Seller"), AMERICAN
------
INCOME LIFE INSURANCE COMPANY, an insurance company organized under the laws of
Indiana ("AIL"), as the initial Servicer (the Servicer together with the Seller,
---
the "Seller Parties" and each a "Seller Party"), the funding entities listed on
-------------- ------------
Schedule A to this Agreement (together with their respective successors and
----------
assigns hereunder, the "Financial Institutions"), PREFERRED RECEIVABLES FUNDING
----------------------
CORPORATION ("PREFCO"), and BANK ONE, NA (with headquarters in Chicago,
------
Illinois), as agent for the Purchasers hereunder or any successor agent
hereunder (together with its successors and assigns hereunder, the "Agent").
-----
Unless defined elsewhere herein, capitalized terms used in this Agreement shall
have the meanings assigned to such terms in Exhibit I.
---------
PRELIMINARY STATEMENTS
Seller desires to transfer and assign Purchaser Interests to the Purchasers
from time to time.
PREFCO may, in its absolute and sole discretion, purchase Purchaser
Interests from Seller from time to time.
In the event that PREFCO declines to make any purchase, the Financial
Institutions shall, at the request of Seller, purchase Purchaser Interests from
time to time. In addition, the Financial Institutions have agreed to provide a
liquidity facility to PREFCO in accordance with the terms hereof.
Bank One, NA has been requested and is willing to act as Agent on behalf of
PREFCO and the Financial Institutions in accordance with the terms hereof.
ARTICLE I
PURCHASE ARRANGEMENTS
Section 1.1 Purchase Facility. Upon the terms and subject to the
-----------------
conditions hereof, Seller may, at its option, sell and assign Purchaser
Interests to the Agent for the benefit of one or more of the Purchasers. In
accordance with the terms and conditions set forth herein, PREFCO may, at its
option, instruct the Agent to purchase on behalf of PREFCO, or if PREFCO shall
decline to purchase, the Agent shall purchase, on behalf of the Financial
Institutions, Purchaser Interests from time to time in an aggregate amount not
to exceed the Purchase Limit during the period from the date hereof to but not
including the earlier to occur of the Amortization Date and the Liquidity
Termination Date.
Section 1.2 Increases. Seller shall provide the Agent with at
---------
least two Business Days' prior written notice of each Incremental Purchase.
Such notice (a "Purchase
--------
1
Notice") shall be in the form set forth as Exhibit II hereto. Each Purchase
------ ----------
Notice shall be subject to Section 6.2 hereof and, except as set forth below,
-----------
shall be irrevocable and shall specify the requested Purchase Price (which
amount shall not be less than $500,000, or an increment of $100,000 in excess
thereof) and shall not be greater than the Commitment Availability as of the
date of the proposed purchase), the date of purchase (which shall be a
Settlement Date) and, in the case of an Incremental Purchase to be funded by the
Financial Institutions, the requested Discount Rate and Tranche Period.
Following receipt of a Purchase Notice, the Agent will determine whether PREFCO
agrees to make the purchase. If PREFCO declines to make a proposed purchase,
Seller may cancel the Purchase Notice or, in the absence of such a cancellation,
the Incremental Purchase of the Purchaser Interest will be made by the Financial
Institutions. On the date of each Incremental Purchase, upon satisfaction of the
applicable conditions precedent set forth in Article VI, PREFCO or the Financial
----------
Institutions, as applicable, shall deposit to the Facility Account, in
immediately available funds, no later than 12:00 noon (Chicago time), an amount
equal to (i) in the case of PREFCO, the aggregate Purchase Price of the
Purchaser Interests PREFCO is then purchasing or (ii) in the case of a Financial
Institution, such Financial Institutions' Pro Rata Share of the aggregate
Purchase Price of the Purchaser Interests the Financial Institutions are
purchasing.
Section 1.3 Decreases. Seller shall provide the Agent with prior
---------
written notice in conformity with the Required Notice Period of any reduction
from Collections requested by Seller of Capital (a "Reduction Notice"). Such
----------------
Reduction Notice shall designate (i) the date (the "Proposed Reduction Date")
-----------------------
upon which any such reduction of Capital shall occur (which date shall give
effect to the applicable Required Notice Period), and (ii) the aggregate amount
of Capital to be reduced which shall be applied ratably to the Purchaser
Interests of PREFCO and the Financial Institutions in accordance with the amount
of Capital (if any) owing to PREFCO, on the one hand, and the amount of Capital
(if any) owing to the Financial Institutions (ratably, based on their respective
Pro Rata Shares), on the other hand (the "Aggregate Reduction"). Only one (1)
-------------------
Reduction Notice shall be outstanding at any time. Notwithstanding the
foregoing, the Aggregate Reduction will not be made if the Amortization Date
shall have occurred for any reason on or prior to the Proposed Reduction Date.
Section 1.4 Payment Requirements. All amounts to be paid or
--------------------
deposited by any Seller Party pursuant to any provision of this Agreement shall
be paid or deposited in accordance with the terms hereof no later than 11:00
a.m. (Chicago time) on the day when due in immediately available funds, and if
not received before 11:00 a.m. (Chicago time) shall be deemed to be received on
the next succeeding Business Day. If such amounts are payable to a Purchaser
they shall be paid to the Agent, for the account of such Purchaser, at Bank One,
NA, 1 Bank ▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇ ▇▇▇-▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (ABA No.
▇▇▇▇▇▇▇▇▇; FMSD Clearing Account No. 7521-7683; Reference: AILIC Receivables
Corporation) until otherwise notified by the Agent. Upon notice to Seller, the
Agent may debit the Facility Account for all amounts due and payable hereunder.
All computations of Yield, per annum fees calculated as part of any CP Costs,
per annum fees hereunder and under the Fee Letter shall be made on the basis of
a year of 360 days for the actual number of days elapsed. If any amount
hereunder shall be payable on a day which is not a Business Day, such amount
shall be payable on the next succeeding Business Day.
2
ARTICLE II
PAYMENTS AND COLLECTIONS
Section 2.1 Payments. Notwithstanding any limitation on recourse
--------
contained in this Agreement, Seller shall immediately pay to the Agent when due,
for the account of the relevant Purchaser or Purchasers on a full recourse
basis, (i) such fees as set forth in the Fee Letter (which fees shall be
sufficient to pay all fees owing to the Financial Institutions), (ii) all CP
Costs, (iii) all amounts payable as Yield, (iv) all amounts payable as Deemed
Collections (which shall be applied to reduce outstanding Capital hereunder in
accordance with Sections 2.2 and 2.3 hereof), (v) all amounts payable pursuant
------------ ---
to Section 2.6, (vi) all amounts payable pursuant to Article X, if any, (vii)
----------- ---------
all Servicer costs and expenses in connection with servicing, administering and
collecting the Receivables, (viii) all Broken Funding Costs and (ix) all Default
Fees (collectively, the "Obligations"). If any Person fails to pay any of the
-----------
Obligations when due, such Person agrees to pay, on demand, the Default Fee in
respect thereof until paid. Notwithstanding the foregoing, no provision of this
Agreement or the Fee Letter shall require the payment or permit the collection
of any amounts hereunder in excess of the maximum permitted by applicable law.
If at any ▇▇▇▇ ▇▇▇▇▇▇ receives any Collections or is deemed to receive any
Collections, Seller shall immediately pay such Collections or Deemed Collections
to the Servicer for application toward the purchase of new Receivables or for
handling as otherwise provided herein and, at all times prior to such payment,
such Collections shall be held in trust by Seller for the exclusive benefit of
the Purchasers and the Agent.
Section 2.2 Collections Prior to Amortization. Prior to the
---------------------------------
Amortization Date, any Collections and/or Deemed Collections received by the
Servicer (after the initial purchase of a Purchaser Interest hereunder and on or
prior to the Amortization Date of such Purchaser Interest) shall be set aside
and held in trust by the Servicer for the payment of any accrued and unpaid
Aggregate Unpaids up to the amount necessary to fund such Aggregate Unpaids. If
at any time any Collections and/or Deemed Collections are received by the
Servicer prior to the Amortization Date, Seller hereby requests and the
Purchasers hereby agree to make, simultaneously with such receipt, a
reinvestment (each a "Reinvestment") with that portion of each and every
------------
Collection received by the Servicer that is part of any Purchaser Interest, such
that after giving effect to such Reinvestment, the amount of Capital of such
Purchaser Interest immediately after such receipt and corresponding Reinvestment
shall be equal to the amount of Capital immediately prior to such receipt. On
each Settlement Date prior to the occurrence of the Amortization Date, the
Servicer shall remit to the Agent's account the amounts set aside during the
preceding Settlement Period and apply such amounts (if not previously paid in
accordance with Section 2.1) to reduce unpaid CP Costs, Yield and other
-----------
Obligations. If such CP Costs, Yield and other Obligations shall be reduced to
zero, any additional Collections and/or Deemed Collections received by the
Servicer shall (i) if applicable, be remitted to the Agent's account no later
than 11:00 a.m. (Chicago time) to the extent required to fund any Aggregate
Reduction on such Settlement Date and (ii) thereafter be remitted from the
Servicer to Seller on such Settlement Date.
3
Section 2.3 Collections Following Amortization. On the Amortization
----------------------------------
Date and on each day thereafter, the Servicer shall set aside and hold in trust,
for the holder of each Purchaser Interest, all Collections and Deemed
Collections received on such day (together with all Collections and Deemed
Collections then held in trust pursuant to Section 2.2 or this Section 2.3).
----------- ------------
On and after the Amortization Date, the Servicer shall, at any time upon the
request from time to time by (or pursuant to standing instructions from) the
Agent (i) remit to the Agent's account the amounts set aside pursuant to the
preceding sentence, and (ii) apply such amounts to reduce the Capital associated
with each such Purchaser Interest and any other Aggregate Unpaids until such
time as the Aggregate Unpaids are reduced to zero.
Section 2.4 Application of Collections. If there shall be
--------------------------
insufficient funds on deposit for the Servicer to distribute funds in payment in
full of the aforementioned amounts pursuant to Section 2.2 or 2.3 (as
----------- ---
applicable), the Servicer shall distribute funds:
first, (i) if AIL or one of its Affiliates is then the Servicer and
-----
no Amortization Event or Potential Amortization Event shall have occurred
and then be continuing, to the payment of the accrued and unpaid Servicing
Fee, and (ii) if neither AIL nor any of its Affiliates is then the
Servicer, to the payment of the Servicer's reasonable out-of-pocket costs
and expenses in connection with servicing, administering and collecting the
Receivables,
second, to the reimbursement of the Agent's costs of collection and
------
enforcement of this Agreement,
third, to the ratable payment of all accrued and unpaid (i) fees under
-----
the Fee Letter, (ii) CP Costs, (iii) Yield and (iv) amounts payable under
Article X,
---------
fourth, to the ratable payment of all other unpaid Obligations,
------
provided that to the extent such Obligations relate to the payment of
--------
Servicer costs and expenses when Seller or one of its Affiliates is acting
as the Servicer, such costs and expenses will not be paid until after the
payment in full of all other Obligations,
fifth, (if applicable) in reduction of Capital of the Purchaser
-----
Interests,
sixth, to the payment of any accrued and unpaid Servicing Fee (unless
-----
such fee shall have been paid in accordance with first above), and
-----
seventh, after the Aggregate Unpaids have been indefeasibly reduced
-------
to zero, to Seller.
Collections applied to the payment of Aggregate Unpaids shall be
distributed in accordance with the aforementioned provisions, and, giving effect
to each of the priorities set forth in Section 2.4 above, shall be shared
-----------
ratably (within each priority) among the Agent and the Purchasers in accordance
with the amount of such Aggregate Unpaids owing to each of them in respect of
each such priority.
4
Section 2.5 Payment Rescission. No payment of any of the Aggregate
------------------
Unpaids shall be considered paid or applied hereunder to the extent that, at any
time, all or any portion of such payment or application is rescinded by
application of law or judicial authority, or must otherwise be returned or
refunded for any reason. Seller shall remain obligated for the amount of any
payment or application so rescinded, returned or refunded, and shall promptly
pay to the Agent (for application to the Person or Persons who suffered such
rescission, return or refund) the full amount thereof, plus the Default Fee from
the date of any such rescission, return or refunding.
Section 2.6 Aggregate Purchaser Interest. Seller shall ensure that
----------------------------
the Purchaser Interests of the Purchaser shall at no time exceed in the
aggregate 100%. If the aggregate of the Purchaser Interests of the Purchasers
exceeds 100%, Seller shall immediately pay to the Agent an amount to be applied
to reduce the Capital of the Purchaser Interests (as allocated by the Agent),
such that after giving effect to such payment the aggregate of the Purchaser
Interests equals or is less than 100%.
ARTICLE III
PREFCO FUNDING
Section 3.1 CP Costs. Seller shall pay CP Costs with respect to
--------
the Capital associated with each Purchaser Interest of PREFCO for each day that
any Capital in respect of such Purchaser Interest is outstanding. Each
Purchaser Interest funded substantially with Pooled Commercial Paper will accrue
CP Costs each day on a pro rata basis, based upon the percentage share the
Capital in respect of such Purchaser Interest represents in relation to all
assets held by PREFCO and funded substantially with Pooled Commercial Paper.
Section 3.2 CP Costs Payments. On each Settlement Date, Seller
-----------------
shall pay to the Agent (for the benefit of PREFCO) an aggregate amount equal to
all accrued and unpaid CP Costs in respect of the Capital associated with all
Purchaser Interests of PREFCO for the Accrual Period then most recently ended in
accordance with Article II.
----------
5
Section 3.3 Calculation of CP Costs. On the 13th day of each month
-----------------------
(or, if such day is not a Business Day, the next following Business Day), PREFCO
shall calculate the aggregate amount of CP Costs for the applicable Accrual
Period and shall notify the Seller of such aggregate amount.
ARTICLE IV
FINANCIAL INSTITUTION FUNDING
Section 4.1 Financial Institution Funding. Each Purchaser Interest
-----------------------------
of the Financial Institutions shall accrue Yield for each day during its Tranche
Period at either the LIBO Rate or the Base Rate in accordance with the terms and
conditions hereof. Until Seller gives notice to the Agent of another Discount
Rate in accordance with Section 4.4, the initial Discount Rate for any Purchaser
-----------
Interest transferred to the Financial Institutions pursuant to the terms and
conditions hereof shall be the Base Rate. If the Financial Institutions acquire
by assignment from PREFCO any Purchaser Interest pursuant to Article XIII, each
------------
Purchaser Interest so assigned shall each be deemed to have a new Tranche Period
commencing on the date of any such assignment.
Section 4.2 Yield Payments. On the Settlement Date for each
--------------
Purchaser Interest of the Financial Institutions, Seller shall pay to the Agent
(for the benefit of the Financial Institutions) an aggregate amount equal to the
accrued and unpaid Yield for the entire Tranche Period of each such Purchaser
Interest in accordance with Article II.
----------
Section 4.3 Selection and Continuation of Tranche Periods. (a)
---------------------------------------------
With consultation from (and approval by) the Agent, Seller shall from time to
time request Tranche Periods for the Purchaser Interests of the Financial
Institutions, provided that, if at any time the Financial Institutions shall
have a Purchaser Interest, Seller shall always request Tranche Periods such that
at least one Tranche Period shall end on each Settlement Date.
(b) Seller or the Agent may, effective on the last day of a
Tranche Period (the "Terminating Tranche") for any Purchaser Interest, divide
-------------------
any such Purchaser Interest into multiple Purchaser Interests or combine any
such Purchaser Interest with one or more other Purchaser Interests which either
have a Terminating Tranche ending on such day or are newly created on such day,
provided, in no event may a Purchaser Interest of PREFCO be combined with a
--------
Purchaser Interest of the Financial Institutions.
Section 4.4 Financial Institution Discount Rates. Seller may select
------------------------------------
the LIBO Rate or the Base Rate for each Purchaser Interest of the
Financial Institutions. Seller shall by 11:00 a.m. (Chicago time): (i) at least
three (3) Business Days prior to the expiration of any Terminating Tranche with
respect to which the LIBO Rate is being requested as a new Discount Rate and
(ii) at least one (1) Business Day prior to the expiration of any Terminating
Tranche with respect to which the Base Rate is being requested as a new Discount
Rate, give the Agent irrevocable notice of the new Discount Rate for the
Purchaser Interest associated with such Terminating Tranche.
6
Section 4.5 Suspension of the LIBO Rate. If any Financial
---------------------------
Institution notifies the Agent that it has determined that funding its Pro Rata
Share of the Purchaser Interests of the Financial Institutions at a LIBO Rate
would violate any applicable law, rule, regulation, or directive of any
governmental or regulatory authority, whether or not having the force of law, or
that (i) deposits of a type and maturity appropriate to match fund its Purchaser
Interests at such LIBO Rate are not available or (ii) such LIBO Rate does not
accurately reflect the cost of acquiring or maintaining a Purchaser Interest at
such LIBO Rate, then the Agent shall suspend the availability of such LIBO Rate
and require Seller to select the Base Rate for any Purchaser Interest accruing
Yield at such LIBO Rate.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.1 Representations and Warranties of Seller Parties. Each
------------------------------------------------
Seller Party hereby represents and warrants to the Agent and the Purchasers
that:
(a) Corporate Existence and Power. Each Torchmark Entity
----------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of its state of incorporation. Each Torchmark Entity is duly qualified to
do business and is in good standing as a foreign corporation, and has and holds
all corporate power and all governmental licenses, authorizations, consents and
approvals required to carry on its business in each jurisdiction in which its
business is conducted, except where the failure to so qualify would not have a
Material Adverse Effect. AIL is duly qualified and licensed as an insurance
company in each state in which Receivables are originated.
(b) Power and Authority; Due Authorization Execution and
----------------------------------------------------
Delivery. The execution and delivery by each Torchmark Entity of this
--------
Agreement and each other Transaction Document to which it is a party, and the
performance of its obligations hereunder and thereunder and, in the case of
Seller, Seller's use of the proceeds of purchases made hereunder, are within its
respective corporate powers and authority and have been duly authorized by all
necessary corporate action on its part. This Agreement and each other
Transaction Document to which each Torchmark Entity is a party has been duly
executed and delivered by such Torchmark Entity.
(c) No Conflict. The execution and delivery by each
-----------
Torchmark Entity of this Agreement and each other Transaction Document to which
it is a party, and the performance of its obligations hereunder and thereunder
do not contravene or violate (i) its certificate or articles of incorporation or
by-laws, (ii) any law, rule or regulation applicable to it, (iii) any
restrictions under any material agreement, contract or instrument to which it is
a party or by which it or any of its property is bound, or (iv) any order, writ,
judgment, award, injunction or decree binding on or affecting it or its
property, and do not result in the creation or imposition of any Adverse Claim
on assets of such Torchmark Entity or its Subsidiaries (except as created
hereunder) and no transaction contemplated hereby requires compliance with any
bulk sales act or similar law.
7
(d) Governmental Authorization. Other than the filing of the
--------------------------
financing statements required hereunder, no authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution and delivery by any Torchmark
Entity of this Agreement or any other Transaction Document to which it is a
party or the performance of its obligations hereunder and thereunder.
(e) Actions, Suits. There are no actions, suits or proceedings
--------------
pending, or to the best of such Seller Party's knowledge, threatened, against or
affecting any Torchmark Entity, or any of its properties, in or before any
court, arbitrator or other body, that could reasonably be expected to have a
Material Adverse Effect. No Torchmark Entity is in default with respect to any
order of any court, arbitrator or governmental body.
(f) Binding Effect. This Agreement and each other Transaction
--------------
Document to which any Torchmark Entity is a party constitute the legal, valid
and binding obligations of such Torchmark Entity enforceable against such
Torchmark Entity in accordance with their respective terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization
or other similar laws relating to or limiting creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(g) Accuracy of Information. All information heretofore furnished by
-----------------------
any Torchmark Entity or any of its Affiliates to the Agent or the Purchasers for
purposes of or in connection with this Agreement, any of the other Transaction
Documents or any transaction contemplated hereby or thereby is, and all such
information hereafter furnished by such Torchmark Entity or any of its
Affiliates to the Agent or the Purchasers will be, true and accurate in every
material respect on the date such information is stated or certified and does
not and will not contain any material misstatement of fact or omit to state a
material fact or any fact necessary to make the statements contained therein not
misleading.
(h) Use of Proceeds. No proceeds of any purchase hereunder will be
---------------
used (i) to purchase "margin stock" as defined in, or otherwise for a purpose
that violates or would be inconsistent with, Regulation T, U or X promulgated by
the Board of Governors of the Federal Reserve System from time to time or (ii)
to acquire any security in any transaction which is subject to Section 13 or 14
of the Securities Exchange Act of 1934, as amended.
(i) Good Title. Immediately prior to each purchase hereunder, Seller
----------
shall be the legal and beneficial owner of the Receivables and Related Security
with respect thereto, free and clear of any Adverse Claim, except as created by
the Transaction Documents. There have been duly filed all financing statements
or other similar instruments or documents necessary under the UCC (or any
comparable law) of all appropriate jurisdictions to perfect Seller's ownership
interest in each Receivable, its Collections and the Related Security.
