EXHIBIT 10.3
RECEIVABLES TRANSFER AGREEMENT
Dated as of February 10, 1999,
by and among
CALLAWAY GOLF COMPANY,
as Parent Guarantor,
CALLAWAY GOLF SALES COMPANY,
as the CGS Originator and as Servicer,
and
GOLF FUNDING CORPORATION,
TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS AND INTERPRETATION................................................... - 2 -
Section 1.01 Definitions........................................................ - 2 -
Section 1.02 Rules of Construction.............................................. - 2 -
ARTICLE II.
TRANSFERS OF RECEIVABLES......................................................... - 2 -
Section 2.01 Agreement to Transfer.............................................. - 2 -
(a) Receivables Transfers.............................................. - 2 -
(b) Determination of Sold Receivables.................................. - 2 -
(c) Payment of Purchase Price.......................................... - 2 -
(d) Determination of Contributed Receivables........................... - 2 -
(e) Ownership of Transferred Receivables............................... - 3 -
(f) Reconstruction of General Trial Balance............................ - 3 -
(g) Servicing of Receivables........................................... - 3 -
Section 2.02 Grant of Security Interest......................................... - 3 -
Section 2.03 Guaranty of Obligations of the CGS Originator...................... - 4 -
Section 2.04 Enforcement of Parent Guaranty..................................... - 4 -
ARTICLE III.
CONDITIONS PRECEDENT............................................................. - 5 -
Section 3.01 Conditions to Initial Transfer..................................... - 5 -
(a) Transfer Agreement; Other Documents................................ - 5 -
(b) Governmental Approvals............................................. - 5 -
(c) Compliance with Laws............................................... - 5 -
(d) Purchase Agreement Conditions...................................... - 5 -
Section 3.02 Conditions to all Transfers........................................ - 5 -
ARTICLE IV.
REPRESENTATIONS, WARRANTIES AND COVENANTS........................................ - 6 -
Section 4.01 Representations and Warranties of the CGS Originator and the Parent
Guarantor.......................................................... - 6 -
(a) Corporate Existence; Compliance with Law........................... - 6 -
(b) Executive Offices; Collateral Locations; Corporate or Other Names;
FEIN............................................................... - 7 -
(c) Corporate Power, Authorization, Enforceable Obligations............ - 7 -
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(d) No Litigation...................................................... - 7 -
(e) Solvency........................................................... - 8 -
(f) Material Adverse Effect............................................ - 8 -
(g) Ownership of Receivables; Liens.................................... - 8 -
(h) Ventures, Subsidiaries and Affiliates; Outstanding Stock........... - 9 -
(i) Taxes.............................................................. - 9 -
(j) Intellectual Property.............................................. - 9 -
(k) Full Disclosure.................................................... - 10 -
(l) Notices to Obligors................................................ - 10 -
(m) ERISA.............................................................. - 10 -
(n) Brokers............................................................ - 11 -
(o) Margin Regulations................................................. - 11 -
(p) Nonapplicability of Bulk Sales Laws................................ - 11 -
(q) Securities Act and Investment Company Act Exemptions............... - 11 -
(r) Government Regulation.............................................. - 11 -
(s) Books and Records; Minutes......................................... - 12 -
(t) Deposit and Disbursement Accounts.................................. - 12 -
(u) Representations and Warranties in Other Related Documents.......... - 12 -
(v) Receivables........................................................ - 12 -
Section 4.02 Affirmative Covenants of the CGS Originator and the Parent
Guarantor.......................................................... - 13 -
(a) Offices and Records................................................ - 13 -
(b) Access............................................................. - 13 -
(c) Communication with Accountants..................................... - 14 -
(d) Compliance With Credit and Collection Policies..................... - 14 -
(e) Assignment......................................................... - 15 -
(f) Compliance with Agreements and Applicable Laws..................... - 15 -
(g) Maintenance of Existence and Conduct of Business................... - 15 -
(h) Notice of Material Event........................................... - 15 -
(i) Use of Proceeds.................................................... - 16 -
(j) Separate Identity.................................................. - 16 -
(k) ERISA.............................................................. - 18 -
(l) Payment, Performance and Discharge of Obligations.................. - 18 -
(m) Deposit of Collections............................................. - 18 -
(n) Accounting Changes................................................. - 18 -
(o) Adjustments to Sale Price.......................................... - 19 -
Section 4.03 Negative Covenants of the CGS Originator and the Parent Guarantor.. - 19 -
(a) Sale of Stock and Assets........................................... - 19 -
(b) Liens.............................................................. - 19 -
(c) Modifications of Receivables or Contracts.......................... - 19 -
(d) Sale Characterization.............................................. - 19 -
(e) Capital Structure and Business..................................... - 20 -
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(f) Actions Affecting Rights.......................................... - 20 -
(g) ERISA............................................................. - 20 -
(h) Change to Credit and Collection Policies.......................... - 20 -
(i) Adverse Tax Consequences.......................................... - 20 -
(j) No Proceedings.................................................... - 21 -
Section 4.04 Breach of Representations, Warranties or Covenants................ - 21 -
Section 4.05 Additional Covenants of the Parent Guarantor...................... - 21 -
(a) Restricted Payments............................................... - 21 -
(b) Indebtedness...................................................... - 22 -
(c) Mergers, Subsidiaries, Etc........................................ - 22 -
(d) Financial Covenants............................................... - 22 -
(e) Operating Plan.................................................... - 22 -
ARTICLE V.
INDEMNIFICATION AND WAIVER...................................................... - 22 -
Section 5.01 Indemnification................................................... - 22 -
Section 5.02 Waiver............................................................ - 24 -
ARTICLE VI.
GFC LOANS TO THE CGS ORIGINATOR................................................. - 25 -
Section 6.01 GFC Loans......................................................... - 25 -
Section 6.02 Notices Relating to GFC Loans..................................... - 25 -
Section 6.03 Disbursement of Loan Proceeds..................................... - 25 -
Section 6.04 CGS Originator Note............................................... - 25 -
Section 6.05 Principal Repayments.............................................. - 26 -
Section 6.06 Interest.......................................................... - 26 -
Section 6.07 Receipt of Payments............................................... - 27 -
Section 6.08 Separateness From Transfer of Receivables......................... - 27 -
ARTICLE VII.
COLLATERAL SECURITY............................................................. - 27 -
Section 7.01 Security Interest................................................. - 27 -
Section 7.02 Other Collateral; Rights in Receivables........................... - 28 -
ARTICLE VIII.
MISCELLANEOUS................................................................... - 28 -
Section 8.01 Notices........................................................... - 28 -
Section 8.02 No Waiver; Remedies............................................... - 29 -
Section 8.03 Successors and Assigns............................................ - 29 -
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Section 8.04 Termination; Survival of Obligations.............................. - 30 -
Section 8.05 Complete Agreement; Modification of Agreement..................... - 30 -
Section 8.06 Amendments and Waivers............................................ - 31 -
Section 8.07 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL........................................................ - 31 -
Section 8.08 Counterparts...................................................... - 32 -
Section 8.09 Severability...................................................... - 32 -
Section 8.10 Section Titles.................................................... - 32 -
Section 8.11 No Setoff......................................................... - 33 -
Section 8.12 Confidentiality................................................... - 33 -
Section 8.13 Further Assurances................................................ - 33 -
Section 8.14 Fees and Expenses................................................. - 34 -
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INDEX OF APPENDICES
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Exhibit 2.01(a) Form of Receivables Assignment
Exhibit 6.04(a) Form of CGS Note
Schedule 4.01(b) Executive Offices; Collateral Locations; Corporate Names
Schedule 4.01(d) Litigation
Schedule 4.01(f) Material Adverse Effect
Schedule 4.01(h) Ventures, Subsidiaries and Affiliates; Outstanding Stock
Schedule 4.01(i) Tax Matters
Schedule 4.01(m) ERISA Plans
Schedule 4.01(t) Deposit and Disbursement Accounts
Schedule 4.02(g) Trade Names
Schedule 4.03(b) Existing Liens
Annex W Financial Covenants
Annex X Definitions
Annex Y Schedule of Documents
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THIS RECEIVABLES TRANSFER AGREEMENT ("Agreement") is entered into as
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of February 10, 1999, by and among CALLAWAY GOLF SALES COMPANY, a California
corporation ("CGS"), as transferor of Receivables (the "CGS Originator") and as
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a servicer hereunder (the "Servicer"), CALLAWAY GOLF COMPANY, a California
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corporation (the "Parent Guarantor") and GOLF FUNDING CORPORATION, a California
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corporation ("GFC").
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RECITALS
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A. The CGS Originator owns all of the outstanding Stock of GFC.
B. GFC has been formed for the sole purpose of purchasing, or
otherwise acquiring by capital contribution, and reselling to the Purchaser, all
domestic trade receivables originated by the CGS Originator.
C. The CGS Originator intends to sell, and GFC intends to purchase,
all such trade receivables, from time to time, as described herein.
D. In addition, the CGS Originator may, from time to time,
contribute capital to GFC in the form of Contributed Receivables or cash (in
such capacity, a "Stockholder Originator").
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E. The Parent Guarantor is the parent of the CGS Originator and as
such will derive direct and indirect economic benefits from the sale of the
trade receivables described above in Recital C.
F. In order to induce GFC to enter into this Agreement, the Parent
Guarantor has agreed to guarantee the CGS Originator's obligations under this
Agreement.
G. In order to effectuate the purposes of this Agreement, GFC
desires to appoint Callaway Golf Sales Company to service, administer and
collect the receivables acquired by GFC pursuant to this Agreement and Callaway
Golf Sales Company is willing to act in such capacity as the Servicer hereunder
on the terms and conditions set forth herein.
AGREEMENT
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NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
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ARTICLE I.
DEFINITIONS AND INTERPRETATION
Section 1.01 Definitions. Capitalized terms used and not otherwise
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defined herein shall have the meanings ascribed to them in Annex X.
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Section 1.02 Rules of Construction. For purposes of this Agreement,
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the rules of construction set forth in Annex X shall govern. All Appendices
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hereto, or expressly identified to this Agreement, are incorporated herein by
reference and, taken together with this Agreement, shall constitute but a single
agreement.
ARTICLE II.
TRANSFERS OF RECEIVABLES
Section 2.01 Agreement to Transfer.
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(a) Receivables Transfers. Subject to the terms and conditions
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hereof, the CGS Originator agrees to sell or contribute (without recourse except
to the extent specifically provided herein) to GFC on the Business Day following
the Closing Date and on each Business Day thereafter (each such date, a
"Transfer Date") all Receivables owned by it on each such Transfer Date, and GFC
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agrees to purchase or acquire as a capital contribution all such Receivables on
each such Transfer Date. All such Transfers shall be evidenced by a certificate
of assignment substantially in the form of Exhibit 2.01(a) (a "Receivables
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Assignment"), and the CGS Originator and GFC shall execute and deliver the
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Receivables Assignment on or before the Closing Date.
(b) Determination of Sold Receivables. On and as of each Transfer
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Date, those Receivables sold to, and purchased by, GFC shall consist of those
Receivables owned by the CGS Originator and identified by the Servicer for sale
to GFC (each such Receivable individually, a "Sold Receivable," and
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collectively, the "Sold Receivables") such that the Sale Price of all Sold
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Receivables shall not exceed the amount of cash available to GFC for the payment
thereof.
(c) Payment of Purchase Price. In consideration for each Sale of
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Sold Receivables hereunder, GFC shall pay to the CGS Originator on the Transfer
Date therefor the Sale Price therefor in Dollars in immediately available funds.
All payments by GFC under this Section 2.01(c) shall be effected by means of a
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wire transfer not later than 12:00 noon (New York time) on the day when due to
the Agent Account.
(d) Determination of Contributed Receivables. To the extent that on
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and as of any Transfer Date, Receivables which do not constitute Transferred
Receivables have not been identified as Sold Receivables pursuant to Section
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2.01(b), then the CGS Originator shall, unless
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it has delivered an Election Notice to GFC, effect transfer of such Receivables
by contributing such Receivables to GFC as a capital contribution (each such
contributed Receivable individually, a "Contributed Receivable," and
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collectively, the "Contributed Receivables"). If the CGS Originator elects not
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to contribute Receivables to GFC on any Transfer Date, the CGS Originator shall
deliver to GFC not later than 5:00 p.m. (New York time) on the Business Day
immediately preceding such Transfer Date a notice of such election (each such
notice, an "Election Notice").
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(e) Ownership of Transferred Receivables. On and after each Transfer
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Date and after giving effect to the Transfers to be made on each such date, GFC
shall own the Transferred Receivables and the CGS Originator shall not take any
action inconsistent with such ownership nor shall the CGS Originator claim any
ownership interest in such Transferred Receivables.
(f) Reconstruction of General Trial Balance. If at any time the CGS
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Originator fails to generate its General Trial Balance, GFC shall have the right
to reconstruct such General Trial Balance so that a determination of the Sold
Receivables can be made pursuant to Section 2.01(b). The CGS Originator agrees
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to cooperate with such reconstruction, including by delivery to GFC, upon GFC's
request, of copies of all Contracts and Records.
(g) Servicing of Receivables. So long as no Event of Servicer
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Termination shall have occurred and be continuing and no Successor Servicer has
assumed the responsibilities and obligations of the Servicer pursuant to Section
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11.02 of the Purchase Agreement, GFC and the CGS Originator hereby appoint the
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Servicer, in a manner consistent with Article VII of the Purchase Agreement, to
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(i) conduct the servicing, administration and collection of the Transferred
Receivables and shall take, or cause to be taken, all such actions as may be
necessary or advisable to service, administer and collect the Transferred
Receivables, all in accordance with (A) the terms of the Purchase Agreement, (B)
customary and prudent servicing procedures for trade receivables of a similar
type and (C) all applicable laws, rules and regulations, and (ii) hold all
Contracts and other documents and incidents relating to the Transferred
Receivables in trust for the benefit of GFC, as the owner thereof, and for the
sole purpose of facilitating the servicing of the Transferred Receivables in
accordance with the terms of the Purchase Agreement.
Section 2.02 Grant of Security Interest. The parties hereto intend
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that each Transfer shall constitute a purchase and sale or capital contribution,
as applicable, and not a loan. Notwithstanding anything to the contrary set
forth in this Section 2.02, if a court of competent jurisdiction determines that
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any transaction provided for herein constitutes a loan and not a purchase and
sale or capital contribution, as applicable, then the parties hereto intend that
this Agreement shall constitute a security agreement under applicable law and
that the CGS Originator shall be deemed to have granted, and the CGS Originator
does hereby grant, to GFC a first priority Lien in and to all of the CGS
Originator's right, title and interest in, to and under the Transferred
Receivables.
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Section 2.03 Guaranty of Obligations of the CGS Originator. The
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Parent Guarantor hereby unconditionally guarantees to GFC, and its respective
successors, endorsees, transferees and assigns (including without limitation the
Purchaser, the Operating Agent and the Collateral Agent), the prompt payment and
performance of the obligations of CGS as the CGS Originator and as the Servicer
under the Purchase Agreement, this Agreement and each other Related Document
(the "Guaranteed Obligations"). The Parent Guarantor agrees that its
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obligations shall be primary, absolute and unconditional, irrespective of, and
unaffected by:
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in the Purchase Agreement, this Agreement, any
other Related Document or any other agreement, document or instrument to which
CGS (whether as CGS Originator or as Servicer) and/or the Parent Guarantor is or
may become a party;
(b) the absence of any action to enforce the obligations of CGS under
the Purchase Agreement, this Agreement or any other Related Document or the
waiver or consent by GFC with respect to any of the provisions hereof or
thereof;
(c) the existence, value or condition of, or failure to perfect its
Lien against, any Transfer Agreement Collateral or any action or the absence of
any action, by GFC or its assigns in respect thereof (including, without
limitation, the release of any such security);
(d) the insolvency of CGS; or
(e) any other action or circumstances which might otherwise constitute
a legal or equitable discharge or defense of a surety or guarantor,
it being agreed by the Parent Guarantor that its obligations under the Purchase
Agreement, this Agreement and the other Related Documents shall not be
discharged until the Termination Date or thereafter to the extent provided in
Section 8.04. The Parent Guarantor agrees that any notice or directive given at
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any time to GFC which is inconsistent with the waiver in the immediately
preceding sentence shall be null and void and may be ignored by GFC and, in
addition, may not be pleaded or introduced as evidence in any litigation
relating to the Purchase Agreement, this Agreement or any other Related Document
for the reason that such pleading or introduction would be at variance with the
written terms of this Agreement, unless GFC (with the prior written consent of
the Purchaser, the Operating Agent and the Collateral Agent) has specifically
agreed otherwise in writing. It is agreed among the Parent Guarantor and GFC
that the foregoing waivers are of the essence of the transaction contemplated by
the Related Documents and that, but for this Section 2.03 and such waivers, GFC
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would decline to enter into this Agreement, and the Purchaser, the Operating
Agent and the Collateral Agent would decline to enter into the Purchase
Agreement.