(j) Perfection. This Agreement, together with the filing of the
----------
financing statements contemplated hereby, is effective to, and shall, upon each
purchase hereunder, transfer to the Agent for the benefit of the relevant
Purchaser or Purchasers (and the
8
Agent for the benefit of such Purchaser or Purchasers shall acquire from Seller)
a valid and perfected first priority undivided percentage ownership interest in
each Receivable existing or hereafter arising and in the Related Security and
Collections with respect thereto, free and clear of any Adverse Claim, except as
created by the Transactions Documents. There have been duly filed all financing
statements or other similar instruments or documents necessary under the UCC (or
any comparable law) of all appropriate jurisdictions to perfect the Agent's (on
behalf of the Purchasers) ownership interest in the Receivables, the Related
Security and the Collections.
(k) Places of Business. The principal places of business and chief
------------------
executive offices of each Torchmark Entity and the offices where it keeps all of
its Records are located at the respective address(es) listed on Exhibit III or
-----------
such other locations of which the Agent has been notified in accordance with
Section 7.2(a) in jurisdictions where all action required by Section 14.4(a) has
-------------- ---------------
been taken and completed. Each Torchmark Entity's Federal Employer
Identification Number is correctly set forth on Exhibit III.
-----------
(l) Collections. The conditions and requirements set forth in Section
----------- -------
7.1(j) and in subsections (b), (c) and (e) of Section 8.2 have at all times been
------ --------------- --- --- -----------
satisfied and duly performed.
(m) Material Adverse Effect. (i) The initial Servicer represents and
-----------------------
warrants that since September 30, 1999 no event has occurred that would have a
material adverse effect on the financial condition or operations of the initial
Servicer and its Subsidiaries or the ability of the initial Servicer to perform
its obligations under this Agreement, (ii) Seller represents and warrants that
since the date of this Agreement, no event has occurred that would have a
material adverse effect on (A) the financial condition or operations of Seller,
(B) the ability of Seller to perform its obligations under this Agreement, or
(C) the collectibility of the Receivables or Related Security generally or of
any material portion of the Receivables or Related Security and (iii) each
Seller Party represents and warrants that since September 30, 1999 no event has
occurred that would have a material adverse effect on the financial condition or
operation of the Performance Guarantor or AIL or the ability of the Performance
Guarantor or AIL to perform its obligations under the Transaction Documents.
(n) Names. In the past five (5) years, (i) Seller has not used any
-----
corporate names, trade names or assumed names other than the name in which it
has executed this Agreement and (ii) AIL has not used any corporate names, trade
names or assumed names other than as disclosed on Exhibit III hereto.
-----------
(o) Ownership of Torchmark Entities. Torchmark owns, directly or
-------------------------------
indirectly, 100% of the issued and outstanding capital stock of each of AIL and
Seller, in each case, free and clear of any Adverse Claim. AIL owns directly
100% of the issued and outstanding capital stock of Seller, free and clear of
any Adverse Claim. Such capital stock in each case is validly issued, fully
paid and nonassessable, and there are no options, warrants or other rights to
acquire securities of Seller.
9
(p) Not a Holding Company or an Investment Company. No Torchmark
----------------------------------------------
Entity is (i) a "holding company" or a "subsidiary holding company" of a
"holding company" within the meaning of the Public Utility Holding Company Act
of 1935, as amended, or any successor statute or (ii) an "investment company"
within the meaning of the Investment Company Act of 1940, as amended, or any
successor statute.
(q) Compliance with Law. Each Torchmark Entity has complied in all
-------------------
material respects with all applicable laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject. Each
Receivable, together with the Contract related thereto, does not contravene any
laws, rules or regulations applicable thereto (including, without limitation,
--------- ------------------
laws, rules and regulations relating to truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt collection practices
and privacy), and no part of such Contract is in violation of any such law, rule
or regulation with respect to which any noncompliance, separately or in the
aggregate, is reasonably likely to have a Material Adverse Effect.
(r) Compliance with Credit and Collection Policy. AIL and Seller have
--------------------------------------------
complied in all material respects with the Credit and Collection Policy with
regard to each Receivable and the related Contract, and neither AIL nor Seller
has made any change to the Credit and Collection Policy, except such material
change as to which the Agent has been notified in accordance with Section
-------
7.1(a)(vii).
-----------
(s) Payments to AIL. With respect to each Receivable transferred to
---------------
Seller under the Receivables Sale Agreement, Seller has given reasonably
equivalent value to AIL in consideration therefor and such transfer was not made
for or on account of an antecedent debt. No transfer by AIL of any Receivable
under the Receivables Sale Agreement is or may be voidable under any section of
the Bankruptcy Reform Act of 1978 (11 U.S.C. (S)(S) 101 et seq.), as amended.
-------
(t) Enforceability of Contracts. Each Contract with respect to each
---------------------------
Receivable is effective to create, and has created, a legal, valid and binding
obligation of the related Obligor (including each Obligor, whether a member of
an Agent-Hierarchy or otherwise, which is a guarantor of such Receivable) to pay
the Outstanding Balance of the Receivable created thereunder and any accrued
interest thereon, enforceable against such Obligor in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to or limiting creditors' rights
generally and by general principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law).
(u) Eligible Receivables. Each Receivable included in the Net
--------------------
Receivables Balance as an Eligible Receivable on the date of its purchase under
the Receivables Sale Agreement was an Eligible Receivable on such purchase date.
10
(v) Net Receivables Balance. The Seller has determined that,
-----------------------
immediately after giving effect to each purchase hereunder, the Net Receivables
Balance is at least equal to the aggregate Capital of all the Purchaser
Interests.
(w) Year 2000. Such Seller Party (i) has reviewed the areas
---------
within its business and operations which could be adversely affected by the Year
2000 Problem, (ii) has developed what it deems as a reasonable Year 2000 Plan to
address the Year 2000 Problem on a timely basis, (iii) is taking all actions it
deems reasonably necessary to meet the schedule and goals of the Year 2000 Plan
and (iv) has established adequate reserves to implement the Year 2000 Plan. Such
Seller Party does not reasonably anticipate that the Year 2000 Problem could
have a Material Adverse Effect.
(x) Accounting. The manner in which each Torchmark Entity
----------
accounts for the transactions contemplated by this Agreement and the Receivables
Sale Agreement does not jeopardize the true sale analysis.
(y) Compliance with Underwriting Guidelines. AIL has complied
---------------------------------------
in all material respects with its underwriting guidelines in issuing or agreeing
to issue each Insurance Product in connection with which a Receivable shall have
arisen, and in electing to extend the credit represented by such Receivable to
the applicable Obligor, and AIL has not made any material change to such
underwriting guidelines except such change as to which the Agent has been
notified in accordance with Section 7.1(a)(vii).
-------------------
(z) Compliance with Representations. On and as of the date of
-------------------------------
each purchase of a Purchaser Interest hereunder and the date of each
Reinvestment hereunder, each Seller Party hereby represents and warrants that
all of the other representations and warranties made by it set forth in this
Section 5.1 are true and correct on and as of the date of such purchase or
-----------
Reinvestment (and after giving effect to such purchase or Reinvestment) as
though made on and as of each such date.
Section 5.2 Financial Institution Representations and Warranties. Each
----------------------------------------------------
Financial Institution hereby represents and warrants to the Agent and PREFCO
that:
(a) Existence and Power. Such Financial Institution is a
-------------------
corporation or a banking association duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, and has all corporate power to perform its obligations hereunder.
(b) No Conflict. The execution and delivery by such Financial
-----------
Institution of this Agreement and the performance of its obligations hereunder
are within its corporate powers, have been duly authorized by all necessary
corporate action, do not contravene or violate (i) its certificate or articles
of incorporation or association or by-laws, (ii) any law, rule or regulation
applicable to it, (iii) any restrictions under any agreement, contract or
instrument to which it is a party or any of its property is bound, or (iv) any
order, writ, judgment, award, injunction or decree binding on or affecting it or
its property, and do not result in the creation or
11
imposition of any Adverse Claim on its assets. This Agreement has been duly
authorized, executed and delivered by such Financial Institution.
(c) Governmental Authorization. No authorization or approval or
--------------------------
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution and delivery by such Financial
Institution of this Agreement and the performance of its obligations hereunder.
(d) Binding Effect. This Agreement constitutes the legal, valid
--------------
and binding obligation of such Financial Institution enforceable against such
Financial Institution in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency, reorganization or other
similar laws relating to or limiting creditors' rights generally and by general
principles of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law).
ARTICLE VI
CONDITIONS OF PURCHASES
Section 6.1 Conditions Precedent to Initial Purchase. The initial
----------------------------------------
purchase of a Purchaser Interest under this Agreement is subject to the
conditions precedent that (a) the Agent shall have received on or before the
date of such purchase those documents listed on Schedule B and (b) the Agent
----------
shall have received all fees and expenses required to be paid on such date
pursuant to the terms of this Agreement and the Fee Letter.
Section 6.2 Conditions Precedent to All Purchases and Reinvestments. Each
-------------------------------------------------------
purchase of a Purchaser Interest (other than pursuant to Section 13.1) and each
------------
Reinvestment shall be subject to the further conditions precedent that (a) in
the case of each such purchase or Reinvestment: (i) the Servicer shall have
delivered to the Agent on or prior to the date of such purchase, in form and
substance satisfactory to the Agent, all Monthly Reports as and when due under
Section 8.5 and (ii) upon the Agent's request, the Servicer shall have delivered
-----------
to the Agent at least three (3) days prior to such purchase or Reinvestment an
interim Monthly Report showing the amount of Eligible Receivables; (b) neither
the Amortization Date nor the Liquidity Termination Date shall have occurred;
(c) on the date of each such purchase or Reinvestment, the following statements
shall be true (and acceptance of the proceeds of such purchase or Reinvestment
shall be deemed a representation and warranty by Seller that such statements are
then true):
(i) the representations and warranties set forth in Section 5.1 are true
-----------
and correct on and as of the date of such purchase or Reinvestment as
though made on and as of such date;
(ii) no event has occurred, or would result from such purchase or
Reinvestment, that would constitute an Amortization Event or a
Potential Amortization Event; and
12
(iii) the aggregate Capital of all Purchaser Interests does not
exceed the Purchase Limit;
and (d) the Agent shall have received such other approvals, opinions or
documents as it may reasonably request. It is expressly understood that each
Reinvestment shall, unless otherwise directed by the Agent or any Purchaser,
occur automatically on each day that the Servicer shall receive any Collections
without the requirement that any further action be taken on the part of any
Person and notwithstanding the failure of Seller to satisfy any of the
foregoing conditions precedent in respect of such Reinvestment. The failure of
Seller to satisfy any of the foregoing conditions precedent in respect of any
Reinvestment shall give rise to a right of the Agent and the Purchasers, which
right may be exercised at any time on demand of the Agent, to rescind the
related purchase and direct Seller to pay to the Agent for the benefit of the
Purchasers an amount equal to the Collections that shall have been applied to
the affected Reinvestment.
ARTICLE VII
COVENANTS
Section 7.1 Affirmative Covenants of the Seller Parties. Until the
-------------------------------------------
date on which the Aggregate Unpaids have been indefeasibly paid in full and this
Agreement terminates in accordance with its terms, each Seller Party hereby
covenants, as to itself, as set forth below:
(a) Financial Reporting. Such Seller Party will maintain,
-------------------
for itself and each of its Subsidiaries, a system of accounting established and
administered in accordance with generally accepted accounting principles, and
furnish to the Agent:
(i) Annual Reporting. Within
---------------
(A) 90 days after the close of each fiscal year
of the Performance Guarantor, audited unqualified financial
statements (which shall include consolidated balance sheets,
statements of income and retained earnings and a statement of
cash flows) for the Performance Guarantor for such fiscal
year, certified by nationally recognized independent public
accountants;
(B) 120 days after the close of each fiscal
year of AIL, audited, unqualified financial statements (which
shall include balance sheets, statements of income and
retained earnings and a statement of cash flows) for AIL for
such fiscal year certified by nationally recognized
independent public accountants;
(C) 90 days after the close of each fiscal year
of Seller, unaudited financial statements (which shall
include balance sheets, statements of income and retained
earnings and a statement of cash flows) for Seller for such
fiscal year, certified by an Authorized Officer; and
13
(D) 90 days after the close of each fiscal year of AIL,
an annual statement of the conditions and affairs of AIL prepared
in accordance with NAIC annual statement instructions and
accounting practices and procedures for, and as filed with, the
Insurance Department of its respective state of organization, all
certified by an Authorized Officer thereof.
(ii) Quarterly Reporting. Within 45 days after the close of
-------------------
the first three (3) quarterly periods of each of the Servicer's fiscal
years,
(A) in respect of each of the Performance Guarantor,
AIL and Seller, balance sheets of each such Person as at the
close of each such period and statements of income and retained
earnings and a statement of cash flows for each such Person for
the period from the beginning of such fiscal year to the end of
such quarter, all certified by an Authorized Officer thereof; and
(B) in respect of AIL, a quarterly statement of the
conditions and affairs of AIL prepared in accordance with NAIC
quarterly statement instructions and accounting practices and
procedures for, and as filed with, the Insurance Department of
its respective state of organization, all certified by an
Authorized Officer thereof.
(iii) Compliance Certificate. Together with the financial
----------------------
statements required hereunder, a compliance certificate in
substantially the form of Exhibit IV signed by an Authorized Officer
----------
of each of the Performance Guarantor, AIL and Seller, and dated the
date of such annual financial statement or such quarterly financial
statement, as the case may be.
(iv) Shareholders Statements and Reports. Promptly upon the
-----------------------------------
furnishing thereof to the shareholders of any Torchmark Entity copies
of all financial statements, reports and proxy statements so
furnished.
(v) S.E.C. Filings. Promptly upon the filing thereof,
--------------
copies of all registration statements and annual, quarterly, monthly
or other regular reports which any Torchmark Entity or any of its
Subsidiaries files with the Securities and Exchange Commission.
(vi) Copies of Notices. Promptly upon its receipt of any
-----------------
notice, request for consent, financial statements, certification,
report or other communication under or in connection with any
Transaction Document from any Person other than the Agent or PREFCO,
copies of the same.
(vii) Change in Credit and Collection Policy or Underwriting
------------------------------------------------------
Guidelines. At least thirty (30) days prior to the effectiveness of
----------
any material change in or amendment to the (A) Credit and Collection
Policy, a copy of the
14
Credit and Collection Policy then in effect and a notice indicating
such change or amendment or (B) underwriting guidelines of AIL, a copy
of the underwriting guidelines of AIL then in effect and a notice
indicating such change or amendment.
(viii) Other Information. Promptly, from time to time, such
-----------------
other information, documents, records or reports relating to the
Receivables or the condition or operations, financial or otherwise, of
such Seller Party or any Torchmark Entity as the Agent may from time
to time reasonably request in order to protect the interests of the
Agent and the Purchasers under or as contemplated by this Agreement.
(b) Notices. Such Seller Party will notify the Agent in writing
-------
of any of the following promptly upon learning of the occurrence thereof,
describing the same and, if applicable, the steps being taken with respect
thereto:
(i) Amortization Events or Potential Amortization Events.
----------------------------------------------------
The occurrence of each Amortization Event and each Potential
Amortization Event, by a statement of an Authorized Officer of such
Seller Party.
(ii) Judgment and Proceedings. (A) The entry of any
------------------------
judgment or decree against (1) Torchmark or any of its respective
Subsidiaries, if the aggregate amount of all judgments and decrees
then outstanding against Torchmark and its Subsidiaries exceeds
$50,000,000, (2) AIL or any of its respective Subsidiaries, if the
aggregate amount of all judgments and decrees then outstanding against
AIL and its Subsidiaries exceeds $5,000,000 or (3) Seller; or (B) the
institution of any litigation, arbitration proceeding or governmental
proceeding against any Torchmark Entity which may have a Material
Adverse Effect.
(iii) Material Adverse Effect. The occurrence of any event
-----------------------
or condition that has, or could reasonably be expected to have, a
Material Adverse Effect.
(iv) Amortization Date. The occurrence of the "Amortization
----------------- ------------
Date" under the Receivables Sale Agreement.
----
(v) Defaults Under Other Agreements. The occurrence of a
-------------------------------
default or an event of default under any other material financing
arrangement pursuant to which any Torchmark Entity is a debtor or an
obligor.
(vi) Downgrade of Torchmark Entities. Any downgrade in the
-------------------------------
claims-paying ability or the rating of any Indebtedness of any
Torchmark Entity by Standard and Poor's Ratings Group or by ▇▇▇▇▇'▇
Investors Service, Inc., setting forth the nature of such change.
15
(vii) Company Action Level Event. With respect to AIL, the
--------------------------
occurrence of a Company Action Level Event.
(c) Compliance with Laws and Preservation of Corporate Existence.
------------------------------------------------------------
Such Seller Party will comply in all respects with all applicable laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject except, in the case of the Servicer, where noncompliance would
not be reasonably likely to have a Material Adverse Effect. Such Seller Party
will 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
its business is conducted except, in the case of the Servicer, where the failure
to so qualify would not be reasonably likely to have a Material Adverse Effect.
Such Seller Party shall cause AIL to remain at all times duly qualified and
licensed as an insurance company in each state in which Receivables are
originated.
(d) Audits. Such Seller Party will furnish to the Agent from time to
------
time such information with respect to it and the Receivables as the Agent may
reasonably request. Such Seller Party will, from time to time during regular
business hours as requested by the Agent upon reasonable notice, permit the
Agent, or its agents or representatives, (i) to examine and make copies of and
abstracts from all Records in the possession or under the control of such Person
relating to the Receivables and the Related Security, including, without
limitation, the related Contracts, and (ii) to visit the offices and properties
of such Person for the purpose of examining such materials described in clause
(i) above, and to discuss matters relating to such Person's financial condition
or the Receivables and the Related Security or any Person's performance under
any of the Transaction Documents or any Person's performance under the Contracts
and, in each case, with any of the officers or employees of Seller or the
Servicer having knowledge of such matters.
(e) Keeping and Marking of Records and Books.
----------------------------------------
(i) The Servicer will maintain and implement administrative and
operating procedures (including, without limitation, an ability to
recreate records evidencing Receivables in the event of the destruction
of the originals thereof), and keep and maintain all documents, books,
records and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records
adequate to permit the immediate identification of each new Receivable
and all Collections of and adjustments to each existing Receivable). The
Servicer will give the Agent notice of any material change in the
administrative and operating procedures referred to in the previous
sentence.
(ii) Such Seller Party will (A) on or prior to the date hereof,
▇▇▇▇ its general ledger and master data processing records and other
books and records relating to the Purchaser Interests with a legend,
acceptable to the Agent, describing the Purchaser Interests and (B) upon
the request of the Agent (x) ▇▇▇▇
16
each Contract with a legend describing the Purchaser Interests and (y)
deliver to the Agent all Contracts (including, without limitation, all
multiple originals of any such Contract) relating to the Receivables.
(f) Compliance with Contracts and Credit and Collection Policy. Such
----------------------------------------------------------
Seller Party will timely and fully (i) perform and comply with all provisions,
covenants and other promises required to be observed by it under the Contracts
related to the Receivables, and (ii) comply in all respects with the Credit and
Collection Policy in regard to each Receivable and the related Contract. Seller
will pay when due any taxes payable in connection with the Receivables,
exclusive of taxes on or measured by income or gross receipts of PREFCO, the
Agent or any Financial Institution.
(g) Performance and Enforcement of Receivables Sale Agreement. Seller
---------------------------------------------------------
shall perform its obligations and undertakings under and pursuant to the
Receivables Sale Agreement, shall purchase Receivables thereunder in strict
compliance with the terms thereof and shall vigorously enforce the rights and
remedies accorded to Seller under the Receivables Sale Agreement. Seller shall
take all actions to protect, perfect and enforce its rights and interests (and
the rights and interests of the Agent and the Purchasers as assignees of Seller)
under the Receivables Sale Agreement as the Agent may from time to time
reasonably request, including, without limitation, making claims to which it may
--------- ------------------
be entitled under any indemnity, reimbursement or similar provision contained in
the Receivables Sale Agreement and requesting such information or such audits as
may be permitted under the Receivables Sale Agreement.