Section 2.04 Enforcement of Parent Guaranty. The guaranty set forth
------------------------------
in Section 2.03 is a guaranty of payment and not a guaranty of collection. In
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no event shall GFC have any
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obligation (although it is entitled, at its option) to proceed against the CGS
Originator or any Transfer Agreement Collateral before seeking satisfaction from
the Parent Guarantor, and GFC may proceed, prior or subsequent to, or
simultaneously with, the enforcement of GFC's rights hereunder, to exercise any
right or remedy which it may have against the Transfer Agreement Collateral, as
a result of any Lien it may have as security.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.01 Conditions to Initial Transfer. The initial Transfer
------------------------------
hereunder shall be subject to satisfaction of each of the following conditions
precedent (any one or more of which may be waived in writing by each of GFC and
the Operating Agent):
(a) Transfer Agreement; Other Documents. This Agreement or
-----------------------------------
counterparts hereof shall have been duly executed by, and delivered to, the CGS
Originator, the Parent Guarantor and GFC, and GFC shall have received such
documents, instruments, agreements and legal opinions as GFC shall request in
connection with the transactions contemplated by this Agreement, including all
those identified in the Schedule of Documents, each in form and substance
satisfactory to GFC.
(b) Governmental Approvals. GFC shall have received (i) satisfactory
----------------------
evidence that the CGS Originator and the Parent Guarantor have obtained all
required consents and approvals of all Persons, including all requisite
Governmental Authorities, to the execution, delivery and performance of this
Agreement and the other Related Documents and the consummation of the
transactions contemplated hereby and thereby or (ii) an Officer's Certificate
from each of the CGS Originator and the Parent Guarantor in form and substance
satisfactory to GFC affirming that no such consents or approvals are required.
(c) Compliance with Laws. The CGS Originator and the Parent Guarantor
--------------------
shall be in compliance in all material respects with all applicable foreign,
federal, state and local laws and regulations, including those specifically
referenced in Section 4.02(f).
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(d) Purchase Agreement Conditions. Each of those conditions precedent
-----------------------------
set forth in Article III of the Purchase Agreement shall have been satisfied or
-----------
waived in writing as provided therein.
Section 3.02 Conditions to all Transfers. Each Transfer hereunder
---------------------------
(including the initial Transfer) shall be subject to satisfaction of the
following further conditions precedent as of the Transfer Date therefor:
(a) the representations and warranties of the CGS Originator and the
Parent Guarantor contained herein or in any other Related Document shall be true
and correct as of such
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Transfer Date, both before and after giving effect to such Transfer and to the
application of the Sale Price therefor, except to the extent that any such
representation or warranty expressly relates to an earlier date and except for
changes therein expressly permitted by this Agreement;
(b) no Incipient Termination Event or Termination Event shall have
occurred and be continuing or would result after giving effect to such Transfer
or the application of the Sale Price therefor; and
(c) the CGS Originator and the Parent Guarantor shall have taken such
other action, including delivery of approvals, consents, opinions, documents and
instruments to GFC as GFC may request.
The acceptance by the CGS Originator of the Sale Price for the Sold Receivables
on any Transfer Date shall be deemed to constitute, as of any such Transfer
Date, a representation and warranty by the CGS Originator that the conditions in
this Section 3.02 have been satisfied. Upon any such acceptance, title to the
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transferred receivables sold or contributed on such Transfer Date shall be
vested absolutely in GFC, whether or not such conditions were in fact so
satisfied.
ARTICLE IV.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 4.01 Representations and Warranties of the CGS Originator
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and the Parent Guarantor. To induce GFC to purchase the Sold Receivables and
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to acquire the Contributed Receivables, the CGS Originator and the Parent
Guarantor make the following representations and warranties to GFC, each and all
of which shall survive the execution and delivery of this Agreement.
(a) Corporate Existence; Compliance with Law. Each of the CGS
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Originator and the Parent Guarantor (i) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation; (ii) is duly qualified to conduct business and is in good
standing in each other jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification, except where failure to
be so qualified would not result in the exposure of either the CGS Originator or
the Parent Guarantor to losses, damages or liabilities in excess of $100,000;
(iii) has the requisite corporate power and authority and the legal right to
own, pledge, mortgage or otherwise encumber and operate its properties, to lease
the property it operates under lease, and to conduct its business as now,
heretofore and proposed to be conducted; (iv) has all licenses, permits,
consents or approvals from or by, and has made all filings with, and has given
all notices to, all Governmental Authorities having jurisdiction, to the extent
required for such ownership, operation and conduct; (v) is in compliance with
its charter and bylaws; and (vi) subject to specific representations set forth
herein regarding ERISA, Environmental Laws, tax laws and other laws, is in
compliance with all applicable provisions of
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law, except where the failure to comply, individually or in the aggregate, could
not reasonably be expected to have a Material Adverse Effect.
(b) Executive Offices; Collateral Locations; Corporate or Other Names;
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FEIN. As of the Closing Date, the current location of each of the CGS
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Originator's and the Parent Guarantor's chief executive office, principal place
of business, other offices, the warehouses and premises within which any
Transfer Agreement Collateral is stored or located, and the locations of its
records concerning the Transfer Agreement Collateral are set forth in Schedule
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4.01(b) and none of such locations have changed within the past 12 months.
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During the prior five years, except as set forth in Schedule 4.01(b), the CGS
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Originator and the Parent Guarantor have not been known as or used any
corporate, fictitious or trade name. In addition, Schedule 4.01(b) lists the
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federal employer identification numbers of the CGS Originator and of the Parent
Guarantor.
(c) Corporate Power, Authorization, Enforceable Obligations. The
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execution, delivery and performance by each of the CGS Originator and the Parent
Guarantor of this Agreement and the other Related Documents to which it is a
party and the creation of all Liens provided for herein and therein and, solely
with respect to clause (vii) below, the exercise by GFC, the Purchaser, the
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Operating Agent or the Collateral Agent of any of its rights and remedies under
any Related Document to which it is a party: (i) are within such Person's
corporate power; (ii) have been duly authorized by all necessary or proper
corporate and shareholder action; (iii) do not contravene any provision of such
Person's charter or bylaws; (iv) do not violate any law or regulation, or any
order or decree of any court or Governmental Authority; (v) do not conflict with
or result in the breach or termination of, constitute a default under or
accelerate or permit the acceleration of any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which such Person is a party or by which such Person or any of its property is
bound; (vi) do not result in the creation or imposition of any Adverse Claim
upon any of the property of such Person; and (vii) do not require the consent or
approval of any Governmental Authority or any other Person, except those
referred to in Section 3.01(b), all of which will have been duly obtained, made
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or complied with prior to the Closing Date. On or prior to the Closing Date,
each of the Related Documents shall have been duly executed and delivered by
each of the CGS Originator and the Parent Guarantor that is a party thereto and
each such Related Document shall then constitute a legal, valid and binding
obligation of the CGS Originator and the Parent Guarantor, as applicable,
enforceable against it in accordance with its terms.
(d) No Litigation. No Litigation is now pending or, to the knowledge
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of the CGS Originator or the Parent Guarantor, threatened against either the CGS
Originator or the Parent Guarantor that (i) challenges either the CGS
Originator's or the Parent Guarantor's right or power to enter into or perform
any of its obligations under the Related Documents to which it is a party, or
the validity or enforceability of any Related Document or any action taken
thereunder, (ii) seeks to prevent the Transfer, Purchase or pledge of any
Receivable or the consummation of any of the transactions contemplated under
this Agreement or the other Related Documents or (iii) has a reasonable risk of
being determined adversely to the CGS Originator or the Parent
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Guarantor and that, if so determined, could have a Material Adverse Effect.
Except as set forth on Schedule 4.01(d), as of the Closing Date there is no
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Litigation pending or threatened that seeks damages in excess of $1,000,000 or
injunctive relief against, or alleges criminal misconduct by, the CGS Originator
or the Parent Guarantor.
(e) Solvency. Both before and after giving effect to (i) the
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transactions contemplated by this Agreement and the other Related Documents and
(ii) the payment and accrual of all transaction costs in connection with the
foregoing, each of the CGS Originator and the Parent Guarantor is and will be
Solvent.
(f) Material Adverse Effect. Between December 31, 1997 and the
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Closing Date, (i) each of the CGS Originator and the Parent Guarantor has not
incurred any obligations, contingent or non-contingent liabilities, liabilities
for Charges, long-term leases or unusual forward or long-term commitments that,
alone or in the aggregate, could reasonably be expected to have a Material
Adverse Effect, other than, with respect to a Material Adverse Effect as listed
on Schedule 4.01(f), (ii) no contract, lease or other agreement or instrument
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has been entered into by the CGS Originator or the Parent Guarantor or has
become binding upon the such Person's assets and no law or regulation applicable
to the CGS Originator or the Parent Guarantor has been adopted that has had or
could reasonably be expected to have a Material Adverse Effect on such Person,
and (iii) neither the CGS Originator nor the Parent Guarantor is in default and
to the knowledge of each of the CGS Originator and the Parent Guarantor after
diligent inquiry, no third party is in default under any material contract,
lease or other agreement or instrument to which the CGS Originator or Parent
Guarantor is a party that alone or in the aggregate could reasonably be expected
to have a Material Adverse Effect. Between December 31, 1997 and the Closing
Date no event has occurred that alone or together with other events could
reasonably be expected to have a Material Adverse Effect, other than, with
respect to a Material Adverse Effect as listed on Schedule 4.01(f).
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(g) Ownership of Receivables; Liens. The CGS Originator owns each
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Receivable originated by it free and clear of any Adverse Claim (other than
Permitted Encumbrances) and, from and after each Transfer Date, GFC will acquire
valid and properly perfected title to and the sole record and beneficial
ownership interest in each Transferred Receivable purchased or otherwise
acquired on such date, free and clear of any Adverse Claim or restrictions on
transferability. As of the Closing Date, none of the properties and assets of
the CGS Originator are subject to any Liens other than Permitted Encumbrances
and Credit Facility Liens, and there are no facts, circumstances or conditions
known to the CGS Originator that may result in any Liens (including Liens
arising under Environmental Laws) other than Permitted Encumbrances and Credit
Facility Liens. The CGS Originator has received all assignments, bills of sale
and other documents, and has duly effected all recordings, filings and other
actions necessary to establish, protect and perfect the CGS Originator's right,
title and interest in and to the Receivables originated by it and its other
properties and assets. The Liens granted to GFC pursuant to Section 7.01 will
------------
at all times be fully perfected first priority Liens in and to the Transfer
Agreement Collateral, subject only to Permitted Encumbrances and Credit Facility
Liens.
-8-
(h) Ventures, Subsidiaries and Affiliates; Outstanding Stock. Except
--------------------------------------------------------
as set forth in Schedule 4.01(h), neither the CGS Originator nor the Parent
----------------
Guarantor has any Subsidiaries, is engaged in any joint venture or partnership
with any other Person, or is an Affiliate of any other Person. All of the
issued and outstanding Stock of each of the CGS Originator and the Parent
Guarantor is owned by each of the Stockholders in the amounts set forth on
Schedule 4.01(h). Except as set forth on Schedule 4.01(h), there are no
---------------- ----------------
outstanding rights to purchase, options, warrants or similar rights or
agreements pursuant to which either the CGS Originator or the Parent Guarantor
may be required to issue, sell, repurchase or redeem any of its Stock or other
equity securities or any Stock or other equity securities of its Subsidiaries.
(i) Taxes. All material tax returns, reports and statements,
-----
including information returns, required by any Governmental Authority to be
filed by the Parent Guarantor or the CGS Originator have been filed with the
appropriate Governmental Authority. All Charges have been paid prior to the
date on which any fine, penalty, interest or late charge may be added thereto
for nonpayment thereof (or any such fine, penalty, interest, late charge or loss
has been paid), excluding Charges or other amounts which are being contested in
accordance with Section 4.02(l) or have been included as a liability on the most
---------------
recent consolidated balance sheet prepared by the Parent Guarantor which has
been provided to GFC and delivered to the Purchaser, the Operating Agent and the
Collateral Agent pursuant to the Purchase Agreement. Proper and accurate
amounts have been withheld by each of the CGS Originator and the Parent
Guarantor from its respective employees for all periods in full and complete
compliance with all applicable federal, state, local and foreign laws or have
been included as a liability on the most recent consolidated balance sheet
prepared by the Parent Guarantor which has been provided to GFC and delivered to
the Purchaser, the Operating Agent and the Collateral Agent pursuant to the
Purchase Agreement. All amounts withheld have been timely paid to the
respective Governmental Authorities. Schedule 4.01(i) sets forth as of the
----------------
Closing Date (i) those taxable years for which each of the CGS Originator's and
the Parent Guarantor's tax returns are currently being audited by the IRS or any
other applicable Governmental Authority and (ii) any assessments or threatened
assessments in connection with such audit or otherwise currently outstanding.
Except as described on Schedule 4.01(i), neither the CGS Originator nor the
----------------
Parent Guarantor has executed or filed with the IRS or any other Governmental
Authority any agreement or other document extending, or having the effect of
extending, the period for assessment or collection of any Charges. Each of the
CGS Originator and the Parent Guarantor and its respective predecessors are not
liable for any Charges: (A) under any agreement (including any tax sharing
agreements) or (B) to the best of the CGS Originator's knowledge, as a
transferee. As of the Closing Date, neither the CGS Originator nor the Parent
Guarantor has agreed or been requested to make any adjustment under IRC Section
481(a), by reason of a change in accounting method or otherwise, that would have
a Material Adverse Effect.
(j) Intellectual Property. As of the Closing Date, each of the CGS
---------------------
Originator and the Parent Guarantor owns or has rights to use all intellectual
property necessary to continue to conduct its business as now or heretofore
conducted by it or proposed to be conducted by it. To the knowledge of each of
the CGS Originator and the Parent Guarantor after diligent inquiry,
-9-
such Person conducts its business and affairs without infringement of or
interference with any intellectual property of any other Person.
(k) Full Disclosure. No information contained in this Agreement, any
---------------
of the other Related Documents, or any written statement furnished by or on
behalf of either the CGS Originator or the Parent Guarantor to GFC, the
Purchaser, the Operating Agent or the Collateral Agent pursuant to the terms of
this Agreement or any of the other Related Documents contains any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading in
light of the circumstances under which they were made.
(l) Notices to Obligors. The CGS Originator has directed all Obligors
-------------------
of Transferred Receivables and shall instruct all future Obligors of such
Receivables, to remit all payments with respect to such Receivables only (A) by
check or money order mailed to an office of the Servicer or (B) by check, money
order, wire transfer or moneygram to one or more of the Blocked Accounts.
(m) ERISA.
-----
(i) Schedule 4.01(m) lists all Title IV Plans, Multiemployer
----------------
Plans, ESOPs and Retiree Welfare Plans. Copies of all such listed Plans,
together with a copy of the latest IRS/DOL 5500-series form for each such Plan,
have been delivered to GFC. Each Qualified Plan has been determined by the IRS
to qualify under Section 401 of the IRC, the trusts created thereunder have been
determined to be exempt from tax under the provisions of Section 501 of the IRC,
and nothing has occurred that would cause the loss of such qualification or tax-
exempt status. Each Plan is in compliance with the applicable provisions of
ERISA and the IRC, including the timely filing of all reports required under the
IRC or ERISA. Neither the CGS Originator, the Parent Guarantor nor an ERISA
Affiliate has failed to make any contribution or pay any amount due as required
by either Section 412 of the IRC or Section 302 of ERISA or the terms of any
such Plan. Neither the CGS Originator nor any ERISA Affiliate has engaged in a
"prohibited transaction," as defined in Section 4975 of the IRC, in connection
with any Plan that would subject either the CGS Originator or the Parent
Guarantor to a material tax on prohibited transactions imposed by Section 4975
of the IRC.
(ii) Except as set forth in Schedule 4.01(m): (A) no Title IV
----------------
Plan has any Unfunded Pension Liability; (B) no ERISA Event or event described
in Section 4062(e) of ERISA with respect to any Title IV Plan has occurred or is
reasonably expected to occur; (C) there are no pending or, to the knowledge of
either the CGS Originator or the Parent Guarantor, threatened claims (other than
claims for benefits in the normal course), sanctions, actions or lawsuits,
asserted or instituted against any Plan or any Person as fiduciary or sponsor of
any Plan; (D) neither the CGS Originator, the Parent Guarantor nor an ERISA
Affiliate has incurred or reasonably expects to incur any liability as a result
of a complete or partial withdrawal from a Multiemployer Plan; (E) within the
last five years no Title IV Plan with Unfunded Pension
-10-
Liabilities has been transferred outside of the "controlled group" (within the
meaning of Section 4001(a)(14) of ERISA) of the CGS Originator, Parent Guarantor
or ERISA Affiliate; (F) no liability under any Title IV Plan has been satisfied
with the purchase of a contract from an insurance company that is not rated AAA
by S&P or an equivalent rating by another nationally recognized rating agency.
(n) Brokers. No broker or finder acting on behalf of either the CGS
-------
Originator or the Parent Guarantor was employed or utilized in connection with
this Agreement or the other Related Documents or the transactions contemplated
hereby or thereby and neither the CGS Originator nor the Parent Guarantor has
any obligation to any Person in respect of any finder's or brokerage fees in
connection therewith.
(o) Margin Regulations. Neither the CGS Originator nor the Parent
------------------
Guarantor nor any of their respective Subsidiaries is engaged, or will engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin security" as
such terms are defined in Regulation U of the Federal Reserve Board as now and
from time to time hereafter in effect (such securities being referred to herein
as "Margin Stock"). The CGS Originator does not own any Margin Stock. Neither
------------
the Parent Guarantor nor any of its Subsidiaries owns any Margin Stock (other
than investments by the Parent Guarantor permitted by Section 6.2(i) of the
Credit Agreement as in effect on the date hereof). The extensions of credit
contemplated by the Credit Facility as in effect on the date hereof do not
violate, and neither the CGS Originator nor the Parent Guarantor or any of its
Subsidiaries will take or permit to be taken any action that might cause any
Related Document or the Credit Facility to violate any regulation of the Federal
Reserve Board.
(p) Nonapplicability of Bulk Sales Laws. No transaction contemplated
-----------------------------------
by this Agreement or any of the other Related Documents requires compliance with
any bulk sales act or similar law.
(q) Securities Act and Investment Company Act Exemptions. Each
----------------------------------------------------
purchase of Transferred Receivables under this Agreement will constitute (i) a
"current transaction" within the meaning of Section 3(a)(3) of the Securities
Act and (ii) a purchase or other acquisition of notes, drafts, acceptances, open
accounts receivable or other obligations representing part or all of the sales
price of merchandise, insurance or services within the meaning of Section
3(c)(5) of the Investment Company Act.
(r) Government Regulation. Neither the CGS Originator nor the Parent
---------------------
Guarantor is an "investment company" or an "affiliated person" of, or "promoter"
or "principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act. Neither the CGS Originator nor the
Parent Guarantor is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, or any other federal or state
statute that restricts or limits its ability to incur Debt or to perform its
obligations hereunder. The purchase or acquisition of the Transferred
Receivables by GFC hereunder, the application of the
-11-
Sale Price therefor and the consummation of the transactions contemplated by
this Agreement and the other Related Documents will not violate any provision of
any such statute or any rule, regulation or order issued by the Securities and
Exchange Commission.
(s) Books and Records; Minutes. The bylaws or the certificate or
--------------------------
articles of incorporation of the CGS Originator require it to maintain (i) books
and records of account and (ii) minutes of the meetings and other proceedings of
its Stockholders and board of directors.
(t) Deposit and Disbursement Accounts. Schedule 4.01(t) lists all
--------------------------------- ----------------
banks and other financial institutions at which the CGS Originator maintains
deposit or other bank accounts as of the Closing Date, including any Blocked
Accounts, and such schedule correctly identifies the name, address and telephone
number of each depository, the name in which the account is held, a description
of the purpose of the account, and the complete account number therefor.
(u) Representations and Warranties in Other Related Documents. Each
---------------------------------------------------------
of the representations and warranties of the CGS Originator and the Parent
Guarantor contained in the Related Documents (other than this Agreement) is true
and correct in all material respects and each of the CGS Originator and the
Parent Guarantor hereby makes each such representation and warranty to, and for
the benefit of, the Purchaser, the Operating Agent and the Collateral Agent as
if the same were set forth in full herein.
(v) Receivables. With respect to each Transferred Receivable
-----------
designated as an Eligible Receivable in any Investment Base Certificate
delivered on or after the Transfer Date of such Transferred Receivable:
(i) such Receivable satisfies the criteria for an Eligible
Receivable;
(ii) prior to its Transfer to GFC such Receivable was owned by
the CGS Originator free and clear of any Adverse Claim (other than
Permitted Encumbrances), and the CGS Originator had the full right, power
and authority to sell, contribute, assign, transfer and pledge its interest
therein as contemplated under this Agreement and the other Related
Documents and, upon such Transfer, GFC will acquire valid and properly
perfected title to and the sole record and beneficial ownership interest in
such Receivable, free and clear of any Adverse Claim and, following such
Transfer, such Receivable will not be subject to any Adverse Claim as a
result of any action or inaction on the part of the CGS Originator;
(ii) the Transfer of each such Receivable pursuant to this
Agreement and the Receivables Assignment executed by the CGS Originator
constitutes, as applicable, a valid sale, contribution, transfer,
assignment, setover and conveyance to GFC of all right, title and interest
of the CGS Originator in and to such Receivable; and
-12-
(iv) the CGS Originator has no knowledge of any fact (including
any defaults by the Obligor thereunder on any other Receivable) that would
cause it or should have caused it to expect that any payments on such
Receivable will not be paid in full when due or to expect any other
Material Adverse Effect.
The representations and warranties described in this Section 4.01 shall survive
------------
the Transfer of the Transferred Receivables to GFC, any subsequent assignment of
the Transferred Receivables by GFC, and the termination of this Agreement and
the other Related Documents and shall continue until the indefeasible payment in
full of all Transferred Receivables.
Section 4.02 Affirmative Covenants of the CGS Originator and the
---------------------------------------------------
Parent Guarantor. The CGS Originator and the Parent Guarantor covenant and
----------------
agree that, unless otherwise consented to by GFC and the Operating Agent, from
and after the Closing Date and until the Termination Date:
(a) Offices and Records. The CGS Originator shall maintain its
-------------------
principal place of business and chief executive office and the office at which
it keeps its Records at the respective locations specified in Schedule 4.01(b)
----------------
or, upon 30 days' prior written notice to GFC, at such other location in a
jurisdiction where all action requested by GFC, the Purchaser, the Operating
Agent or the Collateral Agent pursuant to Section 8.13 shall have been taken
------------
with respect to the Transferred Receivables. The CGS Originator shall also
maintain each location where Transfer Agreement Collateral is located and each
office at which it stores its Records only at the respective locations specified
in Schedule 4.01(b) or at such other substituted or additional locations with
----------------
respect to which the CGS Originator shall, prior to establishing such location,
(x) have notified GFC, the Purchaser, the Operating Agent and the Collateral
Agent thereof and (y) have taken all actions necessary or otherwise requested by
GFC, the Purchaser, the Operating Agent or the Collateral Agent pursuant to
Section 8.13 with respect to the Transferred Receivables and the Originator
------------
Collateral. The CGS Originator shall at its own cost and expense, for not less
than three years from the date on which each Transferred Receivable was
originated, or for such longer period as may be required by law, maintain
adequate Records with respect to such Transferred Receivable, including records
of all payments received, credits granted and merchandise returned with respect
thereto.
(b) Access. The CGS Originator shall, at its own expense and during
------
normal business hours, from time to time upon one Business Day's prior notice
and as frequently as GFC, the Servicer, the Operating Agent or the Collateral
Agent determines to be appropriate: (i) provide GFC, the Servicer, the Operating
Agent or the Collateral Agent and any of their respective officers, employees
and agents access to its properties (including properties of the CGS Originator
utilized in connection with the collection, processing or servicing of the
Transferred Receivables), facilities, advisors and employees (including
officers) of the CGS Originator and to the Transfer Agreement Collateral, (ii)
permit GFC, the Servicer, the Operating Agent or the Collateral Agent and any of
their respective officers, employees and agents, to inspect, audit and make
extracts from the CGS Originator's books and records, including all Records
maintained by
-13-
the CGS Originator, (iii) permit GFC, the Servicer, the Operating Agent or the
Collateral Agent and their respective officers, employees and agents, to
inspect, review and evaluate the Transferred Receivables and other Transfer
Agreement Collateral, and (iv) permit GFC, the Servicer, the Operating Agent or
the Collateral Agent and their respective officers, employees and agents to
discuss matters relating to the Transferred Receivables or the CGS Originator's
performance under this Agreement or the affairs, finances and accounts of the
CGS Originator with any of its officers, directors, employees, representatives
or agents (in each case, with those Persons having knowledge of such matters)
and with its independent certified public accountants. If an Incipient
Termination Event or a Termination Event shall have occurred and be continuing,
or the Operating Agent, in good faith, believes that an Incipient Termination
Event or a Termination Event is imminent or deems the Purchaser's rights or
interests in the Transferred Receivables or the Transfer Agreement Collateral
insecure, the CGS Originator shall, at its own expense, provide such access at
all times and without advance notice and provide GFC, the Servicer, the
Operating Agent or the Collateral Agent with access to its suppliers and
customers. The CGS Originator shall make available to GFC, the Servicer, the
Operating Agent or the Collateral Agent and their respective counsel, as quickly
as is possible under the circumstances, originals or copies of all books and
records, including Records maintained by the CGS Originator, that GFC, the
Servicer, the Operating Agent or the Collateral Agent may request. The CGS
Originator shall deliver any document or instrument necessary for GFC, the
Servicer, the Operating Agent or the Collateral Agent, as they may from time to
time request, to obtain records from any service bureau or other Person that
maintains records for the CGS Originator, and shall maintain duplicate records
or supporting documentation on media, including computer tapes and discs owned
by the CGS Originator.
(c) Communication with Accountants. Each of the CGS Originator and
------------------------------
the Parent Guarantor authorizes GFC, the Servicer, the Operating Agent and the
Collateral Agent to communicate directly with its independent certified public
accountants, and authorizes and shall instruct those accountants and advisors to
disclose and make available to GFC, the Servicer, the Operating Agent and the
Collateral Agent any and all financial statements and other supporting financial
documents, schedules and information relating to the CGS Originator or the
Parent Guarantor (including copies of any issued management letters) with
respect to the business, financial condition and other affairs of such Person.
The CGS Originator and the Parent Guarantor agree to render to GFC, the
Servicer, the Operating Agent and the Collateral Agent at such Person's own cost
and expense, such clerical and other assistance as may be reasonably requested
with regard to the foregoing. If any Termination Event shall have occurred and
be continuing, the CGS Originator shall, promptly upon request therefor, assist
GFC in delivering to the Operating Agent and the Collateral Agent Records
reflecting activity through the close of business on the Business Day
immediately preceding the date of such request.
(d) Compliance With Credit and Collection Policies. The CGS
----------------------------------------------
Originator and the Parent Guarantor shall comply in all material respects with
the Credit and Collection Policies applicable to each Transferred Receivable and
the Contracts therefor, and with the terms of such Receivables and Contracts.
-14-
(e) Assignment. The CGS Originator and the Parent Guarantor agree
----------
that, to the extent permitted under the Purchase Agreement, GFC may assign all
of its right, title and interest in, to and under the Transferred Receivables,
the GFC Loans and this Agreement, including its right to exercise the remedies
set forth in Section 4.04. The CGS Originator and the Parent Guarantor agree
------------
that, upon any such assignment, the assignee thereof may enforce directly,
without joinder of GFC, all of the obligations of the CGS Originator and the
Parent Guarantor hereunder, including any obligations of the CGS Originator or
the Parent Guarantor set forth in Sections 4.02(o), 4.04, 5.01 and 8.14.
---------------- ---- ---- ----
(f) Compliance with Agreements and Applicable Laws. Each of the CGS
----------------------------------------------
Originator and the Parent Guarantor shall perform each of its obligations under
this Agreement and the other Related Documents and comply with all federal,
state and local laws and regulations applicable to it and the Receivables,
including those relating to truth in lending, retail installment sales, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices, privacy, licensing, taxation, ERISA and labor matters and
Environmental Laws and Environmental Permits, except to the extent that the
failure to so comply, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(g) Maintenance of Existence and Conduct of Business. Each of the CGS
------------------------------------------------
Originator and the Parent Guarantor shall: (i) do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence
and its rights and franchises; (ii) continue to conduct its business
substantially as now conducted or as otherwise permitted hereunder and in
accordance with the terms of its certificate or articles of incorporation and
bylaws; (iii) at all times maintain, preserve and protect all of its assets and
properties used or useful in the conduct of its business, including all
licenses, permits, charters and registrations, and keep the same in good repair,
working order and condition in all material respects (taking into consideration
ordinary wear and tear) and from time to time make, or cause to be made, all
necessary or appropriate repairs, replacements and improvements thereto
consistent with industry practices; and (iv) transact business only in such
corporate and trade names as are set forth in Schedule 4.02(g) or, upon 30 days'
----------------
prior written notice to GFC, in such other corporate or trade names with respect
to which all action requested by GFC, the Purchaser, the Operating Agent or the
Collateral Agent pursuant to Section 8.13 shall have been taken with respect to
------------
the Transferred Receivables.