(h) Ownership. Seller shall take all necessary action to (i) vest
---------
legal and equitable title to the Receivables, the Related Security and the
Collections purchased under the Receivables Sale Agreement irrevocably in
Seller, free and clear of any Adverse Claims other than Adverse Claims in favor
of the Agent and the Purchasers (including, without limitation, the filing of
--------- ------------------
all financing statements or other similar instruments or documents necessary
under the UCC (or any comparable law) of all appropriate jurisdictions, and the
giving of notice to each Obligor and to each Policy Holder owing premiums in
respect of which Receivables shall have arisen, to perfect Seller's ownership
interest in such Receivables, Related Security and Collections, and such other
action to perfect, protect or more fully evidence the interest of Seller therein
as the Agent may reasonably request), and (ii) establish and maintain, in favor
of the Agent, for the benefit of the Purchasers, a valid and perfected first
priority undivided percentage ownership interest (and/or a valid and perfected
first priority security interest) in all Receivables, Related Security and
Collections to the full extent contemplated herein, free and clear of any
Adverse Claims other than Adverse Claims in favor of the Agent for the benefit
of the Purchasers (including, without limitation, the filing of all financing
--------- ------------------
statements or other similar instruments or documents necessary under the UCC (or
any comparable law) of all appropriate jurisdictions to perfect the Agent's (for
the benefit of the Purchasers) interest in such Receivables, Related Security
and Collections and such other action to perfect, protect or more fully evidence
the interest of the Agent for the benefit of the Purchasers as the Agent may
reasonably request). Seller shall, by not later than January 20, 2000, give or
cause AIL to give to each Obligor in respect of any Receivable then outstanding
notice as to the transfers of the interests in the Receivables contemplated in
the Transaction Documents, and at all times thereafter give or cause
AIL to give to each Obligor in respect of each Receivable then or thereafter
arising notice as to such interests for the purpose of perfecting such interests
in favor of Seller and the Agent. If at any ▇▇▇▇ ▇▇▇▇▇▇ shall fail to take any
actions required to be taken hereunder, or any additional actions as may have
been reasonably requested by the Agent (including, without limitation, the
giving of notice to each Obligor of the interests created under the Transaction
Documents in the Receivables), the Agent may, but shall not be required to, take
any such action.
(i) Purchasers' Reliance. Seller acknowledges that the Purchasers
--------------------
are entering into the transactions contemplated by this Agreement in reliance
upon Seller's identity as a legal entity that is separate from the other
Torchmark Entities. Therefore, from and after the date of execution and delivery
of this Agreement, Seller shall take all reasonable steps, including, without
limitation, all steps that the Agent or any Purchaser may from time to time
reasonably request, to maintain Seller's identity as a separate legal entity and
to make it manifest to third parties that Seller is an entity with assets and
liabilities distinct from those of the other Torchmark Entities and any
Affiliates thereof and not just a division of any other Torchmark Entity.
Without limiting the generality of the foregoing and in addition to the other
covenants set forth herein, Seller shall:
(A) conduct its own business in its own name and require that all
full-time employees of Seller, if any, identify themselves as such and not
as employees of any other Torchmark Entity (including, without limitation,
by means of providing appropriate employees with business or identification
cards identifying such employees as Seller's employees);
(B) compensate all employees, consultants and agents directly,
from Seller's bank accounts, for services provided to Seller by such
employees, consultants and agents and, to the extent any employee,
consultant or agent of Seller is also an employee, consultant or agent of
another Torchmark Entity, allocate the compensation of such employee,
consultant or agent between Seller and such Torchmark Entity on a basis
that reflects the services rendered to Seller and such Torchmark Entity;
(C) clearly identify its offices (by signage or otherwise) as its
offices and, if such office is located in the offices of any Torchmark
Entity, Seller shall lease such office at a fair market rent;
(D) have a separate telephone number, which will be answered only
in its name and separate stationery, invoices and checks in its own name;
(E) conduct all transactions with each other Torchmark Entity
strictly on an arm's-length basis, allocate all overhead expenses
(including, without limitation, telephone and other utility charges) for
items shared between Seller and each other Torchmark Entity on the basis of
actual use to the extent practicable and, to the extent such allocation is
not practicable, on a basis reasonably related to actual use;
18
(F) at all times have a Board of Directors consisting of three
or more members, at least one of which is an Independent Director;
(G) observe all corporate formalities as a distinct entity, and
ensure that all corporate actions relating to (A) the selection,
maintenance or replacement of the Independent Director on its board of
directors, (B) the dissolution or liquidation of Seller or (C) the
initiation of, participation in, acquiescence in or consent to any
bankruptcy, insolvency, reorganization or similar proceeding involving
Seller, are duly authorized by unanimous vote of its Board of Directors
(including the Independent Director);
(H) maintain Seller's books and records separate from those of
each other Torchmark Entity and otherwise readily identifiable as its own
assets rather than assets of any other Torchmark Entity;
(I) prepare its financial statements separately from those of
each other Torchmark Entity and insure that any consolidated financial
statements of the Torchmark Entities that include Seller and that are filed
with the Securities and Exchange Commission or any other governmental
agency have notes clearly stating that Seller is a separate corporate
entity and that its assets will be available first and foremost to satisfy
the claims of the creditors of Seller;
(J) except as herein specifically otherwise provided, maintain
the funds or other assets of Seller separate from, and not commingled with,
those of any other Torchmark Entity and only maintain bank accounts or
other depository accounts to which the Seller alone is the account party,
into which the Seller alone makes deposits and from which the Seller alone
(or the Agent hereunder) has the power to make withdrawals;
(K) pay all of Seller's operating expenses from the Seller's own
assets (except for certain payments by another Torchmark Entity or other
Persons pursuant to allocation arrangements that comply with the
requirements of this Section 7.1(i));
--------------
(L) operate its business and activities such that: it does not
engage in any business or activity of any kind, or enter into any
transaction or indenture, mortgage, instrument, agreement, contract, lease
or other undertaking, other than the transactions contemplated and
authorized by this Agreement and the Receivables Sale Agreement; and does
not create, incur, guarantee, assume or suffer to exist any indebtedness or
other liabilities, whether direct or contingent, other than (1) as a result
of the endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business, (2) the incurrence
of obligations under this Agreement, (3) the incurrence of obligations, as
expressly contemplated in the Receivables Sale Agreement, to make payment
to AIL thereunder for the purchase of Receivables from
19
AIL under the Receivables Sale Agreement, and (4) the incurrence of
operating expenses in the ordinary course of business of the type otherwise
contemplated by this Agreement;
(M) maintain its corporate charter and other organizational
documents in conformity with this Agreement, such that it does not amend,
restate, supplement or otherwise modify its Certificate of Incorporation or
By-laws in any respect that would impair its ability to comply with the
terms or provisions of any of the Transaction Documents, including, without
limitation, Section 7.1(i) of this Agreement;
--------------
(N) maintain the effectiveness of, and continue to perform under
the Receivables Sale Agreement and each of the other Transaction Documents
to which it is party, such that it does not amend, restate, supplement,
cancel, terminate or otherwise modify the Receivables Sale Agreement or any
other Transaction Document (whether or not Seller is party thereto), or
give or permit any consent, waiver, directive or approval thereunder or in
respect thereof or waive any default, action, omission or breach under the
Receivables Sale Agreement or any other Transaction Document or otherwise
grant any indulgence thereunder or in respect thereof, without (in each
case) the prior written consent of the Agent;
(O) maintain its corporate separateness such that it does not
merge or consolidate with or into, or convey, transfer, lease or otherwise
dispose of (whether in one transaction or in a series of transactions, and
except as otherwise contemplated herein) all or substantially all of its
assets (whether now owned or hereafter acquired) to, or acquire all or
substantially all of the assets of, any Person, nor at any time create,
have, acquire, maintain or hold any interest in any Subsidiary;
(P) maintain at all times the Required Capital Amount (as defined
in the Receivables Sale Agreement) and refrain from making any dividend,
distribution, redemption of capital stock or payment of any subordinated
indebtedness which would cause the Required Capital Amount to cease to be
so maintained; and
(Q) take such other actions as are necessary on its part to
ensure that the facts and assumptions set forth in the opinion issued by
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇, P.C., as counsel for Seller, in connection with the
closing and the initial purchase under this Agreement and relating to
substantive consolidation issues, and in the certificates accompanying such
opinion, remain true and correct in all material respects at all times.
(j) Collections. Such Seller Party shall direct each applicable
-----------
Torchmark Entity to remit all Collections received by such Torchmark Entity
directly to the Servicer for the benefit of the Agent and the Purchasers.
Immediately upon receipt by any Torchmark Entity of any premium payable by
or on behalf of the Policy Holder or any other Person in respect of the
Insurance Product that shall have given rise to any Receivable, such
Torchmark Entity shall be required to remit to the Servicer an amount
calculated in reference thereto that, in the ordinary course of business
and in accordance
20
with its customary practice, is then payable as a commission in respect of
such Insurance Product to the Obligor on such Receivable and which but for
the existence of such Receivable would be remitted to such Obligor. In the
event any payments relating to Receivables are remitted directly to Seller
or any Affiliate of Seller, Seller shall remit (or shall cause all such
payments to be remitted) directly to the Servicer, and at all times prior
to such remittance, Seller shall itself hold or, if applicable, shall cause
such payments to be held in trust for the exclusive benefit of the Agent
and the Purchasers. Seller shall maintain exclusive ownership, dominion and
control (subject to the terms of this Agreement) of each deposit account in
which any Collections are held and shall not grant the right to take
dominion and control of any such account except to the Agent on the demand
of the Agent. At any time following the occurrence of an Amortization
Event, the Agent may, at Seller's sole cost and expense, direct Seller to
notify, or to cause AIL to notify, the Obligors (including Obligors that
are guarantors) of Receivables and all Policy Holders owing premiums in
respect of which any Receivables shall have arisen of the ownership
interests of the Agent and the Purchasers under this Agreement and may also
direct that payments of all amounts due or that become due under any or all
Receivables or Related Security be made directly to the Agent (or its
respective designee) or to a lockbox or collection account designated by
the Agent.
(k) Taxes. Such Seller Party shall file all tax returns and
-----
reports required by law to be filed by it and shall promptly pay all taxes
and governmental charges at any time due and payable; provided that in the
--------
case of the Servicer, the Servicer shall not be required to pay any such
taxes which are being diligently contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with generally
accepted accounting principles shall have been set aside on its books.
(l) Net Worth. Seller shall at all times maintain net
---------
worth in an amount not less than $3,000,000.
Section 7.2 Negative Covenants of the Seller Parties . Until the
----------------------------------------
date on which the Aggregate Unpaids have been indefeasibly paid in full and this
Agreement terminates in accordance with its terms, each Seller Party hereby
covenants, that:
(a) Name Change, Offices and Records. Such Seller Party
--------------------------------
will not (and will not permit AIL to) change its name, identity or corporate
structure (within the meaning of Section 9-402(7) of any applicable enactment of
the UCC) or relocate its chief executive office or any office where Records are
kept unless it shall have: (i) given the Agent at least forty-five (45) days'
prior written notice thereof and (ii) delivered to the Agent all financing
statements, instruments and other documents requested by the Agent in connection
with such change or relocation.
(b) Change in Payment Instructions to Obligors. Such Seller
------------------------------------------
Party will not make (or permit AIL to make) any change in the instructions to
Obligors regarding payments to be made on any Receivable without the prior
written consent of the Agent.
21
(c) Modifications to Contracts and Credit and Collection Policy.
-----------------------------------------------------------
Such Seller Party will not make (or permit AIL to make) any change to the Credit
and Collection Policy that could adversely affect the collectibility of the
Receivables or decrease the credit quality of any newly created Receivables.
Except as provided in Section 8.2(d), the Servicer will not, and will not
--------------
extend, amend or otherwise modify the terms of any Receivable or any Contract
related thereto other than in accordance with the Credit and Collection Policy.
(d) Sales, Liens. Seller shall not sell, assign (by operation
------------
of law or otherwise) or otherwise dispose of, or grant any option with respect
to, or create or suffer to exist any Adverse Claim upon (including, without
limitation, the filing of any financing statement) or with respect to, any
Receivable, Related Security or Collections, or upon or with respect to any
Contract under which any Receivable arises, or any deposit account in which
Collections may be held, or assign any right to receive income with respect
thereto (other than, in each case, the creation of the interests therein in
favor of the Agent and the Purchasers provided for herein), and Seller shall
defend the right, title and interest of the Agent and the Purchasers in, to and
under any of the foregoing property, against all claims of third parties
claiming through or under Seller or AIL.
(e) Net Receivables Balance. At no time prior to the Amortization
-----------------------
Date shall Seller permit the Net Receivables Balance to be less than the
aggregate Capital of all the Purchaser Interests at such time.
(f) Amortization Date Determination. Seller shall not designate
-------------------------------
or permit the designation of an Amortization Date (as defined in the Receivables
Sale Agreement), or send any written notice to AIL in respect thereof, without
the prior written consent of the Agent, except with respect to the occurrence of
such Amortization Date arising pursuant to Section 5.1(d) of the Receivables
Sale Agreement.
(g) Change in Subordinated Note. Seller shall not amend, modify
---------------------------
(by course of conduct or otherwise) or terminate the Subordinated Note without
the prior written consent of the Agent.
ARTICLE VIII
ADMINISTRATION AND COLLECTION
Section 8.1 Designation of Servicer. (a) The servicing, administration
-----------------------
and collection of the Receivables shall be conducted by such Person (the
"Servicer") so designated from time to time in accordance with this
--------
Section 8.1. AIL is hereby designated as, and hereby agrees to perform the
-----------
duties and obligations of, the Servicer pursuant to the terms of this Agreement.
The Agent may, at any time following the occurrence of an Amortization Event,
designate as Servicer any Person to succeed AIL or any successor Servicer.
(b) Without the prior written consent of the Agent and the
Required Financial Institutions, AIL shall not be permitted to delegate any of
its duties or responsibilities as Servicer to any Person other than, with
respect to certain Charged-Off Receivables, outside
22
collection agencies in accordance with its customary practices. If at any time
the Agent shall designate as Servicer any Person other than AIL, all duties and
responsibilities theretofore delegated by AIL to a subservicer may, at the
discretion of the Agent, be terminated forthwith on notice given by the Agent to
AIL and to Seller.
(c) Notwithstanding the foregoing subsection (b), (i) AIL shall be
and remain primarily liable to the Agent and the Purchasers for the full and
prompt performance of all duties and responsibilities of the Servicer hereunder
and (ii) the Agent and the Purchasers shall be entitled to deal exclusively with
AIL in matters relating to the discharge by the Servicer of its duties and
responsibilities hereunder. The Agent and the Purchasers shall not be required
to give notice, demand or other communication to any Person other than AIL in
order for communication to the Servicer and its sub-servicer or other delegate
with respect thereto to be accomplished. AIL, at all times that it is the
Servicer, shall be responsible for providing any sub-servicer or other delegate
of the Servicer with any notice given to the Servicer under this Agreement.
Section 8.2 Duties of Servicer. (a) The Servicer shall take or
------------------
cause to be taken all such actions as may be necessary or advisable to collect
each 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) The Servicer will handle all Collections in a manner
consistent with the terms hereof and as the Agent may otherwise reasonably
request. The Servicer shall, if requested by the Agent at any time following the
occurrence of an Amortization Event, (i) establish such accounts as the Agent
may reasonably request for the remittance of Collections and the remittance of
premiums on Insurance Products in respect of which a Receivable shall have
arisen as an advance on the commissions payable in connection with such
Insurance Product, and (ii) thereafter instruct each Obligor to make payments on
Receivables directly to such accounts.
(c) The Servicer shall administer the Collections in accordance
with the procedures described herein and in Article II. The Servicer shall set
----------
aside and hold in trust for the account of Seller and the Purchasers their
respective shares of the Collections of Receivables in accordance with Article
-------
II. The Servicer shall, upon the request of the Agent at any time, segregate, in
--
a manner acceptable to the Agent, all cash, checks and other instruments
received by it from time to time constituting Collections from the general funds
of the Servicer or Seller prior to the remittance thereof in accordance with
Article II. If the Servicer shall be required to segregate Collections pursuant
-------
to the preceding sentence, the Servicer shall segregate and deposit with a bank
designated by the Agent such allocable share of Collections of Receivables set
aside for the Purchasers on the first Business Day following receipt by the
Servicer of such Collections, duly endorsed or with duly executed instruments of
transfer.
(d) The Servicer shall not extend the maturity of any Receivable
or adjust the Outstanding Balance of any Receivable other than in accordance
with the Credit and Collection Policy. The Servicer shall have the absolute and
unlimited right to commence or
23
settle any legal action with respect to any Receivable or to foreclose upon or
repossess any Related Security.
(e) The Servicer shall hold in trust for Seller and the
Purchasers all Records that (i) evidence or relate to the Receivables, the
related Contracts and Related Security or (ii) are otherwise necessary or
desirable to collect the Receivables and shall, as soon as practicable upon
demand of the Agent at any time, deliver or make available to the Agent all such
Records, at a place selected by the Agent. The Servicer shall, as soon as
practicable following receipt thereof turn over to Seller any cash collections
or other cash proceeds received with respect to Indebtedness not constituting
Receivables. The Servicer shall, from time to time at the reasonable request of
the Agent, furnish to the Agent (as promptly as possible after any such request)
a calculation of the amounts set aside for the Purchasers pursuant to Article
-------
II.
--
(f) Any payment (i) by an Obligor in respect of any
indebtedness owed by it to AIL or Seller or (ii) constituting a premium on an
Insurance Product in respect of which an advance giving rise to a Receivable
shall have been made in anticipation of the receipt of such premium, shall,
except as otherwise specified by such Obligor or Policy Holder or as otherwise
required by contract or law, and unless otherwise instructed by the Agent, be
applied as a Collection of any Receivable of the related Obligor (starting with
the oldest such Receivable) to the extent of any amounts then due and payable
thereunder before being applied to any other receivable or other obligation.
Section 8.3 Collection Rights. Seller hereby authorizes the Agent,
-----------------
and agrees that the Agent shall be entitled to (i) endorse Seller's name on
checks and other instruments representing Collections, (ii) enforce the
Receivables, the related Contracts and the Related Security and (iii) take such
action as shall be necessary or desirable to cause all cash, checks and other
instruments constituting Collections of Receivables to come into the possession
of the Agent rather than Seller.
Section 8.4 Responsibilities of Seller. Anything herein to the
--------------------------
contrary notwithstanding, the exercise by the Agent and the Purchasers of their
rights hereunder shall not release the Servicer, AIL or Seller from any of their
duties or obligations with respect to any Receivables or under the related
Contracts. The Purchasers shall have no obligation or liability with respect to
any Receivables or related Contracts, nor shall any of them be obligated to
perform the obligations of Seller.
Section 8.5 Reports. The Servicer shall prepare and forward to the
-------
Agent (i) on the 10th day of each month (or, if such day is not a Business Day,
the next following day that is a Business Day) and at such other times as the
Agent shall reasonably request, a Monthly Report, which Monthly Report shall set
forth the relevant information in respect of the calendar month then most
recently ended, and (ii) at such times as the Agent shall reasonably request, a
listing by Obligor of all Receivables.
Section 8.6 Servicing Fees. In consideration of AIL's agreement to
--------------
act as Servicer hereunder, Seller hereby agrees that, so long as AIL shall
continue to perform as
24
Servicer hereunder, Seller shall pay AIL a fee (the "Servicing Fee") equal to
-------------
1/2 of 1% per annum of the average aggregate amount of outstanding Capital as
compensation for its servicing activities, which fee shall be payable monthly,
in arrears, on each Settlement Date in respect of the calendar month then most
recently ended. From and after the replacement of AIL as Servicer hereunder,
Seller shall pay all reasonable fees and expenses of the Person then acting as
Servicer hereunder, such fees and expenses to be paid on each Settlement Date or
at such other times as shall be acceptable to the Agent.
ARTICLE IX
AMORTIZATION EVENTS
Section 9.1 Amortization Events. The occurrence of any one or more
-------------------
of the following events shall constitute an Amortization Event:
(a) Any of the following shall occur:
(i) any Seller Party shall fail to make any payment or deposit
required hereunder when due; or
(ii) the Servicer shall fail to perform or observe any term,
covenant or agreement hereunder (other than as referred to in clause
(i) above) and such failure shall continue for five (5) consecutive
Business Days; or
(iii) Seller shall fail to perform or observe any term, covenant
or agreement set forth in Section 7.1(b)(i), Section 7.1(h), Section
----------------- -------------- -------
7.1(i)(L), (M) or (P), Section 7.1(l) or Section 7.2 and such failure
--------- --- --- -------------- -----------
shall continue for three (3) consecutive Business Days; or
(iv) Seller shall fail to perform or observe any term, covenant
or agreement hereunder (other than as referred to in any of the
foregoing clauses) and such failure shall continue for fifteen (15)
consecutive days.
(b) Any representation, warranty, certification or statement made by
any Torchmark Entity in this Agreement, any other Transaction Document or in any
other document delivered pursuant hereto or thereto shall prove to have been
incorrect in any material respect when made or deemed made.
(c) Any of the following shall occur:
(i) the failure of Seller to pay any Indebtedness when due; or
the default by Seller in the performance of any term, provision or
conditions contained in any agreement under which any Indebtedness was
created or is governed, or any other event shall occur or condition
exist, the effect of which is to cause, or to permit the holder or
holders of such Indebtedness to cause, such Indebtedness to become due
prior to its stated maturity; or any Indebtedness of Seller shall be
declared to
25
be due and payable or required to be prepaid (other than by a
regularly scheduled payment) prior to the stated maturity thereof; or
(ii) the failure of Torchmark or any of its Subsidiaries
(including AIL) to pay when due any Indebtedness in excess of, singly
or in the aggregate for all such Subsidiaries, $10,000,000; or the
default by Torchmark or any of such Subsidiaries in the performance of
any term, provision or conditions contained in any agreement under
which any such Indebtedness was created or is governed, or any other
event shall occur or condition exist, the effect of which is to cause,
or to permit the holder or holders of such Indebtedness to cause, such
Indebtedness to become due prior to its stated maturity; or any such
Indebtedness of Torchmark or any such Subsidiary shall be declared to
be due and payable or required to be prepaid (other than by a
regularly scheduled payment) prior to the stated maturity thereof; or
(iii) any event or condition shall have occurred or exist which
would constitute a default under the Torchmark Credit Agreement (the
terms of which are incorporated herein by this reference thereto, and
shall remain in effect for purposes of this Agreement at all times
during the term of this Agreement without regard to whether the
Torchmark Credit Agreement shall then be in effect).
(d) (i) Any Torchmark Entity shall generally not pay its debts as
such debts become due or shall admit in writing its inability to pay its debts
generally or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against any Torchmark Entity seeking to
adjudicate it bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, receivership, arrangement, adjustment, protection, relief or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee or other similar official for
it or any substantial part of its property or (ii) any Torchmark Entity shall
take any corporate action to authorize any of the actions set forth in clause
(i) above in this subsection (d).
(e) The aggregate Purchaser Interests shall exceed 100% and shall
continue as such until the earliest to occur of (i) five (5) Business Days
following the date any Seller Party has actual knowledge thereof, (ii) two (2)
Business Days after demand in respect thereof shall have been made under the
Performance Guaranty and (iii) the next Settlement Date.
(f) A Change of Control shall occur.
(g) One or more final judgments for the payment of money shall be
entered against (i) Seller, (ii) AIL, in excess of $10,000,000 singly or in the
aggregate, or (iii) Torchmark, in excess of $25,000,000 singly or in the
aggregate, in each case on claims not covered by insurance or as to which the
insurance carrier has denied its responsibility, and such judgment shall
continue unsatisfied and in effect for fifteen (15) consecutive days without
being
26
stayed on appeal or otherwise being appropriately contested in good faith by
such Torchmark Entity.
(h) An "Amortization Event" shall for any reason occur under and as
------------------
defined in the Receivables Sale Agreement, or AIL shall for any reason cease to
transfer, or cease to have the legal capacity to transfer, or otherwise be
incapable of transferring Receivables under the Receivables Sale Agreement.
(i) Any Transaction Document shall terminate in whole or in part
(except in accordance with its terms), or shall cease to be effective or to be
the legally valid, binding and enforceable obligation of Seller, AIL, Torchmark
or the Servicer, as applicable; or any Torchmark Entity, or Obligors in respect
of more than 10% of the Net Receivables Balance, shall directly or indirectly
contest in any manner such effectiveness, validity, binding nature or
enforceability; or the Agent for the benefit of the Purchasers shall cease to
have a valid and perfected first priority security interest in the Receivables,
the Related Security and the Collections with respect thereto.
(j) At any time, with respect to AIL, a Regulatory Action Level Event
shall occur.
(k) At any time, with respect to AIL, a Regulatory Control Event shall
occur.
(l) AIL shall assert the invalidity or unenforceability of any term
or provision relating to the subordination in right of payment of any
indebtedness owing to AIL by Seller to the indebtedness and obligations owing to
the Purchasers and the Agent by Seller.
(m) Torchmark shall assert the invalidity or unenforceability of any
term or provision of the Performance Guaranty, or shall at any time default in
the payment or performance of any of its obligations thereunder.
Section 9.2 Remedies. Upon the occurrence and during the
--------
continuation of an Amortization Event, the Agent may, or upon the direction of
the Required Financial Institutions shall, take any of the following actions:
(i) replace the Person then acting as Servicer, (ii) declare the Amortization
Date to have occurred, whereupon the Amortization Date shall forthwith occur,
without demand, protest or further notice of any kind, all of which are hereby
expressly waived by each Seller Party; provided, however, that upon the
--------
occurrence of an Amortization Event described in Section 9.1(d), or of an actual
--------------
or deemed entry of an order for relief with respect to any Seller Party under
the Federal Bankruptcy Code, the Amortization Date shall automatically occur,
without demand, protest or any notice of any kind, all of which are hereby
expressly waived by each Seller Party, and (iii) to the fullest extent permitted
by applicable law, declare that the Default Fee shall accrue with respect to any
of the Aggregate Unpaids outstanding at such time. The aforementioned rights and
remedies shall be in addition to all other rights and remedies of the Agent and
the Purchasers available under this Agreement, by operation of law, at equity or
otherwise, all of which are hereby expressly reserved, including, without
limitation, all rights and remedies provided under the UCC, all of which rights
shall be cumulative.
27
ARTICLE X
INDEMNIFICATION
Section 10.1 Indemnities by the Seller Parties. Without limiting
---------------------------------
any other rights that the Agent or any Purchaser may have hereunder or under
applicable law, (A) Seller hereby agrees to indemnify the Agent and each
Purchaser and their respective assigns, officers, directors, agents and
employees (each an "Indemnified Party") from and against any and all damages,
-----------------
losses, claims, taxes, liabilities, costs, expenses and for all other amounts
payable, including reasonable attorneys' fees (which attorneys may be employees
of the Agent or such Purchaser) and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded against or incurred
-------------------
by any of them arising out of or as a result of this Agreement or the
acquisition, either directly or indirectly, by a Purchaser of an interest in the
Receivables, and (B) the Servicer hereby agrees to indemnify each Indemnified
Party for Indemnified Amounts awarded against or incurred by any of them arising
out of the Servicer's activities as Servicer hereunder excluding, however, in
all of the foregoing instances under the preceding clauses (A) and (B):
(i) Indemnified Amounts to the extent a final judgment of a
court of competent jurisdiction holds that such Indemnified Amounts
resulted from gross negligence or willful misconduct on the part of the
Indemnified Party seeking indemnification;
(ii) Indemnified Amounts to the extent the same includes losses
in respect of Receivables that are uncollectible on account of the
insolvency, bankruptcy or lack of creditworthiness of the related Obligor;
or
(iii) taxes imposed by the jurisdiction in which such
Indemnified Party's principal executive office is located, on or measured
by the overall net income of such Indemnified Party to the extent that the
computation of such taxes is consistent with the characterization for
income tax purposes of the acquisition by the Purchasers of Purchaser
Interests as a loan or loans by the Purchasers to Seller secured by the
Receivables, the Related Security and the Collections;
provided, however, that nothing contained in this sentence shall limit the
--------- --------
liability of any Seller Party or limit the recourse of the Purchasers to any
Seller Party for amounts otherwise specifically provided to be paid by such
Seller Party under the terms of this Agreement. Without limiting the generality
of the foregoing indemnification, Seller shall indemnify the Agent and the
Purchasers for Indemnified Amounts (including, without limitation, losses in
respect of uncollectible receivables for matters specifically described below,
regardless of whether reimbursement therefor would constitute recourse to Seller
or the Servicer) relating to or resulting from:
(i) any representation or warranty made by any Torchmark Entity
(or any officers of any such Person) under or in connection with this
Agreement, any other
28
Transaction Document or any other information or report delivered by any
such Person pursuant hereto or thereto, which shall have been false or
incorrect when made or deemed made;
(ii) the failure by any Torchmark Entity to comply with any
applicable law, rule, regulation, agreement (including any confidentiality
agreement), order, writ, judgment, injunction, decree or award, including
with respect to any Receivable or Contract related thereto, or the
nonconformity of any Receivable or Contract included therein with any such
applicable law, rule or regulation or any failure of any Torchmark Entity
to keep or perform any of its obligations, express or implied, with respect
to any Contract;
(iii) any failure of any Torchmark Entity to perform its duties,
covenants or other obligations in accordance with the provisions of this
Agreement or any other Transaction Document;
(iv) any products liability or similar claim arising out of or
in connection with merchandise, insurance or services that are the subject
of any Contract;
(v) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment of
any Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with its
terms), or any other claim resulting from the sale of the merchandise or
service related to such Receivable or the furnishing or failure to furnish
such merchandise or services;
(vi) the commingling of Collections of Receivables at any time
with other funds;
(vii) any investigation, litigation or proceeding related to or
arising from this Agreement or any other Transaction Document, the
transactions contemplated hereby, the use of the proceeds of a purchase,
the ownership of the Purchaser Interests or any other investigation,
litigation or proceeding relating to any Torchmark Entity in which any
Indemnified Party becomes involved as a result of any of the transactions
contemplated hereby;
(viii) any inability to litigate any claim against any Obligor
in respect of any Receivable as a result of such Obligor being immune from
civil and commercial law and suit on the grounds of sovereignty or
otherwise from any legal action, suit or proceeding;
(ix) any Amortization Event described in Section 9.1(d);
---------------
29
(x) any failure of Seller to acquire and maintain legal and
equitable title to, and ownership of any Receivable and the Related
Security and Collections with respect thereto, free and clear of any
Adverse Claim (other than as created hereunder); or any failure of Seller
to give reasonably equivalent value to AIL under the Receivables Sale
Agreement in consideration of the transfer by AIL of any Receivable, or any
attempt by any Person to void such transfer under statutory provisions or
common law or equitable action;
(xi) any failure to vest and maintain vested in the Agent and
the Purchasers, or to transfer to the Agent and the Purchasers, legal and
equitable title to, and ownership of, a first priority undivided percentage
ownership (to the extent of the Purchaser Interests contemplated hereunder)
in the Receivables, the Related Security and the Collections, free and
clear of any Adverse Claim;
(xii) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under the
UCC of any applicable jurisdiction or other applicable laws with respect to
any Receivable, the Related Security and Collections with respect thereto,
and the proceeds of any thereof, whether at the time of any Incremental
Purchase or Reinvestment or at any subsequent time;
(xiii) any action or omission by any Torchmark Entity which
reduces or impairs the rights of the Agent or the Purchasers with respect
to any Receivable or the value of any such Receivable;
(xiv) any action or omission by any Insurance Agent or any
member of an Agent-Hierarchy which (A) reduces or impairs the rights of
the Agent or the Purchasers with respect to any Receivable or the value of
any such Receivable and (B) does not entail the commencement by such
Insurance Agent or member of any bankruptcy or insolvency proceeding or any
other action or omission (including any failure to pay) by reason of the
lack of creditworthiness or ability to pay on the part of such Insurance
Agent or Agent-Hierarchy;
(xv) any attempt by any Person to void any Incremental Purchase
or Reinvestment hereunder under statutory provisions or common law or
equitable action; and
(xvi) the Year 2000 Problem.
Section 10.2 Increased Cost and Reduced Return. If after the date
---------------------------------
hereof, any Funding Source shall be charged any fee, expense or increased cost
on account of the adoption of any applicable law, rule or regulation (including
any applicable law, rule or regulation regarding capital adequacy) or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency: (i) that subjects any Funding Source to any
charge or withholding on or with respect to any Funding Agreement or a Funding
Source's obligations under a Funding Agreement, or on or with respect to the
Receivables, or changes the basis of taxation of payments to any Funding Source
of any
30
amounts payable under any Funding Agreement (except for changes in the rate of
tax on the overall net income of a Funding Source) or (ii) that imposes,
modifies or deems applicable any reserve, assessment, insurance charge, special
deposit or similar requirement against assets of, deposits with or for the
account of a Funding Source, or credit extended by a Funding Source pursuant to
a Funding Agreement or (iii) that imposes any other condition the result of
which is to increase the cost to a Funding Source of performing its obligations
under a Funding Agreement, or to reduce the rate of return on a Funding Source's
capital as a consequence of its obligations under a Funding Agreement, or to
reduce the amount of any sum received or receivable by a Funding Source under a
Funding Agreement or to require any payment calculated by reference to the
amount of interests or loans held or interest received by it, then, upon demand
by the Agent, Seller shall pay to the Agent, for the benefit of the relevant
Funding Source, such amounts charged to such Funding Source or compensate such
Funding Source for such reduction.
Section 10.3 Other Costs and Expenses. (a) Seller shall pay to the
------------------------
Agent and PREFCO on demand all costs and out-of-pocket expenses in connection
with the preparation, execution, delivery and administration of the Transaction
Documents, the transactions contemplated hereby and the other documents to be
delivered hereunder, including without limitation, the cost (subject to Section
-------
10.3(b) below) of PREFCO's auditors auditing the books, records and procedures
-------
of Seller, reasonable fees and out-of-pocket expenses of legal counsel for
PREFCO and the Agent (which such counsel may be employees of PREFCO or the
Agent) with respect thereto and with respect to advising PREFCO and the Agent as
to their respective rights and remedies under this Agreement. Seller shall pay
to the Agent on demand any and all costs and expenses of the Agent and the
Purchasers, if any, including reasonable counsel fees and expenses in connection
with the enforcement of this Agreement and the other documents delivered
hereunder and in connection with any restructuring or workout of this Agreement
or such documents, or the administration of this Agreement following an
Amortization Event. Seller shall reimburse PREFCO on demand for all other costs
and expenses incurred by PREFCO ("Other Costs"), including, without limitation,
-----------
the cost of auditing PREFCO's books by certified public accountants, the cost of
rating the Commercial Paper by independent financial rating agencies, and the
reasonable fees and out-of-pocket expenses of counsel for PREFCO or any counsel
for any shareholder of PREFCO with respect to advising PREFCO or such
shareholder as to matters relating to PREFCO's operations.
(b) The cost and expense of an outside auditor at any time engaged by
the Agent or PREFCO to conduct an audit of the books, records and procedures of
Seller and the Torchmark Entities, whether pursuant to Section 7.1(d) hereof or
--------------
otherwise, shall be borne by Seller, and Seller shall promptly reimburse the
Agent therefor upon demand of the Agent.
Section 10.4 Allocations. PREFCO shall allocate the liability for
-----------
Other Costs among Seller and other Persons with whom PREFCO has entered into
agreements to purchase interests in receivables ("Other Sellers"). If any Other
-------------
Costs are attributable to Seller and not attributable to any Other Seller,
Seller shall be solely liable for such Other Costs. However, if Other Costs are
attributable to Other Sellers and not attributable to Seller, such Other Sellers
shall be solely liable for such Other Costs. All allocations to be made
pursuant to the foregoing
31
provisions of this Article X shall be made by PREFCO in its sole discretion and
------
shall be binding on Seller and the Servicer.
ARTICLE XI
THE AGENT
Section 11.1 Authorization and Action. Each Purchaser hereby
------------------------
designates and appoints Bank One to act as its agent hereunder and under each
other Transaction Document, and authorizes the Agent to take such actions as
agent on its behalf and to exercise such powers as are delegated to the Agent by
the terms of this Agreement and the other Transaction Documents together with
such powers as are reasonably incidental thereto. The Agent shall not have any
duties or responsibilities, except those expressly set forth herein or in any
other Transaction Document, or any fiduciary relationship with any Purchaser,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities on the part of the Agent shall be read into this Agreement or any
other Transaction Document or otherwise exist for the Agent. In performing its
functions and duties hereunder and under the other Transaction Documents, the
Agent shall act solely as agent for the Purchasers and does not assume nor shall
be deemed to have assumed any obligation or relationship of trust or agency with
or for any Torchmark Entity or any of such Torchmark Entity's successors or
assigns. The Agent shall not be required to take any action that exposes the
Agent to personal liability or that is contrary to this Agreement, any other
Transaction Document or applicable law. The appointment and authority of the
Agent hereunder shall terminate upon the indefeasible payment in full of all
Aggregate Unpaids. Each Purchaser hereby authorizes the Agent to execute each
of the Uniform Commercial Code financing statements on behalf of such Purchaser
(the terms of which shall be binding on such Purchaser).
Section 11.2 Delegation of Duties. The Agent may execute any of
--------------------
its duties under this Agreement and each other Transaction Document by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
Section 11.3 Exculpatory Provisions. Neither the Agent nor any of
----------------------
its directors, officers, agents or employees shall be (i) liable for any action
lawfully taken or omitted to be taken by it or them under or in connection with
this Agreement or any other Transaction Document (except for its, their or such
Person's own gross negligence or willful misconduct), or (ii) responsible in any
manner to any of the Purchasers for any recitals, statements, representations or
warranties made by any Torchmark Entity contained in this Agreement, any other
Transaction Document or any certificate, report, statement or other document
referred to or provided for in, or received under or in connection with, this
Agreement, or any other Transaction Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement, or
any other Transaction Document or any other document furnished in connection
herewith or therewith, or for any failure of any Torchmark Entity to perform its
obligations hereunder or thereunder, or for the satisfaction of any condition
specified in Article VI, or for the perfection, priority, condition, value or
----------
sufficiency of any collateral
32
pledged in connection herewith. The Agent shall not be under any obligation to
any Purchaser to ascertain or to inquire as to the observance or performance of
any of the agreements or covenants contained in, or conditions of, this
Agreement or any other Transaction Document, or to inspect the properties, books
or records of the Torchmark Entities. The Agent shall not be deemed to have
knowledge of any Amortization Event or Potential Amortization Event unless the
Agent has received notice from Seller or a Purchaser.
Section 11.4 Reliance by Agent. The Agent shall in all cases be
-----------------
entitled to rely, and shall be fully protected in relying, upon any document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel, independent accountants and other experts selected by the Agent.
The Agent shall in all cases be fully justified in failing or refusing to take
any action under this Agreement or any other Transaction Document unless it
shall first receive such advice or concurrence of PREFCO or the Required
Financial Institutions or all of the Purchasers, as applicable, as it deems
appropriate and it shall first be indemnified to its satisfaction by the
Purchasers, provided that unless and until the Agent shall have received such
--------
advice, the Agent may take or refrain from taking any action, as the Agent shall
deem advisable and in the best interests of the Purchasers. The Agent shall in
all cases be fully protected in acting, or in refraining from acting, in
accordance with a request of PREFCO or the Required Financial Institutions or
all of the Purchasers, as applicable, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Purchasers.
Section 11.5 Non-Reliance on Agent and Other Purchasers. Each
------------------------------------------
Purchaser expressly acknowledges that neither the Agent, nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has made
any representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of any Seller
Party, shall be deemed to constitute any representation or warranty by the
Agent. Each Purchaser represents and warrants to the Agent that it has and
will, independently and without reliance upon the Agent or any other Purchaser
and based on such documents and information as it has deemed appropriate, made
its own appraisal of and investigation into the business, operations, property,
prospects, financial and other conditions and creditworthiness of Seller and
made its own decision to enter into this Agreement, the other Transaction
Documents and all other documents related hereto or thereto.
Section 11.6 Reimbursement and Indemnification. The Financial
---------------------------------
Institutions agree to reimburse and indemnify the Agent and its officers,
directors, employees, representatives and agents ratably according to their Pro
Rata Shares, to the extent not paid or reimbursed by the Seller Parties (i) for
any amounts for which the Agent, acting in its capacity as Agent, is entitled to
reimbursement by the Seller Parties hereunder and (ii) for any other expenses
incurred by the Agent, in its capacity as Agent and acting on behalf of the
Purchasers, in connection with the administration and enforcement of this
Agreement and the other Transaction Documents.
Section 11.7 Agent in its Individual Capacity. The Agent and its
--------------------------------
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with any
33
Torchmark Entity or any Affiliate thereof as though the Agent were not the Agent
hereunder. With respect to the acquisition of Purchaser Interests pursuant to
this Agreement, the Agent shall have the same rights and powers under this
Agreement in its individual capacity as any Purchaser and may exercise the same
as though it were not the Agent, and the terms "Financial Institution,"
---------------------
"Purchaser," "Financial Institutions" and "Purchasers" shall include the Agent
---------- ---------------------- ----------
in its individual capacity.
Section 11.8 Successor Agent. The Agent may, upon five days'
---------------
notice to Seller and the Purchasers, and the Agent will, upon the direction of
all of the Purchasers (other than the Agent, in its individual capacity) resign
as Agent. If the Agent shall resign, then the Required Financial Institutions
during such five-day period shall appoint from among the Purchasers a successor
agent. If for any reason no successor Agent is appointed by the Required
Financial Institutions during such five-day period, then effective upon the
termination of such five day period, the Purchasers shall perform all of the
duties of the Agent hereunder and under the other Transaction Documents and
Seller and the Servicer (as applicable) shall make all payments in respect of
the Aggregate Unpaids directly to the applicable Purchasers and for all purposes
shall deal directly with the Purchasers. After the effectiveness of any
retiring Agent's resignation hereunder as Agent, the retiring Agent shall be
discharged from its duties and obligations hereunder and under the other
Transaction Documents and the provisions of this Article XI and Article X shall
---------- ---------
continue in effect for its benefit with respect to any actions taken or omitted
to be taken by it while it was Agent under this Agreement and under the other
Transaction Documents.