(h) Notice of Material Event. Each of the CGS Originator and the
------------------------
Parent Guarantor shall promptly inform GFC in writing of the occurrence of any
of the following, in each case setting forth the details thereof and what
action, if any, the CGS Originator or the Parent Guarantor proposes to take with
respect thereto:
(i) any Litigation commenced or threatened against the CGS
Originator or the Parent Guarantor or with respect to or in connection with
all or any portion of the Transferred Receivables that (A) seeks damages or
penalties in an uninsured amount in excess of $500,000 in any one instance
or $1,000,000 in the aggregate,
-15-
(B) seeks injunctive relief, (C) is asserted or instituted against any
Plan, its fiduciaries or its assets or against the CGS Originator or any
ERISA Affiliate in connection with any Plan, (D) alleges criminal
misconduct by the CGS Originator or the Parent Guarantor, or (E) would, if
determined adversely, have a Material Adverse Effect;
(ii) the commencement of a case or proceeding by or against the
CGS Originator or the Parent Guarantor seeking a decree or order in respect
of the CGS Originator or the Parent Guarantor (A) under the Bankruptcy Code
or any other applicable federal, state or foreign bankruptcy or other
similar law, (B) appointing a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) for the CGS Originator or the
Parent Guarantor or for any substantial part of such Person's assets, or
(C) ordering the winding-up or liquidation of the affairs of the CGS
Originator or the Parent Guarantor;
(iii) the receipt of notice that (A) the CGS Originator or the
Parent Guarantor is being placed under regulatory supervision, (B) any
license, permit, charter, registration or approval used in the conduct of
business of the CGS Originator or the Parent Guarantor is to be, or may be,
suspended or revoked if such suspension or revocation may have a Material
Adverse Effect, or (C) the CGS Originator or the Parent Guarantor is to
cease and desist any practice, procedure or policy employed by the CGS
Originator or the Parent Guarantor in the conduct of its business if such
cessation may have a Material Adverse Effect;
(iv) (A) any Adverse Claim made or asserted against any of the
Transferred Receivables of which it becomes aware or (B) any determination
that a Transferred Receivable designated as an Eligible Receivable in an
Investment Base Certificate or otherwise was not an Eligible Receivable at
the time of such designation; or
(v) any other event, circumstance or condition that has had or
could reasonably be expected to have a Material Adverse Effect.
(i) Use of Proceeds. The CGS Originator shall utilize the proceeds
---------------
of (i) the Sale Price obtained by it for each Sale made by it hereunder and
(ii) any GFC Loan solely for general corporate purposes and to pay any related
expenses payable by the CGS Originator under this Agreement and the other
Related Documents in connection with the transactions contemplated hereby and
thereby and for no other purpose.
(j) Separate Identity.
-----------------
(i) The CGS Originator and the Parent Guarantor shall maintain
corporate records and books of account separate from those of GFC.
-16-
(ii) The financial statements of CGS and its consolidated
Subsidiaries and of the Parent Guarantor and its consolidated Subsidiaries
shall disclose the effects of the CGS Originator's transactions in
accordance with GAAP and, in addition, disclose that (A) GFC's sole
business consists of the purchase or acceptance through capital
contribution of the Receivables from the CGS Originator and the subsequent
resale of such Receivables to the Purchaser, (B) GFC is a separate
corporate entity with its own separate creditors who will be entitled, upon
its liquidation, to be satisfied out of GFC's assets prior to any value in
GFC becoming available to GFC's equityholders and (C) the assets of GFC are
not available to pay creditors of the CGS Originator, the Parent Guarantor
or any Affiliate of either of them.
(iii) The resolutions, agreements and other instruments
underlying the transactions described in this Agreement shall be
continuously maintained by the CGS Originator and the Parent Guarantor as
official records.
(iv) The CGS Originator and the Parent Guarantor shall maintain
an arm's-length relationship with GFC and shall not hold themselves out as
being liable for the Debts of GFC.
(v) The CGS Originator and the Parent Guarantor shall keep its
assets and its liabilities wholly separate from those of GFC.
(vi) Each of the CGS Originator and the Parent Guarantor shall
conduct its business solely in its own name through its duly Authorized
Officers or agents and in a manner designed not to mislead third parties as
to the separate identity of the CGS Originator or the Parent Guarantor (as
the case may be).
(vii) The CGS Originator and the Parent Guarantor shall not
mislead third parties by conducting or appearing to conduct business on
behalf of GFC or expressly or impliedly representing or suggesting that
either the CGS Originator or the Parent Guarantor is liable or responsible
for the Debts of GFC or that the assets of either the CGS Originator or the
Parent Guarantor are available to pay the creditors of GFC.
(viii) The CGS Originator and the Parent Guarantor shall cause
operating expenses and liabilities of GFC to be paid from GFC's own funds.
(ix) The CGS Originator and the Parent Guarantor shall at all
times have stationery and other business forms and a mailing address and
telephone number separate from those of GFC.
(x) The CGS Originator and the Parent Guarantor shall at all
times limit its transactions with GFC only to those expressly permitted
hereunder or under any other Related Document.
-17-
(k) ERISA. Each of the CGS Originator and the Parent Guarantor shall
-----
give GFC and the Operating Agent prompt written notice of any event that could
result in the imposition of a Lien under Section 412 of the IRC or Section 302
or 4068 of ERISA.
(l) Payment, Performance and Discharge of Obligations.
-------------------------------------------------
(i) Subject to Section 4.02(l)(ii), the CGS Originator shall
-------------------
pay, perform and discharge or cause to be paid, performed and discharged
all of its obligations and liabilities, including all taxes, assessments
and governmental Charges upon its income and properties and all lawful
claims for labor, materials, supplies and services, promptly when due.
(ii) The CGS Originator may in good faith contest, by appropriate
proceedings, the validity or amount of any Charges or claims described in
Section 4.02(l)(i); provided, that (A) adequate reserves with respect to
------------------ --------
such contest are maintained on the books of the CGS Originator, in
accordance with GAAP, (B) such contest is maintained and prosecuted
continuously and with diligence, (C) none of the Transfer Agreement
Collateral may become subject to forfeiture or loss as a result of such
contest, (D) no Lien may be imposed to secure payment of such Charges or
claims other than inchoate tax liens and (E) GFC has advised the CGS
Originator in writing that GFC reasonably believes that nonpayment or
nondischarge thereof could not reasonably be expected to have or result in
a Material Adverse Effect.
(m) Deposit of Collections. The CGS Originator and the Parent
----------------------
Guarantor shall deposit and cause their respective Subsidiaries to deposit or
cause to be deposited promptly into a Blocked Account, and in any event no later
than the first Business Day after receipt thereof, all Collections it or they
may receive in respect of Transferred Receivables.
(n) Accounting Changes. If any Accounting Changes occur and such
------------------
changes result in a change in the standards or terms used herein, then the
parties hereto agree to enter into negotiations in order to amend such
provisions so as to equitably reflect such Accounting Changes with the desired
result that the criteria for evaluating the financial condition of such Persons
and their Subsidiaries shall be the same after such Accounting Changes as if
such Accounting Changes had not been made. If the parties hereto agree upon the
required amendments to this Agreement, then after appropriate amendments have
been executed and the underlying Accounting Change with respect thereto has been
implemented, any reference to GAAP contained herein shall, only to the extent of
such Accounting Change, refer to GAAP consistently applied after giving effect
to the implementation of such Accounting Change. If such parties cannot agree
upon the required amendments within 30 days following the date of implementation
of any Accounting Change, then all financial statements delivered and all
standards and terms used herein shall be prepared, delivered and used without
regard to the underlying Accounting Change.
-18-
(o) Adjustments to Sale Price. If on any day the Billed Amount of
-------------------------
any Transferred Receivable is reduced as a result of any Dilution Factors, and
the amount of such reduction exceeds the amount, if any, of Dilution Factors
taken into account in the calculation of the Sale Price for such Transferred
Receivable, the CGS Originator shall make a cash payment to GFC in the amount of
such excess by remitting such amount to the Collection Account in accordance
with the terms of the Purchase Agreement.
Section 4.03 Negative Covenants of the CGS Originator and the Parent
-------------------------------------------------------
Guarantor. The CGS Originator and the Parent Guarantor covenant and agree that,
---------
without the prior written consent of GFC and the Operating Agent, from and after
the Closing Date and until the Termination Date:
(a) Sale of Stock and Assets. Neither the CGS Originator nor the
------------------------
Parent Guarantor shall sell, transfer, convey, assign (by operation of law or
otherwise) or otherwise dispose of, or assign any right to receive income in
respect of, any of its properties or other assets, including capital Stock, any
Transferred Receivable or Contract therefor, any of its rights with respect to
any Account or any other Transfer Agreement Collateral (except (i) for sales of
inventory in the ordinary course of business, (ii) as expressly permitted by
this Agreement, any of the other Related Documents or the Intercreditor
Agreement and (iii) as expressly permitted by the Credit Agreement as in effect
on the date hereof).
(b) Liens. The CGS Originator shall not create, incur, assume or
-----
permit to exist any Adverse Claim on or with respect to the CGS Originator's
Receivables or any of its other properties or assets (whether now owned or
hereafter acquired) except for the Liens set forth in Schedule 4.03(b), other
----------------
Permitted Encumbrances and Credit Facility Liens. The Parent Guarantor shall not
create, incur, assume or permit to exist any Adverse Claim on or with respect to
any of its properties or assets (whether now owned or hereafter acquired) except
as expressly permitted by the Credit Agreement as in effect on the date hereof.
In addition, neither the CGS Originator nor the Parent Guarantor shall become a
party to any agreement, note, indenture or instrument or take any other action
that would prohibit the creation of a Lien on any of its properties or other
assets in favor of GFC as additional collateral for the recourse and indemnity
obligations of the CGS Originator to GFC hereunder, including those obligations
set forth in Sections 4.02(o), 4.04 and 5.01, except as otherwise expressly
---------------- ---- ----
permitted by this Agreement or any of the other Related Documents or the
Intercreditor Agreement.
(c) Modifications of Receivables or Contracts. The CGS Originator
-----------------------------------------
shall not extend, amend, forgive, discharge, compromise, cancel or otherwise
modify the terms of any Transferred Receivable, or amend, modify or waive any
term or condition of any Contract therefor.
(d) Sale Characterization. Neither the CGS Originator nor the Parent
---------------------
Guarantor shall make statements or disclosures or prepare any financial
statements for any purpose, including for federal income tax, reporting or
accounting purposes, that shall account for
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the transactions contemplated by this Agreement in any manner other than (i)
with respect to the Sale of each Sold Receivable originated by the CGS
Originator, as a true sale or absolute assignment of its full right, title and
ownership interest in such Transferred Receivable to GFC and (ii) with respect
to the Transfer of each Contributed Receivable originated by the CGS Originator,
as a contribution to the stated capital of GFC.
(e) Capital Structure and Business. Other than as permitted by the
------------------------------
Credit Agreement as in effect on the date hereof, neither the CGS Originator nor
the Parent Guarantor shall: (i) make any changes in any of its business
objectives, purposes or operations that could have or result in a Material
Adverse Effect, (ii) make any change in its capital structure as described on
Schedule 4.01(h), including the issuance of any shares of Stock, warrants or
----------------
other securities convertible into Stock or any revision of the terms of its
outstanding Stock, or (iii) amend, supplement or otherwise modify its
certificate or articles of incorporation or bylaws in a manner that could have
or result in a Material Adverse Effect. Other than as permitted by the Credit
Agreement as in effect on the date hereof, neither the CGS Originator nor the
Parent Guarantor shall engage in any business other than the businesses
currently engaged in by it.
(f) Actions Affecting Rights. Neither the CGS Originator nor the
------------------------
Parent Guarantor shall: (i) take any action, or fail to take any action, if
such action or failure to take action may interfere with the enforcement of any
rights hereunder or under the other Related Documents, including rights with
respect to the Transferred Receivables; (ii) waive or alter any rights with
respect to the Transferred Receivables (or any agreement or instrument relating
thereto); or (iii) fail to pay any tax, assessment, charge, fee or other
obligation of the CGS Originator with respect to the Transferred Receivables, or
fail to defend any action, if such failure to pay or defend may adversely affect
the priority or enforceability of the perfected title of GFC to and the sole
record and beneficial ownership interest of GFC in the Transferred Receivables
or, prior to their Transfer hereunder, the CGS Originator's right, title or
interest therein.
(g) ERISA. Neither the CGS Originator nor the Parent Guarantor
-----
shall, nor shall the CGS Originator or the Parent Guarantor cause or permit any
ERISA Affiliate to, cause or permit to occur an event that could result in the
imposition of a Lien under Section 412 of the IRC or Section 302 or 4068 of
ERISA.
(h) Change to Credit and Collection Policies. Neither the CGS
----------------------------------------
Originator nor the Parent Guarantor shall fail to comply with, and no change
shall be made to, the Credit and Collection Policies without the prior written
consent of GFC and the Operating Agent.
(i) Adverse Tax Consequences. The CGS Originator shall not take or
------------------------
permit to be taken any action (other than with respect to actions taken or to be
taken solely by a Governmental Authority), or fail or neglect to perform, keep
or observe any of its obligations hereunder or under the other Related
Documents, that would have the effect directly or indirectly of subjecting any
payment to GFC, the Purchaser or holders of the Commercial Paper who are
residents of the United States of America to withholding taxation.
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(j) No Proceedings. From and after the Closing Date and until the
--------------
date one year plus one day following the date on which the Commercial Paper with
the latest maturity has been indefeasibly paid in full in cash, neither the CGS
Originator nor the Parent Guarantor shall, directly or indirectly, institute or
cause to be instituted against GFC any proceeding of the type referred to in
Sections 9.01(c) and 9.01(d) of the Purchase Agreement.
---------------- -------
Section 4.04 Breach of Representations, Warranties or Covenants.
--------------------------------------------------
Upon discovery by the CGS Originator, the Parent Guarantor or GFC that any
representation or warranty described in Sections 4.01(g) or (v) (other than a
-----------------------
representation, warranty or covenant relating to the absence of Dilution
Factors) was not true with respect to any Transferred Receivable as of the
Transfer Date therefor, the party discovering the same shall give prompt written
notice thereof to the other parties hereto. The CGS Originator may, at any time
on any Business Day, or shall, if requested by notice from GFC, on the first
Business Day following receipt of such notice, either (a) repurchase such
Transferred Receivable from GFC for cash, (b) transfer ownership of a new
Eligible Receivable or new Eligible Receivables to GFC on such Business Day, or
(c) in the case of a Stockholder Originator, make a capital contribution in cash
to GFC by remitting the amount (the "Rejected Amount") of such capital
---------------
contribution to the Collection Account in accordance with the terms of the
Purchase Agreement, in each case in an amount equal to the Billed Amount of such
Transferred Receivable minus the sum of (A) Collections received in respect
-----
thereof and (B) the amount of any Dilution Factors taken into account in the
calculation of the Sale Price therefor. Notwithstanding the foregoing, if any
Receivable is not paid in full on account of any Dilution Factors, the CGS
Originator's repurchase obligation under this Section 4.04 with respect to such
------------
Receivable shall be reduced by the amount of any such Dilution Factors taken
into account in the calculation of the Sale Price therefor. Upon any such
repurchase by the CGS Originator, GFC shall, without any further action, be
deemed to have reconveyed all of its right, title and interest in and to such
Transferred Receivable to the CGS Originator without recourse, representation or
warranty. GFC shall, at the CGS Originator's expense, take any action the CGS
Originator may reasonably request to further evidence such reconveyance.
Section 4.05 Additional Covenants of the Parent Guarantor. The
--------------------------------------------
Parent Guarantor covenants and agrees that, without the prior written consent of
GFC and the Operating Agent, from and after the Closing Date and until the
Termination Date:
(a) Restricted Payments. Other than as expressly permitted by the
-------------------
Credit Agreement as in effect on the date hereof, the Parent Guarantor shall
not, nor shall the Parent Guarantor permit any of its Subsidiaries to, enter
into any lending or borrowing transaction with any other Person, advance credit
to any Person, declare any dividends, repurchase any Stock, return any capital,
or make any other payment or distribution of cash or other property or assets in
respect of its Stock.
-21-
(b) Indebtedness. Other than as expressly permitted by the Credit
------------
Agreement as in effect on the date hereof, the Parent Guarantor shall not, nor
shall the Parent Guarantor permit any of its Subsidiaries to, create, incur,
assume or permit to exist any Debt.
(c) Mergers, Subsidiaries, Etc. Other than as expressly permitted by
--------------------------
the Credit Agreement as in effect on the date hereof, the Parent Guarantor shall
not, nor shall the Parent Guarantor permit any of its Subsidiaries to, directly
or indirectly, by operation of law or otherwise, (i) form or acquire any
Subsidiary, or (ii) merge with, consolidate with, acquire all or substantially
all of the assets of capital Stock of, or otherwise combine with or acquire, any
Person.