ARTICLE XII
ASSIGNMENTS; PARTICIPATIONS
Section 12.1 Assignments. (a) Seller and each Financial Institution
-----------
hereby agree and consent to the complete or partial assignment by PREFCO of all
or any portion of its rights under, interest in, title to and obligations under
this Agreement to the Financial Institutions pursuant to Section 13.1 or to any
------------
other Person, and upon such assignment, PREFCO shall be released from its
obligations so assigned. Further, Seller and each Financial Institution hereby
agree that any assignee of PREFCO of this Agreement or all or any of the
Purchaser Interests of PREFCO shall have all of the rights and benefits under
this Agreement as if the term "PREFCO" explicitly referred to such party, and no
------
such assignment shall in any way impair the rights and benefits of PREFCO
hereunder. Neither the Seller nor the Servicer shall have the right to assign
its rights or obligations under this Agreement.
(b) Any Financial Institution may at any time and from time to
time assign to one or more Persons ("Purchasing Financial Institutions") all or
---------------------------------
any part of its rights and obligations under this Agreement pursuant to an
assignment agreement, substantially in the form set forth in Exhibit V hereto
---------
(the "Assignment Agreement") executed by such Purchasing Financial Institution
--------------------
and such selling Financial Institution. The consent of PREFCO shall be required
prior to the effectiveness of any such assignment. Each assignee of a Financial
Institution must have a short-term debt rating of A-1 or better by Standard &
Poor's Ratings Group and P-1 by ▇▇▇▇▇'▇ Investor Service, Inc. and must agree to
deliver to the Agent, promptly following any request therefor by the Agent or
PREFCO, an enforceability opinion in
34
form and substance satisfactory to the Agent and PREFCO. Upon delivery of the
executed Assignment Agreement to the Agent, such selling Financial Institution
shall be released from its obligations hereunder to the extent of such
assignment. Thereafter the Purchasing Financial Institution shall for all
purposes be a Financial Institution party to this Agreement and shall have all
the rights and obligations of a Financial Institution under this Agreement to
the same extent as if it were an original party hereto and no further consent or
action by Seller, the Purchasers or the Agent shall be required.
(c) Each of the Financial Institutions agrees that in the event that
it shall cease to have a short-term debt rating of A-1 or better by Standard &
Poor's Ratings Group and P-1 by ▇▇▇▇▇'▇ Investor Service, Inc. (an "Affected
--------
Financial Institution"), such Affected Financial Institution shall be obliged,
---------------------
at the request of PREFCO or the Agent, to assign all of its rights and
obligations hereunder to (x) another Financial Institution or (y) another
funding entity nominated by the Agent and acceptable to PREFCO, and willing to
participate in this Agreement through the Liquidity Termination Date in the
place of such Affected Financial Institution; provided that the Affected
--------
Financial Institution receives payment in full, pursuant to an Assignment
Agreement, of an amount equal to such Financial Institution's Pro Rata Share of
the Capital and Yield owing to the Financial Institutions and all accrued but
unpaid fees and other costs and expenses payable in respect of its Pro Rata
Share of the Purchaser Interests of the Financial Institutions.
Section 12.2 Participations. Any Financial Institution may, in the
--------------
ordinary course of its business at any time sell to one or more Persons (each a
"Participant") participating interests in its Pro Rata Share of the Purchaser
-----------
Interests of the Financial Institutions, its obligation to pay PREFCO its
Acquisition Amounts or any other interest of such Financial Institution
hereunder. Notwithstanding any such sale by a Financial Institution of a
participating interest to a Participant, such Financial Institution's rights and
obligations under this Agreement shall remain unchanged, such Financial
Institution shall remain solely responsible for the performance of its
obligations hereunder, and Seller, PREFCO and the Agent shall continue to deal
solely and directly with such Financial Institution in connection with such
Financial Institution's rights and obligations under this Agreement. Each
Financial Institution agrees that any agreement between such Financial
Institution and any such Participant in respect of such participating interest
shall not restrict such Financial Institution's right to agree to any amendment,
supplement, waiver or modification to this Agreement, except for any amendment,
supplement, waiver or modification described in Section 14.1(b)(i).
------------------
ARTICLE XIII
LIQUIDITY FACILITY
Section 13.1 Transfer to Financial Institutions. Each Financial
----------------------------------
Institution hereby agrees, subject to Section 13.4, that immediately upon
------------
written notice from PREFCO delivered on or prior to the Liquidity Termination
Date, it shall acquire by assignment from PREFCO, without recourse or warranty,
its Pro Rata Share of one or more of the Purchaser Interests of PREFCO as
specified by PREFCO. Each such assignment by PREFCO shall be made pro rata
among the Financial Institutions, provided, however, that PREFCO may at any
-------- -------
35
time and from time to time, in its sole and absolute discretion, make any such
assignment to any Affected Financial Institution on a non-pro rata basis. Each
Financial Institution shall, no later than 1:00 p.m. (Chicago time) on the date
of such assignment, pay in immediately available funds to the Agent at an
account designated by the Agent, for the benefit of PREFCO, its Acquisition
Amount. Unless a Financial Institution has notified the Agent that it does not
intend to pay its Acquisition Amount, the Agent may assume that such payment has
been made and may, but shall not be obligated to, make the amount of such
payment available to PREFCO in reliance upon such assumption. PREFCO hereby
sells and assigns to the Agent for the ratable benefit of the Financial
Institutions, and the Agent hereby purchases and assumes from PREFCO, effective
upon the receipt by PREFCO of the PREFCO Transfer Price, the Purchaser Interests
of PREFCO which are the subject of any transfer pursuant to this Article XIII.
------------
Section 13.2 Transfer Price Reduction Yield. If the Adjusted
------------------------------
Liquidity Price is included in the calculation of the PREFCO Transfer Price for
any Purchaser Interest, each Financial Institution agrees that the Agent shall
pay to PREFCO the Reduction Percentage of any Yield received by the Agent with
respect to such Purchaser Interest.
Section 13.3 Payments to PREFCO. In consideration for the reduction
------------------
of the PREFCO Transfer Prices by the PREFCO Transfer Price Reductions, effective
only at such time as the aggregate amount of the Capital of the Purchaser
Interests of the Financial Institutions equals the PREFCO Residual, each
Financial Institution hereby agrees that the Agent shall not distribute to the
Financial Institutions and shall immediately remit to PREFCO any Yield,
Collections or other payments received by it to be applied pursuant to the terms
hereof or otherwise to reduce the Capital of the Purchaser Interests of the
Financial Institutions.
Section 13.4 Limitation on Commitment to Purchase from PREFCO.
------------------------------------------------
Notwithstanding anything to the contrary in this Agreement, no Financial
Institution shall have any obligation to purchase any Purchaser Interest from
PREFCO, pursuant to Section 13.1 or otherwise, if:
------------
(i) PREFCO shall have voluntarily commenced any
proceeding or filed any petition under any bankruptcy, insolvency or
similar law seeking the dissolution, liquidation or reorganization of
PREFCO or taken any corporate action for the purpose of effectuating
any of the foregoing; or
(ii) involuntary proceedings or an involuntary petition
shall have been commenced or filed against PREFCO by any Person under
any bankruptcy, insolvency or similar law seeking the dissolution,
liquidation or reorganization of PREFCO and such proceeding or
petition shall have not been dismissed.
Section 13.5 Defaulting Financial Institutions. If one or more
---------------------------------
Financial Institutions defaults in its obligation to pay its Acquisition Amount
pursuant to Section 13.1 (each such Financial Institution shall be called a
------------
"Defaulting Financial Institution" and the aggregate amount of such defaulted
---------------------------------
obligations being herein called the "PREFCO Transfer Price Deficit"), then upon
-----------------------------
notice from the Agent, each Financial Institution other than the Defaulting
36
Financial Institutions (a "Non-Defaulting Financial Institution") shall promptly
------------------------------------
pay to the Agent, in immediately available funds, an amount equal to the lesser
of (x) such Non-Defaulting Financial Institution's proportionate share (based
upon the relative Commitments of the Non-Defaulting Financial Institutions) of
the PREFCO Transfer Price Deficit and (y) the unused portion of such Non-
Defaulting Financial Institution's Commitment. A Defaulting Financial
Institution shall forthwith upon demand pay to the Agent for the account of the
Non-Defaulting Financial Institutions all amounts paid by each Non-Defaulting
Financial Institution on behalf of such Defaulting Financial Institution,
together with interest thereon, for each day from the date a payment was made by
a Non-Defaulting Financial Institution until the date such Non-Defaulting
Financial Institution has been paid such amounts in full, at a rate per annum
equal to the Federal Funds Effective Rate plus two percent (2%). In addition,
without prejudice to any other rights that PREFCO may have under applicable law,
each Defaulting Financial Institution shall pay to PREFCO forthwith upon demand,
the difference between such Defaulting Financial Institution's unpaid
Acquisition Amount and the amount paid with respect thereto by the Non-
Defaulting Financial Institutions, together with interest thereon, for each day
from the date of the Agent's request for such Defaulting Financial Institution's
Acquisition Amount pursuant to Section 13.1 until the date the requisite amount
------------
is paid to PREFCO in full, at a rate per annum equal to the Federal Funds
Effective Rate plus two percent (2%).
ARTICLE XIV
MISCELLANEOUS
Section 14.1 Waivers and Amendments. (a) No failure or delay on
----------------------
the part of the Agent or any Purchaser in exercising any power, right or remedy
under this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any such power, right or remedy preclude any other further
exercise thereof or the exercise of any other power, right or remedy. The
rights and remedies herein provided shall be cumulative and nonexclusive of any
rights or remedies provided by law. Any waiver of this Agreement shall be
effective only in the specific instance and for the specific purpose for which
given.
(b) No provision of this Agreement may be amended,
supplemented, modified or waived except in writing in accordance with the
provisions of this Section 14.1(b). PREFCO, Seller, the Servicer and the Agent,
---------------
at the direction of the Required Financial Institutions, may enter into written
modifications or waivers of any provisions of this Agreement, provided, however,
-------- -------
that no such modification or waiver shall:
(i) without the consent of each affected Purchaser, (A)
extend the Liquidity Termination Date or the date of any payment or
deposit of Collections by Seller or the Servicer, (B) reduce the rate
or extend the time of payment of Yield (or any component thereof), (C)
reduce any fee payable to the Agent for the benefit of the Purchasers,
(D) except pursuant to Article XII hereof, change the amount of the
-----------
Capital of any Purchaser, any Financial Institution's Pro Rata Share
(except pursuant to Sections 13.1 or 13.5) or any Financial
------------- ----
Institution's Commitment, (E) amend, modify or waive any provision of
the definition of Required Financial Institutions or this Section
-------
14.1(b), (F) consent to or permit
-------
37
the assignment or transfer by Seller of any of its rights and
obligations under this Agreement, (G) change the definition of
"Eligible Receivable,"or (H) amend or modify any defined term (or any
-------------------
defined term used directly or indirectly in such defined term) used in
clauses (A) through (G) above in a manner that would circumvent the
intention of the restrictions set forth in such clauses; or
(ii) without the written consent of the then Agent, amend,
modify or waive any provision of this Agreement if the effect thereof
is to affect the rights or duties of such Agent; or
(iii) without the written consent of the Servicer, amend,
modify or waive any provision of this Agreement if the effect thereof
is to affect the rights or duties of the Servicer.
Notwithstanding the foregoing, without the consent of the Financial
Institutions, the Agent may, with the consent of Seller, amend this Agreement
solely to add additional Persons as Financial Institutions hereunder. Any
modification or waiver made in accordance with this Section 14.1 shall apply to
------------
each of the Purchasers equally and shall be binding upon Seller, the Purchasers,
the Servicer and the Agent.
Section 14.2 Notices. Except as provided below, all communications
-------
and notices provided for hereunder shall be in writing (including bank wire,
telecopy or electronic facsimile transmission or similar writing) and shall be
given to the other parties hereto at their respective addresses or telecopy
numbers set forth on the signature pages hereof or at such other address or
telecopy number as such Person may hereafter specify for the purpose of notice
to each of the other parties hereto. Each such notice or other communication
shall be effective (i) if given by telecopy, upon the receipt thereof, (ii) if
given by mail, three (3) Business Days after the time such communication is
deposited in the mail with first class postage prepaid or (iii) if given by any
other means, when received at the address specified in this Section 14.2.
------------
Seller hereby authorizes the Agent to effect purchases and Tranche Period and
Discount Rate selections based on telephonic notices made by any Person whom the
Agent in good faith believes to be acting on behalf of Seller. Seller agrees to
deliver promptly to the Agent a written confirmation of each telephonic notice
signed by an authorized officer of Seller; however, the absence of such
confirmation shall not affect the validity of such notice. If the written
confirmation differs from the action taken by the Agent, the records of the
Agent shall govern absent manifest error.
Section 14.3 Ratable Payments. If any Purchaser, whether by setoff
----------------
or otherwise, has payment made to it with respect to any portion of the
Aggregate Unpaids owing to such Purchaser (other than payments received pursuant
to Section 10.2 or 10.3) in a greater proportion than that received by any other
------------ ----
Purchaser entitled to receive a ratable share of such Aggregate Unpaids, such
Purchaser agrees, promptly upon demand, to purchase for cash without recourse or
warranty a portion of such Aggregate Unpaids held by the other Purchasers so
that after such purchase each Purchaser will hold its ratable proportion of such
Aggregate Unpaids; provided that if all or any portion of such excess amount is
thereafter recovered from such
38
Purchaser, such purchase shall be rescinded and the purchase price restored to
the extent of such recovery, but without interest.
Section 14.4 Protection of Ownership Interests of the Purchasers.
---------------------------------------------------
(a) Seller agrees that from time to time, at its expense, it will promptly
execute and deliver all instruments and documents, and take all actions, that
may be reasonably necessary or desirable, or that the Agent may request, to
perfect, protect or more fully evidence the Purchaser Interests, or to enable
the Agent or the Purchasers to exercise and enforce their rights and remedies
hereunder. At any time, the Agent may, or the Agent may direct Seller or the
Servicer to, notify the Obligors (including Obligors that are guarantors) of
Receivables, at Seller's expense, of the ownership interests of the Purchasers
under this Agreement and may also direct that payments of all amounts due or
that become due under any or all Receivables be made directly to the Agent or
its designee. Seller or the Servicer (as applicable) shall, at any Purchaser's
request, withhold the identity of such Purchaser in any such notification.
(b) If any Seller Party fails to perform any of its
obligations hereunder, the Agent or any Purchaser may (but shall not be required
to) perform, or cause performance of, such obligation, and the Agent's or such
Purchaser's costs and expenses incurred in connection therewith shall be payable
by Seller as provided in Section 10.3. Each Seller Party irrevocably authorizes
------------
the Agent at any time and from time to time in the sole discretion of the Agent,
and appoints the Agent as its attorney-in-fact, to act on behalf of such Seller
Party (i) to execute on behalf of Seller as debtor and to file financing
statements necessary or desirable in the Agent's sole discretion to perfect and
to maintain the perfection and priority of the interest of the Purchasers in the
Receivables and (ii) to file a carbon, photographic or other reproduction of
this Agreement or any financing statement with respect to the Receivables as a
financing statement in such offices as the Agent in its sole discretion deems
necessary or desirable to perfect and to maintain the perfection and priority of
the interests of the Purchasers in the Receivables. This appointment is coupled
with an interest and is irrevocable.
Section 14.5 Confidentiality. (a) Each Seller Party and each
---------------
Purchaser shall maintain and shall cause each of its employees and officers to
maintain the confidentiality of this Agreement and the other confidential
proprietary information with respect to Seller, the Servicer and its Affiliates,
the Agent and PREFCO and their respective businesses obtained by it or them in
connection with the structuring, negotiating and execution of the transactions
contemplated herein, except that such Seller Party and such Purchaser and its
officers and employees may disclose (i) such information to such Seller Party's
and such Purchaser's external accountants and attorneys and as required by any
applicable law or order of any judicial or administrative proceeding, and (ii)
such information as relates to the off-balance sheet accounting treatment
intended by the transactions contemplated in the Transaction Documents to any
rating agency rating any Indebtedness or the claims-paying ability of any
Torchmark Entity. In the event any rating agency that is rating any
Indebtedness or the claims-paying ability of any Torchmark Entity shall request
any additional information of the type the disclosure of which is restricted by
this Section 14.5(a), Seller may with the consent of the Agent (which consent
---------------
shall not be unreasonably withheld) disclose such information to such rating
agency.
39
(b) Anything herein to the contrary notwithstanding, each
Seller Party hereby consents to the disclosure of any nonpublic information with
respect to it (i) to the Agent, the Financial Institutions or PREFCO by each
other, (ii) by the Agent or the Purchasers to any prospective or actual assignee
or participant of any of them, (iii) by the Agent to any rating agency,
Commercial Paper dealer or provider of a surety, guaranty or credit or liquidity
enhancement to PREFCO or any entity organized for the purpose of purchasing, or
making loans secured by, financial assets for which Bank One acts as the
administrative agent and to any officers, directors, employees, outside
accountants and attorneys of any of the foregoing, (iv) to the extent the same
becomes available to the Agent or any Purchaser on a non-confidential basis from
a source other than another party hereto, or (v) to the extent necessary in
connection with any legal proceeding relating to the enforcement of any right of
the Agent or the Purchasers under the Transaction Documents. In addition, the
Purchasers and the Agent may disclose any such nonpublic information pursuant to
any law, rule, regulation, direction, subpoena, request or order of any
judicial, administrative or regulatory authority or proceedings (whether or not
having the force or effect of law).
Section 14.6 Bankruptcy Petition. Seller, the Servicer, the Agent
-------------------
and each Financial Institution hereby covenants and agrees that, prior to the
date that is one year and one day after the payment in full of all outstanding
senior Indebtedness of PREFCO, it will not institute against, or join any other
Person in instituting against, PREFCO any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States.
Section 14.7 Limitation of Liability. Except with respect to any
-----------------------
claim arising out of the willful misconduct or gross negligence of PREFCO, the
Agent or any Financial Institution, no claim may be made by any Seller Party or
any other Person against PREFCO, the Agent or any Financial Institution or their
respective Affiliates, directors, officers, employees, attorneys or agents for
any special, indirect, consequential or punitive damages in respect of any claim
for breach of contract or any other theory of liability arising out of or
related to the transactions contemplated by this Agreement, or any act, omission
or event occurring in connection therewith; and each Seller Party hereby waives,
releases, and agrees not to ▇▇▇ upon any claim for any such damages, whether or
not accrued and whether or not known or suspected to exist in its favor.
Section 14.8 CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED AND
-------------
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF
THE STATE OF ILLINOIS.
Section 14.9 CONSENT TO JURISDICTION. EACH SELLER PARTY HEREBY
-----------------------
IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES
FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO, ILLINOIS IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED
BY SUCH PERSON PURSUANT TO THIS AGREEMENT AND EACH SELLER PARTY HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE
40
HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT
MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL LIMIT THE RIGHT OF THE AGENT OR ANY PURCHASER TO BRING PROCEEDINGS
AGAINST ANY SELLER PARTY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL
PROCEEDING BY ANY SELLER PARTY AGAINST THE AGENT OR ANY PURCHASER OR ANY
AFFILIATE OF THE AGENT OR A PURCHASER INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT
OR ANY DOCUMENT EXECUTED BY SUCH SELLER PARTY PURSUANT TO THIS AGREEMENT SHALL
BE BROUGHT ONLY IN A COURT IN CHICAGO, ILLINOIS.
Section 14.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES
--------------------
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, ANY DOCUMENT EXECUTED BY THE
SELLER PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP ESTABLISHED HEREUNDER OR
THEREUNDER.
Section 14.11 Integration; Binding Effect; Survival of Terms.
----------------------------------------------
(a) This Agreement and the Fee Letter contain the final and
complete integration of all prior expressions by the parties hereto with respect
to the subject matter hereof and shall constitute the entire agreement among the
parties hereto with respect to the subject matter hereof superseding all prior
oral or written understandings.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns (including any trustee in bankruptcy). This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms and shall remain in full force and effect until terminated in
accordance with its terms; provided, however, that the rights and remedies with
-------- -------
respect to (i) any breach of any representation and warranty made by any Seller
Party pursuant to Article V, (ii) the indemnification and payment provisions of
---------
Article X, and Sections 14.5 and 14.6 shall be continuing and shall survive any
--------- ------------- ----
termination of this Agreement.
Section 14.12 Counterparts; Severability; Section References. This
----------------------------------------------
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
41
Unless otherwise expressly indicated, all references herein to "Article,"
"Section," "Schedule" or "Exhibit" shall mean articles and sections of, and
schedules and exhibits to, this Agreement.
Section 14.13 Bank One Roles. Each of the Financial Institutions
--------------
acknowledges that Bank One acts, or may in the future act, (i) as administrative
agent for PREFCO, (ii) as issuing and paying agent for the Commercial Paper,
(iii) to provide credit or liquidity enhancement for the timely payment for the
Commercial Paper and (iv) to provide other services from time to time for PREFCO
(collectively, the "Bank One Roles"). Without limiting the generality of this
--------------
Section 14.13, each Financial Institution hereby acknowledges and consents to
-------------
any and all Bank One Roles and agrees that in connection with any Bank One Role,
Bank One may take, or refrain from taking, any action that it, in its
discretion, deems appropriate, including, without limitation, in its role as
administrative agent for PREFCO, and the giving of notice to the Agent of a
mandatory purchase pursuant to Section 13.1.
------------
Section 14.14 Characterization. (a) It is the intention of the
----------------
parties hereto that each purchase of a Purchaser Interest hereunder shall
constitute and be treated as an absolute and irrevocable sale, which purchase
shall provide the applicable Purchaser with the full benefits of ownership of
the applicable Purchaser Interest. Except as specifically provided in this
Agreement, each sale of a Purchaser Interest hereunder is made without recourse
to Seller; provided, however, that (i) Seller shall be liable to each Purchaser
and the Agent for all representations, warranties and covenants made by Seller
pursuant to the terms of this Agreement, and (ii) such sale does not constitute
and is not intended to result in an assumption by any Purchaser or the Agent or
any assignee thereof of any obligation of Seller, AIL or any other person
arising in connection with the Receivables, the Related Security, or the related
Contracts, or any other obligations of Seller or AIL.
(b) In addition to any ownership interest which the Agent
may from time to time acquire pursuant hereto, the Seller hereby grants to the
Agent for the ratable benefit of the Purchasers a valid and perfected security
interest in all of Seller's right, title and interest in, to and under all
Receivables now existing or hereafter arising, the Collections, all Related
Security, all other rights and payments relating to such Receivables, all of
Seller's rights under the Receivables Sale Agreement and all proceeds of any of
the foregoing prior to all other liens on and security interests therein to
secure the prompt and complete payment of the Aggregate Unpaids. After an
Amortization Event, the Agent and the Purchasers shall have, in addition to the
rights and remedies that they may have under this Agreement, all other rights
and remedies provided to a secured creditor after default under the UCC and
other applicable law, which rights and remedies shall be cumulative.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
42
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date hereof.
AILIC RECEIVABLES CORPORATION
By: ________________________________
Name:
Title:
Address:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
AMERICAN INCOME LIFE INSURANCE COMPANY,
as Servicer
By: ________________________________
Name:
Title:
Address:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President and Treasurer
Signature Page to
Receivables Purchase Agreement
43
PREFERRED RECEIVABLES FUNDING CORPORATION
By: ________________________________
Name:
Title: Authorized Signatory
Address: c/o Bank One, NA, as Agent
Asset Backed Finance
Suite IL1-0079, 1-19
1 Bank ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
BANK ONE, NA, as a Financial Institution
and as Agent
By: ________________________________
Name:
Title:
Address: Bank One, NA
Asset Backed Finance
Suite IL1-0079, 1-19
1 Bank ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
44
Signature Page to
Receivables Purchase Agreement
45
EXHIBIT I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings (such meanings to be equally applicable to both the singular and plural
forms of the terms defined):
"Accrual Period" means a period commencing on and including the 10th day of
--------------
a calendar month and ending but excluding the 10th day of the following calendar
month; provided that (i) the initial Accrual Period hereunder shall be the
--------
period from and including the date of the initial purchase hereunder to but
excluding the next date that is the 10th day of a calendar month and (ii) the
final Accrual Period hereunder shall end on the date the Aggregate Unpaids shall
be reduced to zero.
"Acquisition Amount" means, on the date of any purchase from PREFCO of
------------------
Purchaser Interests pursuant to Section 13.1, (i) with respect to each Financial
------------
Institution other than Bank One, the lesser of (a) such Financial Institution's
Pro Rata Share of the PREFCO Transfer Price and (b) such Financial Institution's
unused Commitment and (ii) with respect to Bank One, the difference between (a)
the PREFCO Transfer Price and (b) the aggregate amount payable by all other
Financial Institutions on such date pursuant to clause (i) above.
"Adjusted Liquidity Price" means, in determining the PREFCO Transfer Price
------------------------
for any Purchaser Interest, an amount equal to
RI x [(i) DC + (ii) NDR ]
-----
1.025
where:
RI = the undivided percentage interest evidenced by such Purchaser
Interest.
DC = the Deemed Collections.
NDR = the Outstanding Balance of all Receivables other than Charged-Off
Receivables.
Each of the foregoing shall be determined from the most recent Monthly Report
received from the Servicer.
"Adverse Claim" means a lien, security interest, charge or encumbrance, or
-------------
other right or claim in, of or on any Person's assets or properties in favor of
any other Person.
46
"Affected Financial Institution" has the meaning specified in Section
------------------------------ -------
12.1(c).
-------
"Affiliate" means, with respect to any Person, any other Person directly or
---------
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person or any Subsidiary of such Person. A Person shall be
deemed to control another Person if the controlling Person owns 10% or more of
any class of voting securities of the controlled Person or possesses, directly
or indirectly, the power to direct or cause the direction of the management or
policies of the controlled Person, whether through ownership of stock, by
contract or otherwise.
"Agent" has the meaning set forth in the preamble to this Agreement.
-----
"Agent-Hierarchy" means, in reference to any Insurance Agent, such
---------------
Insurance Agent together with all other Persons (including the SGA thereof and
all managing general agents, general agents, supervisory agents, Insurance
Agents and similar professional relations) which, under existing arrangements
with such Insurance Agent, share directly or indirectly (i) in the proceeds of
any commissions payable to such Insurance Agent by AIL, including any amounts
paid or advanced that give rise to any Receivable, and (ii) in the obligations
and liabilities relating to any Receivable arising in connection with the
cancellation or termination of the underlying Insurance Product.
"Aggregate Reduction" has the meaning specified in Section 1.3.
------------------- -----------
"Aggregate Unpaids" means, at any time, an amount equal to the sum of all
-----------------
accrued and unpaid fees under the Fee Letter, CP Costs, Yield, Capital and all
other unpaid Obligations (whether due or accrued) at such time.
"Agreement" means this Receivables Purchase Agreement, as it may be amended
---------
or modified and in effect from time to time.
"AIL" has the meaning set forth in the preamble to this Agreement.
---
"Amortization Date" means the earliest to occur of (i) the day on which any
-----------------
of the conditions precedent set forth in Section 6.2 are not satisfied, (ii) the
-----------
Business Day immediately prior to the occurrence of an Amortization Event set
forth in Section 9.1(d), (iii) the Business Day specified in a written notice
--------------
from the Agent following the occurrence of any other Amortization Event, (iv)
the date which is 30 Business Days after the Agent's receipt of written notice
from Seller that it wishes to terminate the facility evidenced by this Agreement
and (v) March 31, 2000.
"Amortization Event" has the meaning specified in Article IX.
------------------ ----------
"Assignment Agreement" has the meaning set forth in Section 12.1(b).
-------------------- --------------
47
"Authorized Control Level Risk Based Capital" means the authorized control
-------------------------------------------
level risk-based capital as determined in accordance with the risk-based capital
instructions adopted by the NAIC, as such instructions may be amended, modified,
supplemented or restated from time to time. For reference purposes only, such
term is also defined in Section 27-1-36-4 of the Indiana Code.
"Authorized Officer" shall mean, with respect to any Seller Party, its
------------------
respective president, corporate controller or chief financial officer.
"Bank One" means Bank One, NA, a national banking association having its
--------
principal offices in Chicago, Illinois, in its individual capacity and its
successors.
"Base Rate" means a rate per annum equal to the corporate base rate, prime
---------
rate or base rate of interest, as applicable, announced by the Reference Bank
from time to time, changing when and as such rate changes.
"Broken Funding Costs" means for any Purchaser Interest which: (i) has its
--------------------
Capital reduced without compliance by the Seller with the notice requirements
hereunder or (ii) does not become subject to an Aggregate Reduction following
the delivery of any Reduction Notice or (iii) is assigned under Article XIII or
------------
terminated prior to the date on which it was originally scheduled to end; an
amount equal to the excess, if any, of (A) the CP Costs or Yield (as applicable)
that would have accrued during the remainder of the Tranche Periods or the
tranche periods for Commercial Paper determined by the Agent to relate to such
Purchaser Interest (as applicable) subsequent to the date of such reduction or
termination (or in respect of clause (ii) above, the date such Aggregate
Reduction was designated to occur pursuant to the Reduction Notice) of the
Capital of such Purchaser Interest if such reduction, assignment or termination
had not occurred or such Reduction Notice had not been delivered, over (B) the
sum of (x) to the extent all or a portion of such Capital is allocated to
another Purchaser Interest, the amount of CP Costs or Yield actually accrued
during the remainder of such period on such Capital for the new Purchaser
Interest, and (y) to the extent such Capital is not allocated to another
Purchaser Interest, the income, if any, actually received during the remainder
of such period by the holder of such Purchaser Interest from investing the
portion of such Capital not so allocated. In the event that the amount referred
to in clause (B) exceeds the amount referred to in clause (A), the relevant
Purchaser or Purchasers agree to pay to Seller the amount of such excess. All
Broken Funding Costs shall be due and payable hereunder upon demand.
"Business Day" means any day on which banks are not authorized or required
------------
to close in New York, New York or Chicago, Illinois and The Depository Trust
Company of New York is open for business, and, if the applicable Business Day
relates to any computation or payment to be made with respect to the LIBO Rate,
any day on which dealings in dollar deposits are carried on in the London
interbank market.
"Capital" of any Purchaser Interest means, at any time, (A) the Purchase
-------
Price of such Purchaser Interest, minus (B) the sum of the aggregate amount of
Collections and other payments received by the Agent which in each case are
applied to reduce such Capital in accordance with the terms and conditions of
this Agreement; provided that such Capital shall be restored (in
--------
48
accordance with Section 2.5) in the amount of any Collections or other payments
-----------
so received and applied if at any time the distribution of such Collections or
payments are rescinded, returned or refunded for any reason.
"Change of Control" means (i) the acquisition by any Person, or two or more
-----------------
Persons acting in concert, of beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission under the Securities Exchange
Act of 1934) of 20% or more of the outstanding shares of voting stock of the
Performance Guarantor or (ii) the Performance Guarantor shall at any time cease
to own directly or indirectly 100% of the issued and outstanding capital stock
of each of AIL and Seller.
"Charged-Off Receivable" means a Receivable: (i) as to which the Obligor
----------------------
thereof has taken any action, or suffered any event to occur, of the type
described in Section 9.1(d) (as if references to Torchmark Entity therein refer
--------------
to such Obligor); (ii) which, consistent with the Credit and Collection Policy,
would be written off Seller's books as uncollectible , or (iii) which has been
identified by Seller as uncollectible.
"Charge-Off Ratio" means, as of the last day of any month, a fraction
----------------
(expressed as a percentage) equal to (i) the aggregate Outstanding Balance of
all Receivables that became Charged-Off Receivables at any time during such
month, divided by (ii) the Outstanding Balance of all Receivables on such date.
"Collections" means, with respect to any Receivable, all cash collections
-----------
and other cash proceeds in respect of such Receivable, including, without
limitation, (i) all yield, finance charges or other related amounts accruing in
respect thereof, (ii) all cash proceeds of Related Security with respect to such
Receivable, (iii) all payments by any guarantor in respect of such Receivable
and (iv) upon the payment to AIL of any premium, the funds then available for
payment to the applicable Obligor as commission or related fees and which,
consistent with the Credit and Collection Policy, would be retained by AIL for
application against any Receivable.
"Commercial Paper" means promissory notes of PREFCO issued by PREFCO in the
----------------
commercial paper market.
"Commitment" means, for each Financial Institution, the commitment of such
----------
Financial Institution to purchase its Pro Rata Share of Purchaser Interests from
(i) Seller and (ii) PREFCO, such Pro Rata Share not to exceed, in the aggregate,
the amount set forth opposite such Financial Institution's name on Schedule A to
----------
this Agreement, as such amount may be modified in accordance with the terms
hereof.
"Commitment Availability" means at any time the positive difference (if
-----------------------
any) between (a) an amount equal to the aggregate amount of the Commitments
minus (b) an amount equal to 2% of such aggregate Commitments at such time minus
----- -----
(c) the aggregate Capital at such time.
"Company Action Level Event" means a "company-action-level-event" as such
--------------------------
term is defined in Section 27-1-36-29 of the Indiana Code, or any successor
statute, as the same may be
49
amended, modified, recodified or reenacted, in whole or in part, including all
rules and regulations promulgated thereunder.
"Concentration Limit" means, at any time, for any Obligor, for Training
-------------------
Advance Receivables as a group or for Miscellaneous Receivables as a group, such
percentage of the aggregate Capital of the Purchaser Interests as may from time
to time be designated in a written notice by the Agent to Seller in respect of
such Obligor, the Training Advance Receivables or the Miscellaneous Receivables.
In the event the Agent shall at any time specify a Concentration Limit in
respect of any Obligor, the Concentration Limit shall be calculated as if such
Obligor and all of its Affiliates are one Obligor.
"Contingent Obligation" of a Person means any agreement, undertaking or
---------------------
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or application for a letter of credit.
"Contract" means, with respect to any Receivable, any and all instruments,
--------
agreements (including loan agreements, notes, agent agreements, general agent
agreements, supervisory agent agreements, regional director agreements, broker-
dealer agreements and indemnity agreements), statements or other writings
pursuant to which (i) such Receivable arises or which evidence such Receivable
or (ii) the applicable Obligor shall have agreed to guaranty directly or
indirectly all or a portion of the payment obligations of the primary Obligor on
such Receivable.
"CP Costs" means, for each day, the sum of (i) discount accrued on Pooled
--------
Commercial Paper on such day, plus (ii) any and all accrued commissions in
respect of placement agents and Commercial Paper dealers, and issuing and paying
agent fees incurred, in respect of such Pooled Commercial Paper for such day,
plus (iii) other costs associated with funding small or odd-lot amounts with
respect to all receivable purchase facilities which are funded by Pooled
Commercial Paper for such day, minus (iv) any accrual of income net of expenses
received on such day from investment of collections received under all
receivable purchase facilities funded substantially with Pooled Commercial
Paper, minus (v) any payment received on such day net of expenses in respect of
Broken Funding Costs related to the prepayment of any receivables interest of
PREFCO pursuant to the terms of any receivable purchase facilities funded
substantially with Pooled Commercial Paper. In addition to the foregoing costs,
if Seller shall request any Incremental Purchase during any period of time
determined by the Agent in its sole discretion to result in incrementally higher
CP Costs applicable to such Incremental Purchase, the Capital associated with
any such Incremental Purchase shall, during such period, be deemed to be funded
by PREFCO in a special pool (which may include capital associated with other
receivable purchase facilities) for purposes of determining such additional CP
Costs applicable only to such special pool and charged each day during such
period against such Capital.
50
"Credit and Collection Policy" means , in respect of any Receivable, the
----------------------------
credit and collection policies and practices of AIL relating to Contracts and
Receivables, as in effect on the date hereof and summarized in Exhibit VI
----------
hereto, and as modified from time to time in accordance with this Agreement.
"Deemed Collections" means the aggregate of all amounts Seller shall have
------------------
been deemed to have received as a Collection of a Receivable. Seller shall be
deemed to have received a Collection in full of a Receivable if at any time:
(i) the Outstanding Balance of any such Receivable is either (x)
reduced as a result of any dispute involving any of the Policy Holder, the
Insurance Agent or any other Obligor or AIL in respect of such Receivable
and relating to any aspect of the transaction giving rise to such
Receivable, (y) reduced as a result of any discount or any adjustment or
otherwise by any Torchmark Entity (other than cash Collections on account
of the Receivables) or (z) reduced or canceled as a result of a setoff in
respect of any claim by any Person (whether such claim arises out of the
same or a related transaction or an unrelated transaction and including,
without limitation, any setoff occurring by reason of the application of
the proceeds of any subsequent advance or prepayment made by AIL to the
applicable Insurance Agent or other Obligor in respect of any Insurance
Product issued or scheduled to be issued after the date such Receivable
shall have arisen), or
(ii) the applicable Policy Holder (or any other authorized Person)
shall for any reason at any time decline, cancel, fail to accept or
otherwise terminate the Insurance Product, the issuance or proposed
issuance of which shall have led to the creation of such Receivable, or AIL
shall at any time for any reason refuse to or fail to issue, or shall
terminate, any such Insurance Product, or
(iii) any of the representations or warranties in Article V are not
---------
true on the initial date an interest in such Receivable shall be
transferred to the Purchasers hereunder or such Receivable shall not
constitute an Eligible Receivable on any date the Outstanding Balance of
such Receivable is included in the calculation of Net Receivables Balance,
or
(iv) the applicable Policy Holder dies or ceases for any reason to
make any or all payments due as premiums or otherwise in respect of the
Insurance Product that shall have given rise to such Receivable during the
period that such Receivable shall remain outstanding, or
(v) the applicable Obligor directly or indirectly contests in any
manner the effectiveness, validity, binding nature or enforceability of the
related Contract or this Agreement.
Seller hereby agrees to pay all Deemed Collections immediately to the Servicer
for application in accordance with the terms and conditions hereof.
51
"Default Fee" means with respect to any amount due and payable by Seller in
-----------
respect of any Aggregate Unpaids, an amount equal to the greater of (i) $1000
and (ii) interest on any such unpaid Aggregate Unpaids at a rate per annum equal
to 2% above the Base Rate.
"Designated Obligor" means an Obligor identified as such by the Agent to
------------------
Seller in writing based upon the reasonable credit judgment of the Agent. In
the case of any Obligor that is a member of an Agent Hierarchy, identification
of such Obligor as being a Designated Obligor shall relate solely to such
Obligor and shall not automatically cause any other member of such Agent
Hierarchy to constitute a Designated Obligor.
"Discount Rate" means, the LIBO Rate or the Base Rate, as applicable, with
-------------
respect to each Purchaser Interest of the Financial Institutions.
"Eligible Receivable" means, at any time, a Receivable:
-------------------
(i) each Obligor in respect of which (a) if a natural person, is a
resident of the United States, (b) if a corporation or other business
organization, is organized under the laws of the United States or any
political subdivision thereof and has its chief executive office in the
United States; (c) is not, and the Policy Holder in respect of the
Insurance Product that gave rise to such Receivable is not, an Affiliate
of any of the parties hereto; (d) is not a Designated Obligor; (e) is not,
and the Policy Holder in respect of the Insurance Product that gave rise to
such Receivable is not, a government or a governmental subdivision or
agency; and (f) in the case of an Insurance Agent, is a qualified, licensed
agent in good standing of AIL,
(ii) the Obligor of which is not the Obligor of any Charged-Off
Receivable,
(iii) which is not (a) an Unsupported Receivable, (b) a Charged-Off
Receivable or (c) a Receivable as to which any payment or part thereof
remains unpaid on the date occurring fourteen months after the date of the
creation of such Receivable,
(iv) which (a) by its terms is due and payable within one year or
less of the date of its creation, with payments thereon commencing within
30 days of the original billing date and becoming due monthly thereafter,
(b) has not had its payment terms extended, and (c) relates solely to the
premium on the applicable Insurance Product that is scheduled to be paid
within the first year of such Insurance Product's coming into existence and
not to any premium scheduled to be paid in any subsequent period,
(v) which is an "account" or "general intangible" within the meaning
of Section 9-106 of the UCC of all applicable jurisdictions, and is not an
"instrument" within the meaning of Section 9-105 of the UCC of any
applicable jurisdiction,
(vi) which is denominated and payable only in United States dollars
in the ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇
(vii) which arises under a Contract in substantially the form of one
of the form contracts set forth on Exhibit VII hereto or otherwise approved
-----------
by the Agent in writing, which, together with such Receivable, is in full
force and effect and constitutes the legal, valid and binding obligation of
each related Obligor (including, in the event the applicable Insurance
Agent shall be a member of an Agent-Hierarchy, each other member of such
Agent-Hierarchy as a guarantor of such Receivable) enforceable against such
Obligor in accordance with its terms subject to no offset, counterclaim or
other defense,
(viii) which arises under a Contract which (A) does not require any
Obligor under such Contract, any member of the applicable Agent-Hierarchy
or any other Person to consent to the transfer, sale or assignment of the
rights and duties of Seller under such Contract and (B) does not contain a
confidentiality provision that purports to restrict the ability of any
Purchaser to exercise its rights under this Agreement, including, without
limitation, its right to review the Contract,
(ix) which, together with the Contract related thereto, does not
contravene any law, rule or regulation applicable thereto (including,
without limitation, any law, rule and regulation relating to truth in
lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) and with respect
to which no part of the Contract related thereto is in violation of any
such law, rule or regulation,
(x) which satisfies all applicable requirements of the Credit and
Collection Policy and in respect of which all representations and
warranties set forth in Section 5.1 and relating to Receivables shall be
-----------
true and correct,
(xi) which was generated in the ordinary course of AIL's business,
under a duly authorized Contract,
(xii) which either (A) represents monies advanced or prepaid to the
applicable Insurance Agent, as commissions for a new Insurance Product, by
AIL (and not by any other Person in whole or in part) and was advanced to
such Insurance Agent based exclusively upon (and does not exceed the
commissions payable in respect of) the first year's premium for such new
Insurance Product without regard to any premiums (or
53
commissions thereon) for any subsequent periods, (B) constitutes a
Miscellaneous Receivable representing a loan or an advance made to an SGA
(and not any other type of Obligor), which Miscellaneous Receivable has
been created in accordance with the applicable requirements for such loan
and advances to SGAs, and does not exceed the limits for such loans and
advances, set forth in the Credit and Collection Policy, or (C) constitutes
a Training Advance Receivable representing an advance to a new Insurance
Agent then becoming part of an existing Agent-Hierarchy, which Training
Advance Receivable has been created in accordance with the applicable
requirements for advances to new Insurance Agents, and does not exceed the
limits for such advances, set forth in the Credit and Collection Policy;
provided that in no event shall any Miscellaneous Receivable or Training
--------
Advance Receivable have an Outstanding Balance in excess of $10,000
(xiii) if the primary Obligor thereon is an Insurance Agent that is a
member of an Agent-Hierarchy, 100% of the payment obligation on such
Receivable is guaranteed jointly or severally by the members of such Agent-
Hierarchy, and
(xiv) in the event the Obligor thereon shall have died or been
terminated as an agent of AIL, all obligations relating to such Receivable
shall have been assumed by the Agent-Hierarchy in respect of such Obligor;
provided that such Receivable shall cease to be an Eligible Receivable if
--------
at any time the members of the Agent-Hierarchy shall cease to exist or be
terminated as agents of AIL or such members shall assert the invalidity or
unenforceability of their obligations in respect of the Receivable.