(d) Financial Covenants. The Parent Guarantor shall comply with the
-------------------
covenants set forth in Annex W.
-------
(e) Operating Plan. As soon as available, but not later than forty
--------------
five (45) days after the end of each Fiscal Year, the Parent Guarantor shall
deliver to GFC and the Servicer (and the Servicer shall deliver to the Purchaser
and the Operating Agent in accordance with the Purchase Agreement) an annual
operating plan for the Parent Guarantor certified by its Chief Financial
Officer, for the following year, which will include a statement of all of the
material assumptions on which such plan is based, will include monthly balance
sheets and a monthly budget for the following year and will integrate sales,
gross profits, operating expenses, operating profit, cash flow projections and
credit availability projections all prepared on the same basis and in similar
detail as that on which operating results are reported (and in the case of cash
flow projections, representing management's good faith estimates of future
financial performance based on historical performance), and including plans for
personnel, capital expenditures and facilities.
ARTICLE V.
INDEMNIFICATION AND WAIVER
Section 5.01 Indemnification. Without limiting any other rights
---------------
that GFC or any of its Stockholders, officers, directors, employees, attorneys,
agents or representatives (each, an "GFC Indemnified Person") may have hereunder
----------------------
or under applicable law, the CGS Originator and the Parent Guarantor hereby
agrees to indemnify and hold harmless each GFC Indemnified Person from and
against any and all Indemnified Amounts that may be claimed or asserted against
or incurred by any such GFC Indemnified Person in connection with or arising out
of the transactions contemplated under this Agreement or under any other Related
Document, any actions or failures to act in connection therewith, including any
and all legal costs and expenses arising out of or incurred in connection with
disputes between or among any parties to any of the Related Documents, or in
respect of any Transferred Receivable or any Contract therefor or the use by the
CGS Originator of the Sale Price therefor or the proceeds of any GFC Loan;
provided, that the CGS Originator and the Parent Guarantor shall not be liable
--------
for any indemnification to a
-22-
GFC Indemnified Person to the extent that any such Indemnified Amounts result
solely from (a) such GFC Indemnified Person's gross negligence or willful
misconduct, as finally determined by a court of competent jurisdiction, (b)
recourse for uncollectible or uncollected Transferred Receivables, or (c) any
income tax or franchise tax incurred by any GFC Indemnified Person, except to
the extent that the incurrence of any such tax results from a breach of or
default under this Agreement or any other Related Document. Without limiting the
generality of the foregoing, the CGS Originator and the Parent Guarantor shall
pay on demand to each GFC Indemnified Person any and all Indemnified Amounts
relating to or resulting from:
(i) reliance on any representation or warranty made or deemed
made by the CGS Originator or the Parent Guarantor (or any of its officers)
under or in connection with this Agreement or any other Related Document or
on any other information delivered by the CGS Originator or the Parent
Guarantor pursuant hereto or thereto that shall have been incorrect in any
material respect when made or deemed made or delivered;
(ii) the failure by the CGS Originator or the Parent Guarantor
to comply with any term, provision or covenant contained in this Agreement,
any other Related Document or any agreement executed in connection herewith
or therewith, any applicable law, rule or regulation with respect to any
Transferred Receivable or Contract therefor, or the nonconformity of any
Transferred Receivable or the Contract therefor with any such applicable
law, rule or regulation;
(iii) the failure to vest and maintain vested in or to Transfer
to GFC, or any action taken or omitted by the CGS Originator which impairs
the vesting in or Transfer to GFC of, valid and properly perfected title to
and sole record and beneficial ownership of the Receivables that constitute
Transferred Receivables, together with all Collections in respect thereof,
free and clear of any Adverse Claim;
(iv) any dispute, claim, offset or defense of any Obligor
(other than its discharge in bankruptcy or a dispute, claim, offset or
defense which is finally determined by a court of competent jurisdiction to
be non-meritorious) to the payment of any Receivable that is the subject of
a Transfer hereunder (including a defense based on such Receivable or the
Contract therefor not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms but excluding
discounts to, or other Dilution Factors that reduce, the Billed Amount
thereof), or any other claim resulting from the sale of the merchandise or
services giving rise to such Receivable or the furnishing or failure to
furnish such merchandise or services or relating to collection activities
with respect to such Receivable (if such collection activities were
performed by CGS acting as a Servicer), except to the extent that such
dispute, claim, offset or defense results solely from any action or
inaction on the part of GFC;
-23-
(v) any products liability claim or other claim arising out of
or in connection with merchandise, insurance or services that is the
subject of any Contract;
(vi) any failure by the CGS Originator to cause the filing of,
or any delay in filing, financing statements or other similar instruments
or documents under the UCC of any applicable jurisdiction or any other
applicable laws with respect to any Receivable that is the subject of a
Transfer hereunder, whether at the time of any such Transfer or at any
subsequent time;
(vii) any failure by the CGS Originator (individually or as the
Servicer) to perform, keep or observe any of its duties or obligations
hereunder, under any other Related Document or under any Contract related
to a Transferred Receivable, including the commingling of Collections with
respect to Transferred Receivables by the CGS Originator at any time with
the funds of any other Person;
(viii) any investigation, Litigation or proceeding related to
this Agreement or the use of the Sale Price obtained in connection with any
Sale or the ownership of Receivables or Collections with respect thereto or
in respect of any Receivable or Contract, except to the extent any such
investigation, Litigation or proceeding relates to a matter involving a GFC
Indemnified Person for which neither the CGS Originator, the Parent
Guarantor nor any of their respective Affiliates (other than GFC) is at
fault, as finally determined by a court of competent jurisdiction; or
(ix) any claim brought by any Person other than a GFC
Indemnified Person arising from any activity by the CGS Originator or any
of its Affiliates in servicing, administering or collecting any Transferred
Receivables.
NO GFC INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER PARTY TO
THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR THIRD
PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING CLAIMS
DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES THAT MAY BE ALLEGED AS A RESULT OF ANY TRANSACTION
CONTEMPLATED HEREUNDER OR THEREUNDER.
Section 5.02 Waiver. In addition to the waivers contained in Section
------ -------
2.03 hereof, the Parent Guarantor waives, and agrees that it shall not at any
----
time insist upon, plead or in any manner whatever claim or take the benefit or
advantage of, any appraisal, valuation, stay, extension, marshaling of assets or
redemption laws, or exemption, whether now or at any time hereafter in force,
which may delay, prevent or otherwise affect the performance by the Parent
Guarantor of its Guaranteed Obligations or the enforcement by GFC or its assigns
of the Guaranteed Obligations. The Parent Guarantor hereby waives diligence,
presentment and demand (whether for non-payment or protest or of acceptance,
maturity, extension of time, change in
-24-
nature or form of the Guaranteed Obligations, acceptance of further security,
release of further security, composition or agreement arrived at as to the
amount of, or the terms of, the Guaranteed Obligations, notice of adverse change
in the CGS Originator's financial condition or any other fact which might
increase the risk to the Parent Guarantor) with respect to any of the Guaranteed
Obligations or all other demands whatsoever and waive the benefit of all
provisions of law which are or might be in conflict with the terms of this
Agreement. The Parent Guarantor represents, warrants and agrees that, as of the
date hereof, its obligations under this Agreement are not subject to any offsets
or defenses against GFC or the CGS Originator of any kind. The Parent Guarantor
further agrees that its obligations shall not be subject to any counterclaims,
offsets or defenses against GFC or against the CGS Originator of any kind which
may arise in the future.
ARTICLE VI.
GFC LOANS TO THE CGS ORIGINATOR
Section 6.01 GFC Loans. Subject to the terms and conditions hereof
---------
and upon request of the CGS Originator, GFC agrees to make advances available to
the CGS Originator from time to time until the Facility Termination Date, to the
extent of its available funds (each, an "GFC Loan"). The aggregate principal
--------
amount of GFC Loans outstanding shall not exceed at any time the Maximum
Purchase Limit. Until the Facility Termination Date, the CGS Originator may
from time to time borrow, repay and reborrow; provided, that no such GFC Loans
--------
may be made if, after giving effect thereto, (a) an Incipient Termination Event,
a Termination Event, an Incipient Servicer Termination Event or an Event of
Servicer Termination shall have occurred and be continuing or (b) a Purchase
Excess would exist.
Section 6.02 Notices Relating to GFC Loans. Each GFC Loan and each
-----------------------------
repayment thereof shall be made upon the provision of notice by the CGS
Originator to GFC. Any such notice must be given in writing on or before the
Business Day immediately preceding the day the proposed GFC Loan is to be made
or repaid (which shall be a Business Day). Each such notice of borrowing or
repayment shall specify the amount of GFC Loans to be borrowed or repaid and the
borrowing or repayment date thereof.
Section 6.03 Disbursement of Loan Proceeds. GFC shall, no later
-----------------------------
than 12:00 noon (New York time) on the date specified for each GFC Loan
hereunder, transfer the amount of the GFC Loan to be made on such date to an
account previously designated by the CGS Originator by wire transfer or
otherwise in immediately available funds.
Section 6.04 CGS Originator Note.
-------------------
(a) The CGS Originator shall execute and deliver to GFC a single
promissory note to evidence GFC Loans made by GFC hereunder, which note shall be
dated the Closing Date and be substantially in the form of Exhibit 6.04(a) (the
---------------
"CGS Note"). The CGS Note shall
--------
-25-
represent the CGS Originator's obligation to pay the amount of the Maximum
Purchase Limit or, if less, the aggregate unpaid principal amount of all GFC
Loans made to the CGS Originator together with interest thereon as prescribed in
Section 6.06.
------------
(b) GFC shall record on a schedule attached to the CGS Note (which
schedule may be computer generated) with respect to each GFC Loan: (i) the date
and principal amount thereof and (ii) each payment and repayment of principal
thereof. The balance as reflected on such schedule shall be presumptive
evidence of the amounts due and owing to GFC by the CGS Originator; provided,
--------
that any failure of GFC to record a notation on the schedule to the CGS Note as
aforesaid or any error in so recording shall not limit or otherwise affect the
obligation of the CGS Originator to repay GFC Loans in accordance with their
respective terms as set forth herein.
Section 6.05 Principal Repayments. It is the intention of the
--------------------
parties hereto that the GFC Loans shall represent advances against future
dividends to be declared from time to time by GFC and that, whenever GFC
declares such a dividend, the amount of such dividend shall be credited against
all principal and interest owing by the CGS Originator to GFC under the GFC
Loans before such dividends may be paid in cash, and; provided, that all such
--------
dividends shall first be credited against accrued and unpaid interest before
being credited to principal. Any amount so repaid may, subject to the terms and
conditions hereof, be reborrowed hereunder. The GFC Loans shall not be
repayable except in accordance with the foregoing provisions of this paragraph.
Section 6.06 Interest.
--------
(a) The CGS Originator shall pay interest to GFC, in arrears on each
applicable Interest Payment Date, at the rate shown in The Wall Street Journal
-----------------------
as the "Prime Rate" on such date (the "Interest Rate") on the unpaid principal
-------------
amount of each GFC Loan for the period commencing on and including the date of
such GFC Loan until but excluding the date such GFC Loan is paid in full.
(b) If any payment on any GFC Loan becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension.
(c) All computations of interest shall be made by GFC on the basis of
a 360 day year, in each case for the actual number of days occurring in the
period for which such interest is payable. The Interest Rate shall be
determined (i) on the first Business Day immediately prior to the Closing Date
for calculation of the Interest Rate for the period from the Closing Date
through the end of the first calendar month following the Closing Date, and (ii)
as of the last Business Day of each month for use in calculating the interest
that is payable for the following calendar month, and the Interest Rate so
determined shall be utilized for such calendar
-26-
month. Each determination by GFC of an interest rate hereunder shall be final,
binding and conclusive on the CGS Originator (absent manifest error).
(d) The CGS Originator shall pay interest at the applicable Interest
Rate on unpaid interest, on any GFC Loan or any installment thereof, and on any
other amount payable by the CGS Originator hereunder (to the extent permitted by
law) that shall not be paid in full when due (whether at stated maturity, by
acceleration or otherwise) for the period commencing on the due date thereof to
(but excluding) the date the same is indefeasibly paid in full.
Section 6.07 Receipt of Payments. All payments of principal,
-------------------
interest and other amounts (including indemnities) payable by the CGS Originator
to GFC under this Agreement shall be made in Dollars, in immediately available
funds, to GFC not later than 12:00 noon (New York time), on the due date
therefor. Any such payment made on such date but after such time shall, if the
amount paid bears interest, be deemed to have been made on, and interest shall
continue to accrue and be payable thereon until, the next succeeding Business
Day. All payments under this Article VI and under the CGS Note shall be made
----------
without setoff or counterclaim and in such amounts as may be necessary in order
that all such payments shall not be less than the amounts otherwise specified to
be paid under this Agreement and the CGS Note.
Section 6.08 Separateness From Transfer of Receivables. The parties
-----------------------------------------
hereto acknowledge and agree that GFC Loans made by GFC to the CGS Originator
hereunder are separate and distinct transactions from the Transfer of
Receivables by the CGS Originator to GFC hereunder and are not intended to
derogate from the expressed intention of the parties regarding the
characterization of the Transfers of the Transferred Receivables made hereunder
as purchases and sales or capital contributions, as applicable, and not as
secured transactions.
ARTICLE VII
COLLATERAL SECURITY
Section 7.01 Security Interest. To secure the prompt and complete
-----------------
payment, performance and observance of any and all recourse and indemnity
obligations of the CGS Originator to GFC, including those set forth in Sections
--------
4.02(o), 4.04, 5.01 and 8.14, and to induce GFC to enter into this Agreement in
------- ---- ---- ----
accordance with the terms and conditions hereof, the CGS Originator and the
Parent Guarantor hereby grant, assign, convey, pledge, hypothecate and transfer
to GFC a Lien upon all of the CGS Originator's and the Parent Guarantor's right,
title and interest in, to and under the following property, whether now owned by
or owing to, or hereafter acquired by or arising in favor of, either the CGS
Originator or the Parent Guarantor (including under any trade names, styles or
derivations of the CGS Originator or the Parent Guarantor), and whether owned by
or consigned by or to, or leased from or to, the CGS Originator or the Parent
Guarantor, and regardless of where located (all of which being hereinafter
collectively referred to as the "Transfer Agreement Collateral"):
-----------------------------
-27-
(a) all accounts, inventory, general intangibles, investment property,
chattel paper, documents, and instruments, whether or not specifically assigned
to GFC;
(b) all books and records (including customer lists, credit files,
computer programs, tapes, disks, data processing software and other related
property and rights) pertaining to the foregoing;
(c) all monies, securities and other property now or hereafter in the
possession or custody of, or in transit to, GFC, for any purpose (including
safekeeping, collection or pledge), from or for the CGS Originator, or as to
which the CGS Originator may have any right or power, and all of GFC's credits
and balances with the CGS Originator existing at any time; and
(d) to the extent not otherwise included, all proceeds and products of
the foregoing and all accessions to, and substitutions and replacements for,
each of the foregoing; provided, that the Transfer Agreement Collateral shall
not include any general intangibles and instruments in which a Lien is not
granted as a result of the terms of the Subsidiaries Security Agreement
delivered pursuant to (and defined in) the Credit Agreement.
Section 7.02 Other Collateral; Rights in Receivables. Nothing
---------------------------------------
contained in this Article VII shall limit the rights of GFC in and to any other
-----------
collateral that may have been or may hereafter be granted to GFC by the CGS
Originator or any third party pursuant to any other agreement or the rights of
GFC under any of the Transferred Receivables.
ARTICLE VII
MISCELLANEOUS
Section 8.01 Notices. Except as otherwise provided herein, whenever
-------
it is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other parties, or whenever any of the parties desires to
give or serve upon any other parties any communication with respect to this
Agreement, each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of actual receipt and three
Business Days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission
(with such telecopy or facsimile promptly confirmed by delivery of a copy by
personal delivery or United States Mail as otherwise provided in this Section
-------
8.01), (c) one Business Day after deposit with a reputable overnight courier
----
with all charges prepaid or (d) when delivered, if hand-delivered by messenger,
all of which shall be addressed to the party to be notified and sent to the
address or facsimile number set forth under its name on the signature page
hereof or to such other address (or facsimile number) as may be substituted by
notice given as herein provided;
-28-
provided, that each such declaration or other communication shall be deemed to
--------
have been validly delivered to the Collateral Agent under this Agreement upon
delivery to the Operating Agent in accordance with the terms of this Section
-------
8.01. The giving of any notice required hereunder may be waived in writing
----
by the party entitled to receive such notice. Failure or delay in delivering
copies of any notice, demand, request, consent, approval, declaration or other
communication to any Person (other than GFC) designated in any written
communication provided hereunder to receive copies shall in no way adversely
affect the effectiveness of such notice, demand, request, consent, approval,
declaration or other communication. Notwithstanding the foregoing, whenever it
is provided herein that a notice is to be given to any other party hereto by a
specific time, such notice shall only be effective if actually received by such
party prior to such time, and if such notice is received after such time or on a
day other than a Business Day, such notice shall only be effective on the
immediately succeeding Business Day.
Section 8.02 No Waiver; Remedies. GFC's failure, at any time or
-------------------
times, to require strict performance by the CGS Originator or the Parent
Guarantor of any provision of this Agreement or any Receivables Assignment shall
not waive, affect or diminish any right of GFC thereafter to demand strict
compliance and performance herewith or therewith. Any suspension or waiver of
any breach or default hereunder shall not suspend, waive or affect any other
breach or default whether the same is prior or subsequent thereto and whether
the same or of a different type. None of the undertakings, agreements,
warranties, covenants and representations of the CGS Originator or the Parent
Guarantor contained in this Agreement or any Receivables Assignment, and no
breach or default by the CGS Originator or the Parent Guarantor hereunder or
thereunder, shall be deemed to have been suspended or waived by GFC unless such
waiver or suspension is by an instrument in writing signed by an officer of or
other duly authorized signatory of GFC and directed to the CGS Originator or the
Parent Guarantor, as applicable, specifying such suspension or waiver. GFC's
rights and remedies under this Agreement shall be cumulative and nonexclusive of
any other rights and remedies that GFC may have under any other agreement,
including the other Related Documents, by operation of law or otherwise.
Recourse to the Transfer Agreement Collateral shall not be required.
Section 8.03 Successors and Assigns. This Agreement shall be
----------------------
binding upon and shall inure to the benefit of the CGS Originator and the Parent
Guarantor (including a debtor-in-possession on behalf of either of them) and GFC
and their respective successors, transferees, endorsees and permitted assigns,
except as otherwise provided herein. The CGS Originator may not assign,
transfer, hypothecate or otherwise convey its rights, benefits, obligations or
duties hereunder without the prior express written consent of GFC, the
Purchaser, the Operating Agent and the Collateral Agent. Any such purported
assignment, transfer, hypothecation or other conveyance by the CGS Originator
without the prior express written consent of GFC, the Purchaser, the Operating
Agent and the Collateral Agent shall be void. The Parent Guarantor may not
assign, sell, hypothecate of otherwise transfer any interest in or obligation
under this Agreement. The CGS Originator and the Parent Guarantor acknowledge
that, to the extent permitted under the Purchase Agreement, GFC may assign its
rights granted hereunder, including the benefit of any indemnities under Article
-------
V and any of its rights in the Transfer Agreement
-
-29-
Collateral granted under Article VII, and upon such assignment, such assignee
-----------
shall have, to the extent of such assignment, all rights of GFC hereunder and,
to the extent permitted under the Purchase Agreement, may in turn assign such
rights. The CGS Originator and the Parent Guarantor each agree that, upon any
such assignment, such assignee may enforce directly, without joinder of GFC, the
rights set forth in this Agreement. All such assignees, including parties to the
Purchase Agreement in the case of any assignment to such parties, shall be third
party beneficiaries of, and shall be entitled to enforce GFC's rights and
remedies under, this Agreement to the same extent as if they were parties
hereto. The terms and provisions of this Agreement are for the purpose of
defining the relative rights and obligations of the CGS Originator, the Parent
Guarantor and GFC with respect to the transactions contemplated hereby and,
except for the Purchaser, the Operating Agent and the Collateral Agent, no
Person shall be a third party beneficiary of any of the terms and provisions of
this Agreement. The rights of the Purchaser, the Operating Agent and the
Collateral Agent hereunder with respect to the "Lenders" and the "Agent" party
to the Credit Facility are subject to the Intercreditor Agreement to the extent
provided therein.
Section 8.04 Termination; Survival of Obligations.
------------------------------------
(a) This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect until the Termination Date.
(b) Except as otherwise expressly provided herein or in any other
Related Document, no termination or cancellation (regardless of cause or
procedure) of any commitment made by GFC under this Agreement shall in any way
affect or impair the obligations, duties and liabilities of the CGS Originator
or the Parent Guarantor or the rights of GFC relating to any unpaid portion of
any and all recourse and indemnity obligations of the CGS Originator or the
Parent Guarantor to GFC, including those set forth in Sections 4.02(o), 4.04,
---------------- ----
5.01 and 8.14, due or not due, liquidated, contingent or unliquidated or any
---- ----
transaction or event occurring prior to such termination, or any transaction or
event, the performance of which is required after the Facility Termination Date.
Except as otherwise expressly provided herein or in any other Related Document,
all undertakings, agreements, covenants, warranties and representations of or
binding upon the CGS Originator or the Parent Guarantor, and all rights of GFC
hereunder, all as contained in the Related Documents, shall not terminate or
expire, but rather shall survive any such termination or cancellation and shall
continue in full force and effect until the Termination Date; provided, that the
--------
rights and remedies pursuant to Sections 4.02(o), 4.04, the indemnification and
---------------- ----
payment provisions of Article V, and the provisions of Sections 4.03(j), 8.03,
--------- ---------------- ----
8.12 and 8.14 shall be continuing and shall survive any termination of this
---- ----
Agreement.
Section 8.05 Complete Agreement; Modification of Agreement. This
---------------------------------------------
Agreement and the other Related Documents constitute the complete agreement
between the parties with respect to the subject matter hereof and thereof,
supersede all prior agreements and
-30-
understandings relating to the subject matter hereof and thereof, and may not be
modified, altered or amended except as set forth in Section 8.06.
------------
Section 8.06 Amendments and Waivers. No amendment, modification,
----------------------
termination or waiver of any provision of this Agreement or any of the other
Related Documents, or any consent to any departure by the CGS Originator or the
Parent Guarantor therefrom, shall in any event be effective unless the same
shall be in writing and signed by each of the parties hereto and the Purchaser,
the Operating Agent and the Collateral Agent. No consent or demand in any case
shall, in itself, entitle any party to any other consent or further notice or
demand in similar or other circumstances.
SECTION 8.07 GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
--------------------------------------- --------------
TRIAL.
-----
(A) THIS AGREEMENT AND EACH RELATED DOCUMENT (EXCEPT TO THE EXTENT
THAT ANY RELATED DOCUMENT EXPRESSLY PROVIDES TO THE CONTRARY) AND THE
OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL IN ALL RESPECTS, INCLUDING
ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
(B) EACH PARTY HERETO HEREBY CONSENTS AND AGREES THAT THE STATE OR
FEDERAL COURTS LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY SHALL HAVE
EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THEM
PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY RELATED DOCUMENT; PROVIDED, THAT EACH PARTY HERETO ACKNOWLEDGES
--------
THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE OF THE BOROUGH OF MANHATTAN IN NEW YORK CITY; PROVIDED FURTHER, THAT
-------- -------
NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE GFC FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE
ON THE TRANSFER AGREEMENT COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS
OF THE CGS ORIGINATOR OR THE PARENT GUARANTOR ARISING HEREUNDER, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF GFC. EACH PARTY HERETO SUBMITS AND
CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY
SUCH COURT, AND EACH PARTY HERETO HEREBY WAIVES ANY OBJECTION THAT SUCH PARTY
MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
-31-
IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF
----- --- ----------
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH
PARTY HERETO HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER
PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH
SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH BENEATH ITS NAME ON THE
SIGNATURE PAGES HEREOF AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON
THE EARLIER OF SUCH PARTY'S ACTUAL RECEIPT THEREOF OR THREE DAYS AFTER DEPOSIT
IN THE UNITED STATES MAIL, PROPER POSTAGE PREPAID. NOTHING IN THIS SECTION SHALL
AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.
(C) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
RELATED DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 8.08 Counterparts. This Agreement may be executed in any
------------
number of separate counterparts, each of which shall collectively and separately
constitute one agreement.
Section 8.09 Severability. Wherever possible, each provision of
------------
this Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
Section 8.10 Section Titles. The section titles and table of
--------------
contents contained in this Agreement are provided for ease of reference only and
shall be without substantive meaning or content of any kind whatsoever and are
not a part of the agreement between the parties hereto.
-32-
Section 8.11 No Setoff. The CGS Originator's and the Parent
---------
Guarantor's obligations under this Agreement shall not be affected by any right
of setoff, counterclaim, recoupment, defense or other right the CGS Originator
or the Parent Guarantor might have against GFC, the Purchaser, the Operating
Agent or the Collateral Agent, all of which rights are hereby expressly waived
by the CGS Originator and the Parent Guarantor .
Section 8.12 Confidentiality.
---------------
(a) Except to the extent otherwise required by applicable law, as
required to be filed publicly with the Securities and Exchange Commission, or
unless each Affected Party shall otherwise consent in writing, the CGS
Originator, the Parent Guarantor and GFC agree to maintain the confidentiality
of this Agreement (and all drafts hereof and documents ancillary hereto) in its
communications with third parties other than any Affected Party or any GFC
Indemnified Person and otherwise and not to disclose, deliver or otherwise make
available to any third party (other than its directors, officers, employees,
accountants or counsel) the original or any copy of all or any part of this
Agreement (or any draft hereof and documents ancillary hereto) except to an
Affected Party or a GFC Indemnified Person.
(b) Each of the CGS Originator and the Parent Guarantor agrees that
it shall not (and shall not permit any of its Subsidiaries to) issue any news
release or make any public announcement pertaining to the transactions
contemplated by this Agreement and the Related Documents without the prior
written consent of GFC and each Affected Party (which consent shall not be
unreasonably withheld) unless such news release or public announcement is
required by law, in which case the CGS Originator shall consult with GFC and
each Affected Party prior to the issuance of such news release or public
announcement. The CGS Originator may, however, disclose the general terms of the
transactions contemplated by this Agreement and the Related Documents to trade
creditors, suppliers and other similarly-situated Persons so long as such
disclosure is not in the form of a news release or public announcement.
Section 8.13 Further Assurances.
------------------
(a) Each the CGS Originator and the Parent Guarantor shall, at its
sole cost and expense, upon request of GFC, the Purchaser, the Operating Agent
or the Collateral Agent, promptly and duly execute and deliver any and all
further instruments and documents and take such further actions that may be
necessary or desirable or that GFC, the Purchaser, the Operating Agent or the
Collateral Agent may request to carry out more effectively the provisions and
purposes of this Agreement or any other Related Document or to obtain the full
benefits of this Agreement and of the rights and powers herein granted,
including (i) using its best efforts to secure all consents and approvals
necessary or appropriate for the assignment to or for the benefit of GFC of any
Transferred Receivable or Transfer Agreement Collateral held by the CGS
Originator or in which the CGS Originator has any rights not heretofore
assigned, (ii) filing any financing or continuation statements under the UCC
with respect to the ownership interests or Liens granted hereunder or under any
other Related Document, and (iii) transferring the Transfer
-33-
Agreement Collateral to GFC's possession if such Transfer Agreement Collateral
consists of chattel paper or instruments or if a Lien upon such Transfer
Agreement Collateral can be perfected only by possession, or if otherwise
requested by GFC. The CGS Originator hereby authorizes GFC, the Purchaser, the
Operating Agent or the Collateral Agent to file any such financing or
continuation statements without the signature of the CGS Originator to the
extent permitted by applicable law. A carbon, photographic or other reproduction
of this Agreement or of any notice or financing statement covering the
Transferred Receivables, the Transfer Agreement Collateral or any part thereof
shall be sufficient as a notice or financing statement where permitted by law.
If any amount payable under or in connection with any of the Transfer Agreement
Collateral is or shall become evidenced by any instrument, such instrument,
other than checks and notes received in the ordinary course of business, shall
be duly endorsed in a manner satisfactory to GFC immediately upon the CGS
Originator's receipt thereof and promptly delivered to GFC.
(b) If the CGS Originator or the Parent Guarantor fail to perform any
agreement or obligation under this Section 8.13, GFC, the Purchaser, the
------------
Operating Agent or the Collateral Agent may (but shall not be required to)
itself perform, or cause performance of, such agreement or obligation, and the
reasonable expenses of GFC, the Purchaser, the Operating Agent or the Collateral
Agent incurred in connection therewith shall be payable by the CGS Originator or
the Parent Guarantor, as applicable, upon demand of GFC, the Purchaser, the
Operating Agent or the Collateral Agent.
Section 8.14 Fees and Expenses. In addition to its indemnification
-----------------
obligations pursuant to Article V, the CGS Originator agrees to pay on demand
---------
all costs and expenses incurred by GFC in connection with the negotiation,
preparation, execution and delivery of this Agreement and the other Related
Documents, including the fees and out-of-pocket expenses of GFC's counsel,
advisors, consultants and auditors retained in connection with the transactions
contemplated thereby and advice in connection therewith, and the CGS Originator
agrees to pay all costs and expenses, if any (including attorneys' fees and
expenses but excluding any costs of enforcement or collection of the Transferred
Receivables), in connection with the enforcement of this Agreement and the other
Related Documents.
* * *
-34-
IN WITNESS WHEREOF, the parties have caused this Receivables Transfer
Agreement to be executed by their respective duly authorized representatives, as
of the date first above written.
CALLAWAY GOLF SALES COMPANY,
as CGS Originator and as Servicer
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name:
Title:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
GOLF FUNDING CORPORATION
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name:
Title:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
CALLAWAY GOLF COMPANY,
as Parent Guarantor
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
--------------------------------
Name:
Title:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
EXHIBIT 2.01(a)
---------------
Form of
RECEIVABLES ASSIGNMENT
----------------------
THIS RECEIVABLES ASSIGNMENT (the "Receivables Assignment") is entered
----------------------
into as of February 10, 1999, by and between Callaway Golf Sales Company (the
"CGS Originator") and Golf Funding Corporation ("GFC").
-------------- ---
1. We refer to that certain Receivables Transfer Agreement (the "CGS
---
Transfer Agreement") of even date herewith among the CGS Originator and GFC.
------------------
All of the terms, covenants and conditions of the CGS Transfer Agreement are
hereby made a part of this Receivables Assignment and are deemed incorporated
herein in full. Unless otherwise defined herein, capitalized terms or matters
of construction defined or established in the CGS Transfer Agreement shall be
applied herein as defined or established therein.
2. For good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the CGS Originator hereby sells or contributes
to GFC, without recourse, except as provided in Sections 4.02(o) and 4.04 of the
---------------- ----
CGS Transfer Agreement, all of the CGS Originator's right, title and interest
in, to and under all Transferred Receivables transferred from time to time by
the CGS Originator to GFC under the CGS Transfer Agreement.