Notwithstanding the foregoing, a Receivable that otherwise satisfies the
criteria set forth above but for the fact that (A) the Obligor thereon is a
resident of Canada or New Zealand and (B) such Receivable is denominated in
the lawful currency of Canada or New Zealand rather than United States
Dollars may constitute an "Eligible Receivable" for purposes of this
Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Facility Account" means the account of Seller at Bank One, Account
----------------
No. 10-36987.
"Federal Funds Effective Rate" means, for any period, a fluctuating
----------------------------
interest rate per annum equal for each day during such period equal to (a)
the weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds
brokers, as published for such day (or, if such day is not a Business Day,
for the preceding Business Day) by the Federal Reserve Bank of New York in
the Composite Closing Quotations for U.S. Government Securities; or (b) if
such rate is not so published for any day which is a Business Day, the
average of the quotations at approximately 10:30 a.m. (Chicago time) for
such day on such transactions received by the Reference Bank from three
federal funds brokers of recognized standing selected by it.
54
"Fee Letter" means that certain letter agreement dated as of the date
----------
hereof among the Agent, PREFCO and Seller, and acknowledged by Torchmark,
as it may be amended or modified and in effect from time to time.
"Finance Charges" means, with respect to a Contract, any finance,
---------------
interest, late payment charges, fees, chargebacks or similar charges owing
by an Obligor pursuant to such Contract.
"Financial Institutions" has the meaning set forth in the preamble in
----------------------
this Agreement.
"Funding Agreement" means this Agreement and any agreement or
-----------------
instrument executed by any Funding Source with or for the benefit of
PREFCO.
"Funding Source" means (i) any Financial Institution or (ii) any
--------------
insurance company, bank or other funding entity providing liquidity, credit
enhancement or back-up purchase support or facilities to PREFCO.
"Incremental Purchase" means a purchase of one or more Purchaser
--------------------
Interests which increases the total outstanding Capital hereunder.
"Indebtedness" of a Person means such Person's (i) obligations for
------------
borrowed money, (ii) obligations representing the deferred purchase price
of property or services (other than accounts payable arising in the
ordinary course of such Person's business payable on terms customary in the
trade), (iii) obligations, whether or not assumed, secured by liens or
payable out of the proceeds or production from property now or hereafter
owned or acquired by such Person, (iv) obligations which are evidenced by
notes, acceptances, or other instruments, (v) capitalized lease
obligations, (vi) net liabilities under interest rate swap, exchange or cap
agreements, (vii) Contingent Obligations and (viii) liabilities in respect
of unfunded vested benefits under plans covered by Title IV of ERISA.
"Independent Director" shall mean a member of the Board of Directors
--------------------
of Seller who is not at such time, and has not been at any time during the
preceding five (5) years, (A) a director, officer, employee or affiliate
of any Torchmark Entity or any of their respective Subsidiaries or
Affiliates, or (B) the beneficial owner (at the time of such individual's
appointment as an Independent Director or at any time thereafter while
serving as an Independent Director) of any of the outstanding capital stock
of any Torchmark Entity or any of their respective Subsidiaries or
Affiliates.
"Insurance Agent" means, in respect of any Receivable, the insurance
---------------
broker or agent that shall have arranged the issuance or the proposed
issuance of an Insurance Product in connection with which such Receivable
shall have arisen.
55
"Insurance Product" means any life insurance policy (whether term
-----------------
life, whole life or other life insurance policy of any type or kind),
supplemental health insurance policy or any annuity, rider, other policy or
similar contract.
"Lapse Ratio" means, at any time, the average of the Monthly Lapse
-----------
Ratios for the three calendar months then most recently ended.
"LIBO Rate" means the rate per annum equal to the sum of (i) (a) the
---------
rate at which deposits in U.S. Dollars are offered by the Reference Bank to
first-class banks in the London interbank market at approximately 11:00
a.m. (London time) two Business Days prior to the first day of the relevant
Tranche Period, such deposits being in the approximate amount of the
Capital of the Purchaser Interest to be funded or maintained, divided by
(b) one minus the maximum aggregate reserve requirement (including all
basic, supplemental, marginal or other reserves) which is imposed against
the Reference Bank in respect of Eurocurrency liabilities, as defined in
Regulation D of the Board of Governors of the Federal Reserve System as in
effect from time to time (expressed as a decimal), applicable to such
Tranche Period plus (ii) 0.75% per annum. The LIBO Rate shall be rounded,
if necessary, to the next higher 1/16 of 1%.
"Liquidity Termination Date" means December 19, 2000.
--------------------------
"Material Adverse Effect" means a material adverse effect on (i) the
-----------------------
financial condition or operations of any Seller Party and its Subsidiaries,
(ii) the ability of any Seller Party to perform its obligations under this
Agreement or the ability of the Performance Guarantor to perform its
obligations under the Performance Guaranty, (iii) the legality, validity or
enforceability of this Agreement or any other Transaction Document, (iv)
any Purchaser's interest in the Receivables generally or in any significant
portion of the Receivables, the Related Security or the Collections with
respect thereto, or (v) the collectibility of the Receivables generally or
of any material portion of the Receivables.
"Minimum SGA Net Worth" means, with respect to any SGA at any time of
---------------------
determination, a ratio (expressed as a percentage) of (i) the present value
of all future commissions then payable to such SGA or to any member of its
Agent-Hierarchy in respect of Insurance Products that have been arranged by
such Agent-Hierarchy, as determined in accordance with the Credit and
Collection Policy, divided by (ii) the aggregate Outstanding
-------
Balance of all Receivables then owing by such SGA or any member of its
Agent-Hierarchy, which ratio shall not be less than 100% at such time.
"Miscellaneous Receivable" means the indebtedness arising in
------------------------
connection with the extension by AIL to an Obligor or a loan of an advance,
whether for working capital purposes or otherwise, in accordance with the
Credit and Collection Policy, which loan or advance (i) has not been
advanced in connection with the issuance of a specific Insurance Product,
and the anticipated receipt of a commission thereon, and (ii) does not
constitute a Training Advance Receivable therewith.
56
"Monthly Lapse Ratio" means, at any time, a percentage equal to (i)
-------------------
the number of Insurance Products issued by AIL that lapsed or were
terminated during the calendar month then most recently ended divided by
(ii) the average number of Insurance Products issued by AIL that were in
force during such calendar month.
"Monthly Report" means a report, in substantially the form of Exhibit
-------------- -------
VIII hereto (appropriately completed), furnished by the Servicer to the
----
Agent pursuant to Section 8.5.
-----------
"NAIC" means the National Association of Insurance Commissioners.
----
"Net Receivables Balance" means, at any time, (i) the aggregate
-----------------------
Outstanding Balance of all Eligible Receivables at such time, minus (ii)
-----
the aggregate amount by which the Outstanding Balance of all Eligible
Receivables of each Obligor and its Affiliates exceeds the Concentration
Limit (if any) for such Obligor, minus (iii) the aggregate amount by which
-----
the aggregate Outstanding Balance of all Eligible Receivables comprising
Training Advance Receivables exceeds the Concentration Limit (if any) for
Training Advance Receivables, minus (iv) the aggregate amount by which the
-----
aggregate Outstanding Balance of all Eligible Receivables comprising
Miscellaneous Receivables exceeds the Concentration Limit (if any) for
Miscellaneous Receivables.
"Obligations" shall have the meaning set forth in Section 2.1.
----------- -----------
"Obligor" means a Person (including any guarantor) obligated to make
-------
payments pursuant to a Contract or by reason of the arrangements existing
within an Agent-Hierarchy.
"Outstanding Balance" of any Receivable at any time means the then
-------------------
outstanding principal balance thereof.
"Performance Guarantor" means Torchmark, in its capacity as guarantor
---------------------
under the Performance Guaranty.
"Performance Guaranty" means that certain Performance Guaranty dated
--------------------
as of the date hereof made by Torchmark, as guarantor, in respect of the
obligations of AIL and Seller and certain other liabilities specified
therein, as the same may from time to time be amended, restated,
supplemented or otherwise modified.
"Person" means an individual, partnership, corporation (including a
------
business trust), joint stock company, trust, unincorporated association,
joint venture or other entity, or a government or any political subdivision
or agency thereof.
"Policy Holder" means, in respect of any Receivable, the Person that
-------------
shall have requested the issuance of the Insurance Product, which request
shall have led to the creation of such Receivable, and/or the Person or
Persons that shall have the obligation to make payments of the premium and
related charges for such Insurance Product.
57
"Pooled Commercial Paper" means Commercial Paper notes of PREFCO
-----------------------
subject to any particular pooling arrangement by PREFCO, but excluding
Commercial Paper issued by PREFCO for a tenor and in an amount specifically
requested by any Person in connection with any agreement effected by
PREFCO.
"Potential Amortization Event" means an event which, with the passage
----------------------------
of time or the giving of notice, or both, would constitute an Amortization
Event.
"PREFCO" has the meaning set forth in the preamble to this Agreement.
------
"PREFCO Residual" means the sum of the PREFCO Transfer Price
---------------
Reductions.
"PREFCO Transfer Price" means, with respect to the assignment by
---------------------
PREFCO of one or more Purchaser Interests to the Agent for the benefit of
the Financial Institutions pursuant to Section 13.1, the sum of (i) the
------------
Capital of each Purchaser Interest (the "Capital Component") and (ii) all
-----------------
accrued and unpaid Yield for such Purchaser Interest; provided that if at
--------
any time the senior long-term unsecured debt rating of Torchmark shall be
below BB from Standard & Poor's Ratings Group or below Ba2 from ▇▇▇▇▇'▇
Investor Services, Inc., the Capital Component at such time shall be equal
to the lesser of (a) the Capital of each Purchaser Interest and (b) the
Adjusted Liquidity Price of each Purchaser Interest.
"PREFCO Transfer Price Reduction" means in connection with the
-------------------------------
assignment of a Purchaser Interest by PREFCO to the Agent for the benefit
of the Financial Institutions, in the event the Adjusted Liquidity Price
shall have been used in the determination of the PREFCO Transfer Price
therefor, the positive difference between (i) the Capital of such Purchaser
Interest and (ii) the Adjusted Liquidity Price for such Purchaser Interest.
"Proposed Reduction Date" has the meaning set forth in Section 1.3.
----------------------- -----------
"Pro Rata Share" means, for each Financial Institution, the Commitment
--------------
of such Financial Institution divided by the Purchase Limit, adjusted as
necessary to give effect to the application of the terms of Sections 13.1
-------------
or 13.5.
----
"Purchase Limit" means $100,000,000.
--------------
"Purchase Notice" has the meaning set forth in Section 1.2.
--------------- -----------
"Purchase Price" means, with respect to any Incremental Purchase of a
--------------
Purchaser Interest, the amount paid to Seller for such Purchaser Interest
which shall not exceed the least of (i) the amount requested by Seller in
the applicable Purchase Notice, (ii) the unused portion of the Purchase
Limit on the applicable purchase date, (iii) the Commitment Availability on
the applicable purchase date and (iv) the excess, if any, of the Net
Receivables Balance on the applicable purchase date over the aggregate
outstanding amount of Capital without taking into account such proposed
Incremental Purchase.
58
"Purchaser" means PREFCO or a Financial Institution, as applicable.
---------
"Purchaser Interest" means, at any time, an undivided percentage
------------------
ownership interest (computed as set forth below) associated with a
designated amount of Capital, selected pursuant to the terms and conditions
hereof in (i) each Receivable arising prior to the time of the most recent
computation or recomputation of such undivided interest, (ii) all Related
Security with respect to each such Receivable, and (iii) all Collections
with respect to, and other proceeds of, each such Receivable. Each such
undivided percentage interest shall equal:
C
---
NRB
where:
C = the Capital of such Purchaser Interest.
NRB = the Net Receivables Balance.
Such undivided percentage ownership interest shall be initially computed on
its date of purchase. Thereafter, until its Amortization Date, each
Purchaser Interest shall be automatically recomputed (or deemed to be
recomputed) on each day prior to its Amortization Date. The variable
percentage represented by any Purchaser Interest as computed ( or deemed
recomputed) as of the close of the business day immediately preceding its
Amortization Date shall remain constant at all times after such
Amortization Date.
"Receivable" means the indebtedness and other obligations owed by an
----------
Obligor to AIL (but for giving effect to any transfer or conveyance under
the Receivables Sale Agreement or this Agreement), whether constituting an
account, chattel paper, instrument or general intangible, whether arising
prior to, contemporaneous with or subsequent to the execution of this
Agreement, and existing in connection with any Insurance Product issued by
AIL (or an Affiliate thereof), the extension of credit by AIL to an Obligor
(whether constituting an advance against anticipated premiums, a working
capital advance or an extension of credit for any other purpose) or the
rendering of any services by AIL to an Obligor. "Receivable" shall
include, without limitation, (i) any "debit balance," "agent debit balance"
or "actual debit balance," or any similar or successor concept thereto,
owing at any time by an Obligor to AIL, (ii) any amounts advanced to an
Obligor by AIL, such as an annualized payment, commission advance, regular
advance, special advance, loan, indebtedness, obligation for repayment, or
any other advance of any type, whether with respect to commissions (whether
annualized, renewal, override or any other type or kind), earnings,
compensation, payments, service fees, bonuses, incentives, credits, monies
due, sums due or other amounts earned or expected to be earned by such
Obligor and (iii) the obligation of such Obligor to pay any Finance Charges
with respect to any of the foregoing. Indebtedness and other rights and
obligations arising from any one transaction, notwithstanding the joint or
several
59
obligation of more than one Obligor thereon, shall constitute a single
Receivable separate from a Receivable consisting of the indebtedness and
other rights and obligations arising from any other transaction.
"Receivables Sale Agreement" means the Receivables Sale Agreement of
--------------------------
even date herewith between AIL, as seller, and Seller, as buyer, as the
same may from time to time be amended, restated, supplemented or otherwise
modified.
"Records" means, with respect to any Receivable, all Contracts and
-------
other documents, books, records and other information (including, without
limitation, computer programs, tapes, disks, punch cards, data processing
software and related property and rights) relating to such Receivable, any
Related Security therefor and the related Obligor(s).
"Reduction Notice" has the meaning set forth in Section 1.3.
---------------- -----------
"Reduction Percentage" means, for any Purchaser Interest acquired by
--------------------
the Financial Institutions from PREFCO for less than the Capital of such
Purchaser Interest, a percentage equal to a fraction the numerator of which
is the PREFCO Transfer Price Reduction for such Purchaser Interest and the
denominator of which is the Capital of such Purchaser Interest.
"Reference Bank" means Bank One or such other bank as the Agent shall
--------------
designate with the consent of Seller.
"Regulatory Action Level Event" means a "regulatory-action-level-
-----------------------------
event" as such term is defined in Section 27-1-36-35 of the Indiana Code,
as the same may be amended, modified, recodified or reenacted, in whole or
in part, including all rules and regulations promulgated thereunder.
"Regulatory Control Event" means any event that causes the applicable
------------------------
entity to be placed under supervision or any other regulatory control
pursuant to Article 27-9 of the Indiana Code or any parallel provision in
any other state law, or any successor provisions, as any of the foregoing
may be amended, modified, recodified or reenacted, in whole or in part,
including all rules and regulations promulgated thereunder.
"Reinvestment" has the meaning set forth in Section 2.2.
------------ -----------
"Related Security" means, with respect to any Receivable:
----------------
(i) all of Seller's interest (including any assignment or pledge
in favor of the Seller or any offset rights held by Seller) in or to (A)
any and all commissions, annualized commissions, renewal commissions,
override commissions, earnings, compensation, payments, service fees,
bonuses, incentives, credits, monies due, sums due or other amounts,
whether earned or unearned or that may at any time be or become payable to
the related Obligor, whether existing in connection with any Receivable or
60
otherwise, by AIL or any Affiliate thereof and (B) any and all premiums and
related payments due from Policy Holders in respect of any Insurance
Product the issuance or proposed issuance of which shall have given rise to
such Receivable, to the extent such premiums and related payments are
allocable to the commissions payable by AIL to the applicable Obligor in
respect of such Insurance Product;
(ii) all of Seller's interest (including any assignment or
pledge in favor of the Seller or any offset rights held by the Seller) in
any other assets or interests in property of the applicable Insurance Agent
or Agent-Hierarchy,
(iii) 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 a Contract related to such Receivable or
otherwise, together with all financing statements and security agreements
describing any such arrangements securing such Receivable,
(iv) all guaranties, contracts of suretyship, insurance and
other agreements or arrangements of whatever character from time to time
supporting or securing payment of such Receivable whether pursuant to a
Contract related to such Receivable or otherwise,
(v) all Records related to such Receivable,
(vi) all of Seller's right, title and interest in, to and under
the Receivables Sale Agreement, and
(vii) all proceeds of any of the foregoing.
"Required Financial Institutions" means, at any time, Financial
-------------------------------
Institutions with Commitments in excess of 66-2/3% of the Purchase Limit.
"Required Notice Period" means a period of two Business Days.
----------------------
"Seller" has the meaning set forth in the preamble to this Agreement.
------
"Seller Interest" means, at any time, an undivided percentage
---------------
ownership interest of Seller in the Receivables, Related Security and all
Collections with respect thereto equal to (i) one, minus (ii) the aggregate
of the Purchaser Interests.
"Seller Parties" has the meaning set forth in the preamble to this
--------------
Agreement.
"Servicer" means at any time the Person (which may be the Agent) then
--------
authorized pursuant to Article VIII to service, administer and collect
------------
Receivables.
"Servicing Fee" has the meaning set forth in Section 8.6.
------------- -----------
61
"Settlement Date" means (A) the 15th day of each month, and (B) the
---------------
last day of the relevant Tranche Period in respect of each Purchaser
Interest of the Financial Institutions.
"Settlement Period" means (A) in respect of each Purchaser Interest
-----------------
of PREFCO, the calendar month then most recently ended, and (B) in respect
of each Purchaser Interest of the Financial Institutions, the entire
Tranche Period of such Purchaser Interest.
"SGA" means a Person that (i) has been engaged by AIL as a "state
---
general agent", (ii) serves as the senior manager of an Agent-Hierarchy and
(iii) has guaranteed to AIL the repayment in full of all Receivables owing
by any member of such Agent-Hierarchy.
"Subordinated Note" means the Subordinated Note issued under and in
-----------------
connection with the Receivables Sale Agreement, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"Subsidiary" of a Person means (i) any corporation more than 50% of
----------
the outstanding securities having ordinary voting power of which shall at
the time be owned or controlled, directly or indirectly, by such Person or
by one or more of its Subsidiaries or by such Person and one or more of its
Subsidiaries, or (ii) any partnership, association, joint venture or
similar business organization more than 50% of the ownership interests
having ordinary voting power of which shall at the time be so owned or
controlled. Unless otherwise expressly provided, all references herein to
a "Subsidiary" shall mean a Subsidiary of Seller.
"Terminating Tranche" has the meaning set forth in Section 4.3(b).
------------------- --------------
"Torchmark" means Torchmark Corporation, a Delaware corporation, and
---------
its successors.
"Torchmark Credit Agreement" means that certain Credit Agreement dated
--------------------------
as of October 22, 1997 among Torchmark, certain lenders parties thereto
from time to time and Bank One (formerly known as The First National Bank
of Chicago), as such Credit Agreement is in effect on the date hereof and
without giving effect to any amendment, restatement, supplement,
termination, release or other modification of all or any term or provision
of such Credit Agreement after the date hereof.
"Torchmark Entities" means, collectively, Torchmark, AIL and Seller.
------------------
"Total Adjusted Capital" means the total adjusted capital as
----------------------
determined in accordance with the risk-based capital instructions adopted
by the NAIC, as such instructions may be amended, modified, supplemented or
restated from time to time. For reference purposes only, such term is also
defined in Section 27-1-36-24 of the Indiana Code.
62
"Training Advance Receivable" means a Receivable representing an
---------------------------
advance made to any Person at the time of the commencement of such Person's
engagement as an Insurance Agent for AIL.
"Tranche Period" means, with respect to any Purchaser Interest held by
--------------
a Financial Institution:
(a) if Yield for such Purchaser Interest is calculated on the basis
of the LIBO Rate, a period of one, two, three or six months, or such other
period as may be selected by Seller with consultation from (and approval
by) the Agent, commencing on a Business Day selected by Seller or the Agent
pursuant to this Agreement. Such Tranche Period shall end on the day in
the applicable succeeding calendar month which corresponds numerically to
the beginning day of such Tranche Period, provided, however, that if there
--------
is no such numerically corresponding day in such succeeding month, such
Tranche Period shall end on the last Business Day of such succeeding month;
or
(b) if Yield for such Purchaser Interest is calculated on the basis
of the Base Rate, a period commencing on a Business Day selected by Seller
and agreed to by the Agent, provided no such period shall exceed one month.
--------
If any Tranche Period would end on a day which is not a Business Day, such
Tranche Period shall end on the next succeeding Business Day, provided,
--------
however, that in the case of Tranche Periods corresponding to the LIBO
Rate, if such next succeeding Business Day falls in a new month, such
Tranche Period shall end on the immediately preceding Business Day. In the
case of any Tranche Period for any Purchaser Interest of which commences
before the Amortization Date and would otherwise end on a date occurring
after the Amortization Date, such Tranche Period shall end on the
Amortization Date. The duration of each Tranche Period which commences
after the Amortization Date shall be of such duration as selected by the
Agent.
"Transaction Documents" means, collectively, this Agreement, each
---------------------
Purchase Notice, the Receivables Sale Agreement, the Subordinated Note, the
Performance Guaranty, the Fee Letter and all other instruments, documents
and agreements executed and delivered in connection herewith.
"UCC" means the Uniform Commercial Code as from time to time in effect
---
in the specified jurisdiction.
"Unsupported Receivable" means any Receivable which as of January 31,
----------------------
2000 (i) is subject to a Purchaser Interest, (ii) is owing by a member of
an Agent-Hierarchy the SGA in respect of which shall then fail to have the
Minimum SGA Net Worth for such SGA and (iii) such SGA shall have been an
SGA for longer than twelve (12) months.
63
"Year 2000 Plan" means a plan to prevent the Year 2000 Problem from
--------------
having an adverse effect upon the business, financial condition,
operations, property or prospects of a Person.
"Year 2000 Problem" means, with respect to any Person, the risk that
-----------------
computer applications directly used by that Person cannot or will not: (a)
handle date information involving any and all dates before, during and/or
after January 1, 2000, including accepting input, providing output and
performing date calculations in whole or in part; (b) operate accurately
without interruption on and in respect of any and all dates before, during
and/or after January 1, 2000; and (c) store and provide date input
information without creating any ambiguity as to the century.
"Yield" means for each respective Tranche Period relating to Purchaser
-----
Interests of the Financial Institutions, an amount equal to the product of
the applicable Discount Rate for such Purchaser Interest multiplied by the
Capital of such Purchaser Interest for each day elapsed during such Tranche
Period, annualized on a 360 day basis.
All accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles. All terms used in
Article 9 of the UCC in the State of Illinois, and not specifically defined
herein, are used herein as defined in such Article 9.
64
EXHIBIT II
FORM OF PURCHASE NOTICE
[Date]
Bank One, NA,
as Agent for the Purchasers parties
to the Receivables Purchase Agreement
referred to below
Suite IL1-0079, 1-21
1 Bank ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Asset Backed Finance
Re: Purchase Notice
---------------
Ladies and Gentlemen:
The undersigned refers to the Receivables Purchase Agreement, dated as
of December 21, 1999 (the "Receivables Purchase Agreement," the terms defined
therein being used herein as therein defined), among the undersigned, as Seller
and American Income Life Insurance Company, as initial Servicer, Preferred
Receivables Funding Corporation ("PREFCO"), certain Financial Institutions
parties thereto and Bank One, NA, as Agent for PREFCO and such Financial
Institutions, and hereby gives you notice, irrevocably, pursuant to Section 1.2
of the Receivables Purchase Agreement, that the undersigned hereby requests an
Incremental Purchase under the Receivables Purchase Agreement, and in that
connection sets forth below the information relating to such Incremental
Purchase (the "Proposed Purchase") as required by Section 1.2 of the Receivables
Purchase Agreement:
(i) The Business Day of the Proposed Purchase is [insert purchase
date], which date is at least three (3) Business Days after the date hereof and
is a Settlement Date.
(ii) The requested Purchase Price in respect of the Proposed Purchase
is $__________.
(iii) The requested Discount Rate is [LIBO Rate] [Base Rate] [Pooled
Commercial Paper rate] [having a Tranche Period of ___________________].
65
The undersigned hereby certifies that the following statements are
true on the date hereof, and will be true on the date of the Proposed Purchase
(before and after giving effect to the Proposed Purchase):
(i) the representations and warranties of the undersigned set forth
in Section 5.1 of the Receivables Purchase Agreement are true and correct on and
as of the date of such Proposed Purchase as though made on and as of such date;
(ii) no event has occurred and is continuing, or would result from
such Proposed Purchase, that will constitute an Amortization Event or a
Potential Amortization Event; and
(iii) neither the Liquidity Termination Date nor the Amortization
Date shall have occurred, the aggregate Capital of all Purchaser Interests shall
not exceed the Purchase Limit and the aggregate Purchaser Interests shall not
exceed 100%.
Very truly yours,
AILIC RECEIVABLES CORPORATION
By: ________________________________
Name:
Title:
Signature Page to
Purchase Notice
66
EXHIBIT III
PLACES OF BUSINESS OF THE SELLER PARTIES;
LOCATIONS OF RECORDS;
FEDERAL EMPLOYER IDENTIFICATION NUMBER(S)
AILIC RECEIVABLES CORPORATION
Principal Place of Business
---------------------------
None, except:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Location(s) of Records
----------------------
None, except:
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Federal Employer Identification Number(s)
-----------------------------------------
None, except:
Corporate, Partnership Trade and Assumed Names
----------------------------------------------
None.
AMERICAN INCOME LIFE INSURANCE COMPANY
Principal Place of Business
---------------------------
None, except:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
67
Location(s) of Records
----------------------
None, except:
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Federal Employer Identification Number(s)
-----------------------------------------
None, except:
▇▇-▇▇▇▇▇▇▇
Corporate, Partnership Trade and Assumed Names
----------------------------------------------
None.
68
EXHIBIT IV
FORM OF COMPLIANCE CERTIFICATE
To: Bank One, NA, as Agent
This Compliance Certificate is furnished pursuant to that certain
Receivables Purchase Agreement dated as of December 21, 1999 among AILIC
Receivables Corporation (the "Seller"), American Income Life Insurance Company
------
(the "Servicer"), the Purchasers party thereto and Bank One, NA, as agent for
--------
such Purchasers (the "Agreement"). Terms used herein and not otherwise defined
---------
herein shall have the meanings assigned under the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _____________________ of [the Performance
Guarantor][AIL][Seller].
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of [the Performance Guarantor][AIL][Seller] and its Subsidiaries
during the accounting period covered by the attached financial statements.
3. The examinations described in paragraph 2 did not disclose, and I have
no knowledge of, the existence of any condition or event which (i) constitutes
an Amortization Event or Potential Amortization Event, as each such term is
defined under the Agreement, during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth in paragraph 5 below, or (ii) which has had or
is reasonably likely to have a Material Adverse Effect.
4. Schedule I attached hereto sets forth financial data and computations
evidencing the compliance with certain covenants of the Agreement, all of which
data and computations are true, complete and correct. [Schedule I attached
hereto further sets forth financial data and computations evidencing the
compliance with the covenants of, and the absence of default under, the
Torchmark Credit Agreement, all of which data and computations are true,
complete and accurate.]/1/
5. Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which Seller has taken, is taking, or proposes to take
with respect to each such condition or event:
__________________
/1/To be included in the Compliance Certificate to be issued by the Performance
Guarantor.
69
It is understood and acknowledged that the undersigned is executing this
Certificate not in an individual capacity but solely in his or her capacity as
an officer of the Seller and is without any personal liability as to the matters
contained in this certificate.
The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Certificate
----------
in support hereof, are made and delivered this ____ day of ______________,
____________.
________________________________
Name:
Title:
70
Signature Page to
Compliance Certificate
71
SCHEDULE I TO COMPLIANCE CERTIFICATE
A. Unless otherwise defined herein, the terms used in this Compliance
Certificate have the meanings ascribed thereto in the Agreement.
This schedule relates to the month ended:___________
72
EXHIBIT V
FORM OF ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT is entered into as of the ___ day of
____________, ____, by and between _____________________ ("Seller") and
------
__________________ ("Purchaser").
---------
PRELIMINARY STATEMENTS
----------------------
A. This Assignment Agreement is being executed and delivered in
accordance with Section 12.1(b) of that certain Receivables Purchase
Agreement dated as of December 21], 1999 by and among AILIC Receivables
Corporation, American Income Life Insurance Company, as "Servicer",
Preferred Receivables Funding Corporation, Bank One, NA, as Agent, and the
Seller and certain other Financial Institutions party thereto (as amended,
modified or restated from time to time, the "Purchase Agreement").
------------------
Capitalized terms used and not otherwise defined herein are used with the
meanings set forth or incorporated by reference in the Purchase Agreement.
B. The Seller is a Financial Institution party to the Purchase
Agreement, and the Purchaser wishes to become a Financial Institution
thereunder; and
C. The Seller is selling and assigning to the Purchaser an undivided
____________% (the "Transferred Percentage") interest in all of Seller's
----------------------
rights and obligations under the Purchase Agreement and the Transaction
Documents, including, without limitation, the Seller's Commitment and (if
applicable) the Capital of the Seller's Purchaser Interests as set forth
herein;
The parties hereto hereby agree as follows:
1. This sale, transfer and assignment effected by this Assignment
Agreement shall become effective (the "Effective Date") two (2) Business
--------------
Days (or such other date selected by the Agent in its sole discretion)
following the date on which a notice substantially in the form of Schedule
II to this Assignment Agreement ("Effective Notice") is delivered by the
----------------
Agent to PREFCO, the Seller and the Purchaser. From and after the Effective
Date, the Purchaser shall be a Financial Institution party to the Purchase
Agreement for all purposes thereof as if the Purchaser were an original
party thereto and the Purchaser agrees to be bound by all of the terms and
provisions contained therein.
2. If the Seller has no outstanding Capital under the Purchase
Agreement, on the Effective Date, Seller shall be deemed to have hereby
transferred and assigned to the Purchaser, without recourse, representation
or warranty (except as provided in paragraph 6 below), and the Purchaser
shall be deemed to have hereby irrevocably taken, received and assumed from
the Seller, the Transferred Percentage of the Seller's Commitment and all
rights and obligations associated therewith under the terms of the Purchase
Agreement, including, without limitation, the Transferred Percentage of the
Seller's future funding obligations under Section 4.1 of the Purchase
-----------
Agreement.
73
3. If the Seller has any outstanding Capital under the Purchase
Agreement, at or before 12:00 noon, local time of the Seller, on the
Effective Date the Purchaser shall pay to the Seller, in immediately
available funds, an amount equal to the sum of (i) the Transferred
Percentage of the outstanding Capital of the Seller's Purchaser Interests
(such amount, being hereinafter referred to as the "Purchaser's Capital");
-------------------
(ii) all accrued but unpaid (whether or not then due) Yield attributable to
the Purchaser's Capital; and (iii) accruing but unpaid fees and other costs
and expenses payable in respect of the Purchaser's Capital for the period
commencing upon each date such unpaid amounts commence accruing, to and
including the Effective Date (the "Purchaser's Acquisition Cost");
----------------------------
whereupon, the Seller shall be deemed to have sold, transferred and assigned to
the Purchaser, without recourse, representation or warranty (except as
provided in paragraph 6 below), and the Purchaser shall be deemed to have
hereby irrevocably taken, received and assumed from the Seller, the
Transferred Percentage of the Seller's Commitment and the Capital of the
Seller's Purchaser Interests (if applicable) and all related rights and
obligations under the Purchase Agreement and the Transaction Documents,
including, without limitation, the Transferred Percentage of the Seller's
future funding obligations under Section 4.1 of the Purchase Agreement.
4. Concurrently with the execution and delivery hereof, the Seller
will provide to the Purchaser copies of all documents requested by the
Purchaser which were delivered to such Seller pursuant to the Purchase
Agreement.
5. Each of the parties to this Assignment Agreement agrees that at
any time and from time to time upon the written request of any other party,
it will execute and deliver such further documents and do such further acts
and things as such other party may reasonably request in order to effect
the purposes of this Assignment Agreement.
6. By executing and delivering this Assignment Agreement, the Seller
and the Purchaser confirm to and agree with each other, the Agent and the
Financial Institutions as follows: (a) other than the representation and
warranty that it has not created any Adverse Claim upon any interest being
transferred hereunder, the Seller makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made by any other Person in or in connection with the
Purchase Agreement or the Transaction Documents or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the
Purchaser, the Purchase Agreement or any other instrument or document
furnished pursuant thereto or the perfection, priority, condition, value or
sufficiency of any collateral; (b) the Seller makes no representation or
warranty and assumes no responsibility with respect to the financial
condition of the Seller, any Obligor, any Seller Affiliate or the
performance or observance by the Seller, any Obligor, any Seller Affiliate
of any of their respective obligations under the Transaction Documents or
any other instrument or document furnished pursuant thereto or in
connection therewith; (c) the Purchaser confirms that it has received a
copy of the Transaction Documents, together with such other documents and
information as it has deemed appropriate to make its own credit analysis
and decision to enter into this Assignment Agreement; (d) the Purchaser
will, independently and without reliance upon the Agent, PREFCO, the Seller
or any
74
other Financial Institution or Purchaser and based on such documents and
information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under the Purchase
Agreement and the Transaction Documents; (e) the Purchaser appoints and
authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under the Transaction Documents as are delegated to
the Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; (f) the Purchaser appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such powers under
the Transaction Documents as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto;
and (g) the Purchaser agrees that it will perform in accordance with their
terms all of the obligations which, by the terms of the Purchase Agreement
and the Transaction Documents, are required to be performed by it as a
Financial Institution or, when applicable, as a Purchaser.
7. Each party hereto represents and warrants to and agrees with the
Agent that it is aware of and will comply with the provisions of the
Purchase Agreement, including, without limitation, Sections 4.1, 13.1 and
14.6 thereof.
8. Schedule I hereto sets forth the revised Commitment of the Seller
and the Commitment of the Purchaser, as well as administrative information
with respect to the Purchaser.
9. THIS ASSIGNMENT AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS.
10. The Purchaser hereby covenants and agrees that, prior to the date
which is one year and one day after the payment in full of all senior
indebtedness for borrowed money of PREFCO, it will not institute against,
or join any other Person in instituting against, PREFCO any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
similar proceeding under the laws of the United States or any state of the
United States.
75
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be executed by their respective duly authorized officers as of the
date hereof.
[SELLER]
By:
Title:
[Purchaser]
By:
Title:
76
SCHEDULE I TO ASSIGNMENT AGREEMENT
----------------------------------
LIST OF LENDING OFFICES, ADDRESSES
FOR NOTICES AND COMMITMENT AMOUNTS
----------------------------------
Date: _______________, ____
Transferred Percentage: ________%
----------------------
▇-▇ ▇-▇ ▇-▇ ▇-▇
--- --- --- ---
Outstanding
Commitment Commitment Capital Ratable
Seller [existing] [revised] (if any) Share
------ ---------- --------- -------- -----
▇-▇ ▇-▇ ▇-▇
--- --- ---
Outstanding
Commitment Capital Ratable
Seller [initial] (if any) Share
------ ---------- -------- -----
Address for Notices
-------------------
Attention:
Phone:
Fax:
77
SCHEDULE II TO ASSIGNMENT AGREEMENT
-----------------------------------
EFFECTIVE NOTICE
TO:________________________, Seller
________________________
________________________
________________________
TO:________________________, Purchaser
________________________
________________________
________________________
The undersigned, as Agent under the Receivables Purchase Agreement
dated as of December 21, 1999 by and among AILIC Receivables Corporation,
American Income Life Insurance Company, as "Servicer", Preferred Receivables
Funding Corporation, Bank One, NA, as Agent, and the Financial Institutions
party thereto, hereby acknowledges receipt of executed counterparts of a
completed Assignment Agreement dated as of ____________, ____ between
__________________, as Seller, and __________________, as Purchaser. Terms
defined in such Assignment Agreement are used herein as therein defined.
1. Pursuant to such Assignment Agreement, you are advised that the
Effective Date will be ______________, ____.
2. PREFCO hereby consents to the Assignment Agreement as required by
Section 12.1(b) of the Purchase Agreement.
[3. Pursuant to such Assignment Agreement, the Purchaser is required
to pay $____________ to the Seller at or before 12:00 noon (local time of the
Seller) on the Effective Date in immediately available funds.]
Very truly yours,
BANK ONE, NA,
individually and as Agent
By:__________________________
Title:_______________________
78
PREFERRED RECEIVABLES FUNDING
CORPORATION
By: ____________________________
Authorized Signatory
79
EXHIBIT VI
CREDIT AND COLLECTION POLICY
(Attached)
80
EXHIBIT VII
FORM OF CONTRACT(S)
(Attached)
81
EXHIBIT VIII
FORM OF MONTHLY REPORT
(Attached)
[In addition to such other information as may be included on this
exhibit, each Monthly Report should set forth the following with respect to
the related Calculation Period (as defined in the Receivables Sale
Agreement): (i) the aggregate Outstanding Balance of Receivables created
and conveyed by AIL to Seller in purchases pursuant to the Receivables Sale
Agreement during such Calculation Period, as well as the Net Receivables
Balance included therein, (ii) the aggregate purchase price payable to AIL
in respect of such purchases, specifying the Discount Factor (as defined in
the Receivables Sale Agreement) in effect for such Calculation Period and
the aggregate Purchase Price Credits (as defined in the Receivables Sale
Agreement) deducted in calculating such aggregate purchase price, (iii) the
aggregate amount of funds received by the Servicer during such Calculation
Period which are to be applied as Reinvestments, (iv) the increase or
decrease in the amount outstanding under the Subordinated Note as of the
end of such Calculation Period after giving effect to the application of
funds toward the aggregate purchase price and the restrictions on
Subordinated Loans (as defined in the Receivables Sale Agreement) set forth
in Section 1.2(a)(ii) of the Receivables Sale Agreement, and (v) the amount
of any capital contribution made by AIL to Seller as of the end of such
Calculation Period pursuant to Section 1.2(b) of the Receivables Sale
Agreement.]
[In the event Seller elects to have any Monthly Report serve as a Purchase
Notice, the following shall be appended to such Monthly Report as the last
page thereof:
Seller gives you notice, irrevocably, pursuant to Section 1.2 of the
Receivables Purchase Agreement, that the undersigned hereby requests
an Incremental Purchase under the Receivables Purchase Agreement, and
in that connection sets forth below the information relating to such
Incremental Purchase (the "Proposed Purchase") as required by Section
1.2 of the Receivables Purchase Agreement:
(i) The Business Day of the Proposed Purchase is [insert
purchase date], which date is at least three (3) Business Days after
the date hereof and is a Settlement Date.
(ii) The requested Purchase Price in respect of the Proposed
Purchase is $__________.
(iii) The requested Discount Rate is [LIBO Rate] [Base Rate]
[Pooled Commercial Paper rate] [having a Tranche Period of
___________________].
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Purchase (before and after giving effect to the Proposed Purchase):
82
(i) the representations and warranties of the undersigned set forth
in Section 5.1 of the Receivables Purchase Agreement are true and correct
on and as of the date of such Proposed Purchase as though made on and as of
such date;
(ii) no event has occurred and is continuing, or would result from
such Proposed Purchase, that will constitute an Amortization Event or a
Potential Amortization Event; and
(iii) neither the Liquidity Termination Date nor the Amortization
Date shall have occurred, the aggregate Capital of all Purchaser Interests
shall not exceed the Purchase Limit and the aggregate Purchaser Interests
shall not exceed 100%.
Very truly yours,
AILIC RECEIVABLES CORPORATION
By: ________________________________
Name:
Title: ]
83
SCHEDULE A
COMMITMENTS OF FINANCIAL INSTITUTIONS
---------------------------------------- --------------------------------------
Financial Institution Commitment
--------------------- ----------
---------------------------------------- --------------------------------------
BANK ONE, NA $102,040,816.00
---------------------------------------- --------------------------------------
84
SCHEDULE B
DOCUMENTS TO BE DELIVERED TO THE AGENT
ON OR PRIOR TO THE INITIAL PURCHASE
(Attached)
85
::ODMA\PCDOCS\CHICAGO4\1004451\9 December 23, 1999 (2:59PM)
86