3. Subject to the terms and conditions of the CGS Transfer
Agreement, the CGS Originator hereby covenants and agrees to sign, sell or
contribute, as applicable, execute and deliver, or cause to be signed, sold or
contributed, executed and delivered, and to do or make, or cause to be done or
made, upon request of GFC and at the CGS Originator's expense, any and all
agreements, instruments, papers, deeds, acts or things, supplemental,
confirmatory or otherwise, as may be reasonably required by GFC for the purpose
of or in connection with acquiring or more effectively vesting in GFC or
evidencing the vesting in GFC of the property, rights, title and interests of
the CGS Originator sold or contributed hereunder or intended to be sold or
contributed hereunder.
4. Wherever possible, each provision of this Receivables Assignment
shall be interpreted in such a manner as to be effective and valid under
applicable law, but if any provision of this Receivables Assignment shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of this
Receivables Assignment.
5. THIS RECEIVABLES ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING
CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
IN WITNESS WHEREOF, the parties have caused this Receivables
Assignment to be executed by their respective officers thereunto duly
authorized, as of the day and year first above written.
CALLAWAY GOLF SALES COMPANY GOLF FUNDING CORPORATION
By:__________________________ By:__________________________
Name: Name:
Title: Title:
EXHIBIT 6.04(a)
---------------
Form of
CGS NOTE
--------
$80,000,000 February __, 1999
FOR VALUE RECEIVED, on demand, the undersigned, Callaway Golf Sales
Company, a California corporation (the "CGS Originator"), hereby promises to pay
--------------
to the order of Golf Funding Corporation, a California corporation (the
"Lender"), or its assigns, at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-
------
8815, or at such other place as the holder of this CGS Note ("Note") may
----
designate from time to time in writing, in lawful money of the United States of
America and in immediately available funds, the principal amount of EIGHTY
MILLION DOLLARS ($80,000,000), or, if less, the aggregate unpaid principal
amount of all GFC Loans (as defined in the CGS Transfer Agreement referred to
below) made to the CGS Originator, together with interest thereon from time to
time from the Closing Date (as defined in the CGS Transfer Agreement) at the
rate provided therein.
The date, amount and interest rate of each GFC Loan made by the Lender
to the CGS Originator, and each payment made by or on behalf of the CGS
Originator on account of the principal thereof, shall be recorded by the Lender
on its books and, prior to any transfer of this Note, endorsed by the Lender on
the schedule attached hereto or any continuation thereof.
All capitalized terms, unless otherwise defined herein, shall have the
meanings assigned to them in the Receivables Transfer Agreement of even date
herewith (as the same may be subsequently amended, restated or otherwise
modified, the "CGS Transfer Agreement") by and among the CGS Originator and GFC.
----------------------
This Note is issued pursuant to the CGS Transfer Agreement, is the CGS Note
referred to therein, and is entitled to the benefit of the provisions set forth
therein, to which reference is hereby made for a statement of all of the terms
and conditions under which the GFC Loans are made. All of the terms, covenants
and conditions of the CGS Transfer Agreement and all other instruments
evidencing the indebtedness hereunder, including the other Related Documents,
are hereby made a part of this Note and are deemed incorporated herein in full.
The CGS Transfer Agreement provides for prepayments of GFC Loans upon
the terms and conditions specified therein. Interest on the outstanding
principal amount of this Note shall be paid until such principal amount is paid
in full at the Interest Rate and at such times as are specified in the CGS
Transfer Agreement.
If any payment or prepayment on this Note becomes due and payable on a
day other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day and, with respect to payments of principal,
interest thereon shall be payable at the Interest Rate during such extension.
In no contingency or event whatsoever, whether by reason of
advancement of the proceeds hereof or otherwise, shall the amount paid or agreed
to be paid to Lender for the use, forbearance or detention of money advanced
hereunder exceed the highest rate of interest permissible under law (the
"Maximum Lawful Rate"). In the event that a court of competent jurisdiction
-------------------
determines that Lender has charged or received interest hereunder in excess of
the Maximum Lawful Rate, the amount of interest payable hereunder shall be equal
to the amount payable under the Maximum Lawful Rate; provided, that if at any
--------
time thereafter the amount of interest payable to Lender hereunder is less than
the amount payable under the Maximum Lawful Rate, the CGS Originator shall
continue to pay interest hereunder at the Maximum Lawful Rate until such time as
the total interest received by Lender from the making of GFC Loans hereunder is
equal to the total interest that Lender would have received had the amount of
interest payable to Lender hereunder been (but for the operation of this
paragraph) the amount of interest payable from the Closing Date. Thereafter,
the amount of interest payable hereunder shall be the amount determined in
accordance with the terms hereof unless and until the amount so calculated again
exceeds the amount payable under the Maximum Lawful Rate, in which event this
paragraph shall again apply. In no event shall the total interest received by
Lender pursuant to the terms hereof exceed the amount that Lender could lawfully
have received had the interest due hereunder been calculated for the full term
hereof at the Maximum Lawful Rate. In the event the amount payable under the
Maximum Lawful Rate is calculated pursuant to this paragraph, such interest
shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by
the number of days in the year in which such calculation is made. In the event
that a court of competent jurisdiction, notwithstanding the provisions of this
Note, shall make a final determination that Lender has received interest
hereunder in excess of the Maximum Lawful Rate, Lender shall, to the extent
permitted by applicable law, promptly apply such excess first to any interest
due and not yet paid hereunder, then to the outstanding principal amount of the
GFC Loans, then to fees and any other unpaid charges, and thereafter shall
refund any excess to the CGS Originator or as a court of competent jurisdiction
may otherwise order.
Wherever possible each provision of this Note shall be interpreted in
such a manner as to be effective and valid under applicable law, but if any
provision of this Note shall be prohibited or invalid under applicable law, such
provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or remaining
provisions of this Note.
Time is of the essence of this Note. To the fullest extent permitted
by applicable law, the CGS Originator expressly waives presentment, demand,
diligence, protest and all notices of any kind whatsoever with respect to this
Note.
BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL
TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND
EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY
(RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE
CGS ORIGINATOR HERETO WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER THIS NOTE,
THE CGS TRANSFER AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY,
WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
THE PRINCIPLES THEREOF REGARDING CONFLICT OF LAWS, AND ANY APPLICABLE LAWS OF
THE UNITED STATES OF AMERICA.
IN WITNESS WHEREOF, the CGS Originator has caused this Note to be
signed and delivered by its duly authorized officer as of the date set forth
above.
CALLAWAY GOLF SALES COMPANY
By: _______________________________
Name:
Title:
SCHEDULE OF LOANS TO CGS NOTE
-----------------------------
ANNEX W
-------
FINANCIAL COVENANTS
The Parent Guarantor shall not breach or fail to comply with any of
the following financial covenants, each of which shall be calculated in
accordance with GAAP consistently applied:
(a) Tangible Net Worth. The Parent Guarantor and its Subsidiaries on a
------------------
consolidated basis shall maintain at all times Tangible Net Worth equal to or
greater than the sum of (i) $275,000,000, plus (ii) fifty percent (50%) of
----
cumulative net income (but without subtracting net losses for any Fiscal Quarter
for which there was no net income) for each Fiscal Quarter from January 1, 1999
to the date of determination, plus (iii) fifty percent (50%) of the net cash
----
proceeds of Stock issued by the Parent Guarantor after January 1, 1999.
(b) Minimum EBITDA. The Parent Guarantor and its Subsidiaries shall have
--------------
on a consolidated basis EBITDA for the Fiscal Quarter ending March 31, 1999 of
no less than $10,000,000.
(c) Minimum Fixed Charge Coverage Ratio. The Parent Guarantor and its
-----------------------------------
Subsidiaries shall have on a consolidated basis at the end of each Fiscal
Quarter set forth below, a Fixed Charge Coverage Ratio for the 12-month period
then ended (or with respect to the Fiscal Quarters ending on or before September
30, 1999, the period commencing on January 1, 1999 and ending on the last day of
such Fiscal Quarter) of not less than the following:
1.00 for the Fiscal Quarter ending June 30, 1999;
1.00 for the Fiscal Quarter ending September 30, 1999;
1.00 for the Fiscal Quarter ending December 31, 1999;
1.00 for the Fiscal Quarter ending March 31, 2000;
1.00 for the Fiscal Quarter ending June 30, 2000;
1.25 for each Fiscal Quarter thereafter.
Unless otherwise specifically provided herein, any accounting term used in
the Agreement shall have the meaning customarily given such term in accordance
with GAAP, and all financial computations hereunder shall be computed in
accordance with GAAP consistently applied. That certain items or computations
are explicitly modified by the phrase "in accordance with GAAP" shall in no way
be construed to limit the foregoing. If any "Accounting Changes" (as defined
below) occur and such changes result in a change in the calculation of the
financial covenants, standards or terms used in the Agreement or any other
Related Document, then Seller, the Operating Agent and the Purchaser agree to
enter into negotiations in order to amend such provisions of the Agreement so as
to equitably reflect such Accounting Changes with the desired result that the
criteria for evaluating the Parent Guarantor's and its Subsidiaries' financial
condition shall be the same after such Accounting Changes as if such Accounting
Changes had not been made. "Accounting Changes" means (a) changes in
------------------
accounting principles required by the
promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions), (b)
changes in accounting principles concurred in by Seller's certified public
accountants; (c) purchase accounting adjustments under A.P.B. 16 and/or 17 and
EITF 88-16, and the application of the accounting principles set forth in FASB
109, including the establishment of reserves pursuant thereto and any subsequent
reversal (in whole or in part) of such reserves; and (d) the reversal of any
reserves established as a result of purchase accounting adjustments. All such
adjustments resulting from expenditures made subsequent to the Closing Date
(including capitalization of costs and expenses or payment of pre-Closing Date
liabilities) shall be treated as expenses in the period the expenditures are
made and deducted as part of the calculation of EBITDA in such period. If the
Operating Agent, Seller and the Purchaser agree upon the required amendments,
then after appropriate amendments have been executed and the underlying
Accounting Change with respect thereto has been implemented, any reference to
GAAP contained in the Agreement or in any other Related Document shall, only to
the extent of such Accounting Change, refer to GAAP, consistently applied after
giving effect to the implementation of such Accounting Change. If the Operating
Agent, Seller and the Purchaser cannot agree upon the required amendments within
thirty (30) days following the date of implementation of any Accounting Change,
then all Financial Statements delivered and all calculations of financial
covenants and other standards and terms in accordance with the Agreement and the
other Related Documents shall be prepared, delivered and made without regard to
the underlying Accounting Change.
Capitalized terms used in this Annex W and not otherwise defined below
-------
shall have the respective meanings ascribed to them in Annex X.
-------
"Capital Expenditures" shall mean, with respect to any Person, all
--------------------
expenditures (by the expenditure of cash or the incurrence of Indebtedness) by
such Person during any measuring period for any fixed assets or improvements or
for replacements, substitutions or additions thereto, that have a useful life of
more than one year and that are required to be capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any lease of
-------------
any property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person.
"CEF Lease Facility" shall mean (i) the Master Lease Agreement dated
------------------
as of December 30, 1998 between General Electric Capital Corporation, for itself
and as agent for certain participants, as lessor, and Callaway Golf Ball
Company, as lessee, (ii) the Corporate Guaranty dated December 30, 1998 by
Callaway Golf Company for the benefit of General Electric Capital Corporation,
for itself and as agent for certain participants, (iii) the Interim Finance
Agreement dated December 30, 1998 between General Electric Capital Corporation,
for itself and as agent for certain participants, as lender, and Callaway Golf
Ball Company, as borrower and (iv)
all documents delivered under, and relating to, any of the agreements described
in clauses (i) through (iii) hereof.
----------- -----
"EBITDA" shall mean, with respect to any Person for any fiscal period,
------
an amount equal to
(a) consolidated net income of such Person for such period, minus
-----
(b) the sum, without duplication, of (i) income tax credits, (ii)
interest income, (iii) gain from extraordinary items for such period, (iv)
any aggregate net gain (but not any aggregate net loss) during such period
arising from the sale, exchange or other disposition of capital assets by
such Person (including any fixed assets, whether tangible or intangible,
all inventory sold in conjunction with the disposition of fixed assets and
all securities), and (v) any other non-cash gains which have been added in
determining consolidated net income, in each case to the extent included in
the calculation of consolidated net income of such Person for such period
in accordance with GAAP, plus
----
(c) the sum, without duplication, of (i) any provision for income
taxes, (ii) Interest Expense, (iii) loss from extraordinary items for such
period, (iv) the amount of non-cash charges (including depreciation and
amortization) for such period, (v) amortized debt discount for such period,
and (vi) the amount of any deduction to consolidated net income as the
result of any grant to any members of the management of such Person of any
Stock, in each case to the extent included in the calculation of
consolidated net income of such Person for such period in accordance with
GAAP.
"Fixed Charges" shall mean, with respect to any Person for any fiscal
-------------
period, (a) the aggregate of all Interest Expense paid or accrued during such
period, plus (b) scheduled payments of principal with respect to Indebtedness
(including the principal component of payments with respect to Capital Leases
and the CEF Lease Facility) during such period, plus (c) Restricted Payments
described in Section 6.14(d) of the Credit Facility) paid or accrued during such
---------------
period.
"Fixed Charge Coverage Ratio" shall mean, with respect to any Person
---------------------------
for any fiscal period, the ratio of (a) EBITDA, minus the sum of (i) Capital
-----
Expenditures (other than Capital Expenditures financed pursuant to clause (i) or
----------
(ii) of Section 6.3 of the Credit Facility), (ii) all taxes paid or accrued
---- -----------
during such period and (iii) amounts payable (determined in accordance with
clause (v) of Section 6.1 of the Credit Facility) during such period in
---------- -----------
connection with Permitted Acquisitions (as defined in the Credit Facility) to
(b) Fixed Charges. In computing Fixed Charges for any fiscal period, interest
and principal payments that are due within one week after the end of that fiscal
period, without duplication, shall be deemed to have been paid on the last day
of that fiscal period.
"Interest Expense" shall mean, with respect to any Person for any
----------------
fiscal period, interest expense (whether cash or non-cash) of such Person
determined in accordance with GAAP for the relevant period ended on such date,
including, in any event, interest expense with respect to any Funded Debt of
such Person, the interest component of any payment with respect to Capital
Leases and the CEF Lease Facility, interest expense for the relevant period that
has been capitalized on the balance sheet of such Person and yield or other
amounts due and payable (other than upfront fees) under any accounts receivable
securitization facility to which the Parent Guarantor and GE Capital are
parties.
"Net Worth" shall mean, with respect to any Person as of any date of
---------
determination, the book value of the assets of such Person, minus (a) reserves
-----
applicable thereto, and minus (b) all of such Person's liabilities on a
-----
consolidated basis (including accrued and deferred income taxes), all as
determined in accordance with GAAP.
"Net Worth Percentage" shall mean a fraction (expressed as a
--------------------
percentage) (a) the numerator of which equals the excess of assets over
liabilities, in each case determined in accordance with GAAP consistently
applied and (b) the denominator of which equals the Outstanding Balance of
Transferred Receivables.
"Restricted Payment" shall mean (a) the declaration or payment of any
------------------
dividend or the incurrence of any liability to make any other payment or
distribution of cash or other property or assets in respect of a Person's Stock,
(b) any payment on account of the purchase, redemption, defeasance, sinking fund
or other retirement of a Person's Stock or any other payment or distribution
made in respect thereof, either directly or indirectly, (c) any payment or
prepayment of principal of, premium, if any, or interest, fees or other charges
on or with respect to, and any redemption, purchase, retirement, defeasance,
sinking fund or similar payment and any claim for rescission with respect to,
any subordinated debt (other than as permitted by Section 6.13 of the Credit
------------
Facility); (d) any payment made to redeem, purchase, repurchase or retire, or to
obtain the surrender of, any outstanding warrants, options or other rights to
acquire Stock of such Person now or hereafter outstanding; (e) any payment of a
claim for the rescission of the purchase or sale of, or for material damages
arising from the purchase or sale of, any shares of such Person's Stock or of a
claim for reimbursement, indemnification or contribution arising out of or
related to any such claim for damages or rescission; (f) any payment, loan,
contribution, or other transfer of funds or other property to any Stockholder of
such Person other than payment of compensation in the ordinary course to
stockholders who are employees of such Person; and (g) any payment of management
fees (or other fees of a similar nature) by such Person to any Stockholder of
such Person or their Affiliates.
"Tangible Net Worth" shall mean, with respect to any Person at any
------------------
date, the Net Worth of such Person at such date, excluding, however, from the
--------- -------
determination of the total assets at such date, (a) all goodwill, capitalized
organizational expenses, capitalized research and development expenses,
trademarks, trade names, copyrights, patents, patent applications, licenses and
rights in any thereof, and other intangible items, (b) all unamortized debt
discount and
expense, (c) treasury Stock, and (d) any write-up in the book value of any asset
resulting from a revaluation thereof.
Rules of Construction Concerning Financial Covenants. Unless
----------------------------------------------------
otherwise specifically provided therein, any accounting term used in any Related
Document shall have the meaning customarily given such term in accordance with
GAAP, and all financial computations thereunder shall be computed in accordance
with GAAP consistently applied. That certain items or computations are
explicitly modified by the phrase "in accordance with GAAP" shall in no way be
construed to limit the foregoing. If any Accounting Changes occur and such
changes result in a change in the calculation of the financial covenants,
standards or terms used in any Related Document, then the parties thereto agree
to enter into negotiations in order to amend such provisions so as to equitably
reflect such Accounting Changes with the desired result that the criteria for
evaluating the financial condition of such Persons and their Subsidiaries shall
be the same after such Accounting Changes as if such Accounting Changes had not
been made. If the parties thereto agree upon the required amendments thereto,
then after appropriate amendments have been executed and the underlying
Accounting Change with respect thereto has been implemented, any reference to
GAAP contained therein shall, only to the extent of such Accounting Change,
refer to GAAP consistently applied after giving effect to the implementation of
such Accounting Change. If such parties cannot agree upon the required
amendments within 30 days following the date of implementation of any Accounting
Change, then all financial statements delivered and all calculations of
financial covenants and other standards and terms in accordance with the Related
Documents shall be prepared, delivered and made without regard to the underlying
Accounting Change.
ANNEX X
to
CGS RECEIVABLES TRANSFER AGREEMENT,
ODYSSEY RECEIVABLES TRANSFER AGREEMENT,
and
RECEIVABLES PURCHASE AND SERVICING AGREEMENT
each dated as of
February 10, 1999
Definitions and Interpretation
-1-
SECTION 1. Definitions and Conventions. Capitalized terms used in the
---------------------------
CGS Transfer Agreement, the Odyssey Transfer Agreement and the Purchase
Agreement shall have (unless otherwise provided elsewhere therein) the following
respective meanings:
"Accession Agreement" shall mean an Accession Agreement substantially
-------------------
in the form of Exhibit A to the Collateral Agent Agreement.
---------
"Accounting Changes" shall mean, with respect to any Person, (a)
------------------
changes in accounting principles required by the promulgation of any rule,
regulation, pronouncement or opinion of the Financial Accounting Standards Board
of the American Institute of Certified Public Accountants (or any successor
thereto or any agency with similar functions); (b) changes in accounting
principles concurred in by such Person's certified public accountants; (c)
purchase accounting adjustments under A.P.B. 16 or 17 and EITF 88-16, and the
application of the accounting principles set forth in FASB 109, including the
establishment of reserves pursuant thereto and any subsequent reversal (in whole
or in part) of such reserves; and (d) the reversal of any reserves established
as a result of purchase accounting adjustments.
"Accrued Monthly Yield" shall mean, as of any date of determination
---------------------
within a Settlement Period, the sum of the Daily Yields for each day from and
including the first day of the Settlement Period through and including such
date.
"Accrued Servicing Fee" shall mean, as of any date of determination
---------------------
within a Settlement Period, the sum of the Servicing Fees calculated for each
day from and including the first day of the Settlement Period through and
including such date.
"Accrued Unused Facility Fee" shall mean, as of any date of
---------------------------
determination within a Settlement Period, the sum of the Unused Facility Fees
calculated for each day from and including the first day of the Settlement
Period through and including such date.
"Accumulated Funding Deficiency" shall mean an "accumulated funding
------------------------------
deficiency" as defined in Section 412 of the IRC and Section 302 of ERISA,
whether or not waived.
"Additional Amounts" shall mean any amounts payable to any Affected
------------------
Party under Sections 2.09 or 2.10 of the Purchase Agreement.
------------- ----
"Additional Costs" shall have the meaning assigned to it in Section
---------------- -------
2.09(b) of the Purchase Agreement.
-------
"Adverse Claim" shall mean any claim of ownership or any Lien, other
-------------
than any ownership interest or Lien created under the CGS Transfer Agreement,
the Odyssey Transfer Agreement or the Purchase Agreement or any Lien created
under the Collateral Agent Agreement.
-1-
"Affected Party" shall mean each of the following Persons: the
--------------
Purchaser, the Liquidity Agent, each Liquidity Lender, the Operating Agent, the
Letter of Credit Agent, each Letter of Credit Provider, the Collateral Agent,
the Depositary and each Affiliate of the foregoing Persons.
"Affiliate" shall mean, with respect to any Person, (a) each Person
---------
that, directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, five percent (5%) or more of the Stock
having ordinary voting power in the election of directors of such Person, (b)
each Person that controls, is controlled by or is under common control with such
Person, or (c) each of such Person's officers, directors, joint venturers and
partners. For the purposes of this definition, "control" of a Person shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of its management or policies, whether through the ownership of voting
securities, by contract or otherwise.
"Agent Account" shall mean that certain segregated deposit account
-------------
established by the Purchaser and maintained with the Depositary designated as
the "Agent Account (Revolver) -GECC/CAF Depository," account number ▇▇▇▇▇▇▇▇,
ABA No. ▇▇▇▇▇▇▇▇▇, Reference: CFW3273.
"Ancillary Services and Lease Agreement" shall mean that certain
--------------------------------------
Ancillary Services and Lease Agreement dated as of February 10, 1999 between GFC
and CGS, pursuant to which CGS agrees to provide office space and certain
administrative and clerical services to GFC and to advance to GFC subordinated
loans from time to time in an aggregate not to exceed $500,000 to satisfy GFC's
initial and ongoing administrative and operating expenses.
"Appendices" shall mean, with respect to any Related Document, all
----------
exhibits, schedules, annexes and other attachments thereto, or expressly
identified thereto.
"Authorized Officer" shall mean, with respect to any corporation, the
------------------
Chairman or Vice-Chairman of the Board, the President, any Vice President, the
Secretary, the Treasurer, any Assistant Secretary, any Assistant Treasurer and
each other officer of such corporation specifically authorized in resolutions of
the Board of Directors of such corporation to sign agreements, instruments or
other documents on behalf of such corporation in connection with the
transactions contemplated by the CGS Transfer Agreement, the Odyssey Transfer
Agreement, the Purchase Agreement and the other Related Documents.
"Availability" shall mean, as of any date of determination, the amount
------------
equal to the lesser of: (a) (i) the Investment Base multiplied by the Purchase
-------------
Discount Rate, minus (ii) the Yield Discount Amount, and (b) the Maximum
-----
Purchase Limit.
"Available LOC Percentage" shall mean twelve and one-half percent
------------------------
(12.5%); provided, that the Available LOC Percentage may be changed at any time
--------
at the sole discretion of
-2-
the Operating Agent, exercised in good faith, and, in the case of a increase
only, upon satisfaction of the Rating Agency Condition with respect thereto.
"Bankruptcy Code" shall mean the provisions of title 11 of the United
---------------
States Code, 11 U.S.C. (S) (S) 101 et seq.
-------
"Billed Amount" shall mean, with respect to any Receivable, the amount
-------------
billed on the Billing Date to the Obligor thereunder.
"Billing Date" shall mean, with respect to any Receivable, the date on
------------
which the invoice with respect thereto was generated.
"Blocked Account" shall have the meaning set forth in Section 6.01(b)
--------------- ---------------
of the Purchase Agreement.
"Blocked Account Agreement" shall mean an agreement, satisfactory in
-------------------------
form and substance to the Operating Agent, pursuant to which a Blocked Account
is established and maintained at a Deposit Bank in accordance with Section
-------
6.01(b) of the Purchase Agreement.
-------
"Breakage Costs" shall have the meaning assigned to it in Section 2.10
-------------- ------------
of the Purchase Agreement.
"Bringdown Certificate" shall mean an Officer's Certificate
---------------------
substantially in the form of Exhibit 3.01(a)(ii) to the Purchase Agreement.
-------------------
"Business Day" shall mean any day that is not a Saturday, a Sunday or
------------
a day on which banks are required or permitted to be closed in the State of New
York.
"Callaway Golf Company" shall mean Callaway Golf Company, a California
---------------------
corporation.
"Capital Investment" shall mean, as of any date of determination, the
------------------
amount equal to (a) the aggregate deposits made by the Purchaser to the
Collection Account pursuant to Section 2.04(b)(i) of the Purchase Agreement on
------------------
or before such date, minus (b) the aggregate amounts disbursed to the Purchaser
-----
in reduction of Capital Investment pursuant to Sections 6.02, 6.03, 6.04 or 6.05
------------- ---- ---- ----
of the Purchase Agreement on or before such date.
"Capital Investment Available" shall mean, as of any date of
----------------------------
determination, the amount, if any, by which Availability exceeds Capital
Investment, in each case as of the end of the immediately preceding day.
"Capital Investment Shortfall" shall mean, for any day with respect to
----------------------------
which the Deferred Purchase Price Adjustment for the immediately preceding day
was greater than zero and
-3-
was not satisfied, the amount, if any, by which the Deferred Purchase Price
Adjustment exceeded the amount of Collections on deposit in the Capital
Investment Sub-Account after disbursement of any amounts pursuant to Sections
--------
6.03(c)(i) and (ii) of the Purchase Agreement, in each case as of the end of the
---------- ----
immediately preceding day.
"Capital Investment Sub-Account" shall mean that certain sub-account
------------------------------
of the Collection Account designated as such.
"Capital Lease" shall mean, with respect to any Person, any lease of
-------------
any property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, would be required to be classified and accounted for as a
capital lease on a balance sheet of such Person.
"Capital Lease Obligation" shall mean, with respect to any Capital
------------------------
Lease of any Person, the amount of the obligation of the lessee thereunder that,
in accordance with GAAP, would appear on a balance sheet of such lessee in
respect of such Capital Lease.
"Cash Management Systems" shall mean the cash management systems
-----------------------
described in Section 6.01 of the Purchase Agreement.
------------
"Cash Purchase Price" shall mean, as of any Purchase Date, the amount
-------------------
distributable to the Seller pursuant to Section 6.03(c)(v) of the Purchase
------------------
Agreement.
"CGS" shall mean Callaway Golf Sales Company, a California
---
corporation.
"CGS Account" shall mean the Collection Account under (and as defined
-----------
in) the Credit Agreement.
"CGS Note" shall have the meaning assigned to it in Section 6.04(a) of
-------- ---------------
the CGS Transfer Agreement.
"CGS Originator" shall have the meaning assigned to it in the Preamble
--------------
of the CGS Transfer Agreement.
"CGS Transfer Agreement" shall mean that certain Receivables Transfer
----------------------
Agreement dated as of February 10, 1999, between CGS, the Parent Guarantor and
GFC.
"Change of Control" shall mean any event, transaction or occurrence as
-----------------
a result of which (a) any person or group of persons (within the meaning of the
Securities Exchange Act of 1934, as amended) shall have acquired beneficial
ownership (within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended) of
20% or more of the issued and outstanding shares of capital Stock of CGS having
the right to vote for the election of directors of the respective entity under
ordinary circumstances; (b) CGS shall cease to own and control all of the
economic and voting rights
-4-
associated with all of the outstanding capital Stock of the Seller, or (c) CGS
has sold, transferred, conveyed, assigned or otherwise disposed of all or
substantially all of its assets.
"Charges" shall mean (i) all federal, state, county, city, municipal,
-------
local, foreign or other governmental taxes (including taxes owed to the PBGC at
the time due and payable); (ii) all levies, assessments, charges or claims of
any governmental entity or any claims of statutory lienholders, the nonpayment
of which could give rise by operation of law to a Lien or Adverse Claim and
(iii) any such taxes, levies, assessment, charges or claims which constitute a
lien or encumbrance on any property of the CGS Originator, the Parent Guarantor
or the Seller.
"Closing Date" shall mean February 12, 1999.
------------
"Collateral Account" shall mean that certain segregated deposit
------------------
account established by Redwood and maintained with the Depositary designated as
the "Redwood Receivables Corporation - Collateral Account," account number
11844, ABA No. 021 001 033, or such other account as may be designated in
writing by Redwood and approved by the Operating Agent and the Collateral Agent.
"Collateral Agent" shall mean GE Capital, in its capacity as
----------------
collateral agent for the Purchaser and the Purchaser Secured Parties under the
Purchase Agreement and the other Related Documents.
"Collateral Agent Agreement" shall mean that certain Second Amended
--------------------------
and Restated Collateral Agent and Security Agreement dated as of June 29, 1995,
among Redwood, the Depositary and GE Capital, in its capacities as (a) the
Collateral Agent, (b) the Operating Agent, (c) the Liquidity Agent and (d) the
Letter of Credit Agent, as amended pursuant to that certain Amendment No. 1 to
Second Amended and Restated Collateral Agent and Security Agreement dated as of
February 27, 1996, as amended pursuant to that certain Amendment No. 2 to Second
Amended and Restated Collateral Agent and Security Agreement dated as of January
4, 1997, as amended pursuant to that certain Amendment No. 3 to Second Amended
and Restated Collateral Agent and Security Agreement dated as of January 24,
1997.
"Collection Account" shall mean that certain segregated deposit
------------------
account established by the Purchaser and maintained with the Depositary
designated as the "Redwood Receivables Corporation - Collection Account (GFC),"
account number 27063, ABA No. ▇▇▇▇▇▇▇▇▇, or such other account established in
accordance with the requirements set forth in Section 6.01(c)(iii) of the
--------------------
Purchase Agreement.
"Collections" shall mean, with respect to any Receivable, all cash
-----------
collections and other proceeds of such Receivable (including late charges, fees
and interest arising thereon, and all recoveries with respect thereto that have
been written off as uncollectible).
-5-
"Commercial Paper" shall mean those certain short-term promissory
----------------
notes issued by Redwood from time to time in the United States of America
commercial paper market.
"Commitment Reduction Notice" shall have the meaning assigned to it in
---------------------------
Section 2.02(a) of the Purchase Agreement.
---------------
"Commitment Termination Notice" shall have the meaning assigned to it
-----------------------------
in Section 2.02(b) of the Purchase Agreement.
---------------
"Concentration Discount Amount" shall mean, with respect to any
-----------------------------
Obligor and as of any date of determination after giving effect to all Eligible
Receivables to be transferred on such date, the amount by which the Outstanding
Balance of Eligible Receivables owing by such Obligor exceeds the lesser of (a)
the dollar amount (if any) set forth on Annex 1 to the Purchase Agreement, and
-------
(b) (i) the applicable short-term debt rating percentage for such Obligor as set
forth on Annex 1 to the Purchase Agreement multiplied by (ii) the Outstanding
------- -------------
Balance of all Eligible Receivables on such date. The dollar amount (if any) or
percentage referenced in clauses (a) and (b)(i) above, respectively, with
----------- ------
respect to any Obligor may be changed at any time at the sole discretion of the
Operating Agent and, in the case of an increase only, upon satisfaction of the
Rating Agency Condition with respect thereto.
"Contract" shall mean any agreement (including any invoice) pursuant
--------
to, or under which, an Obligor shall be obligated to make payments with respect
to any Receivable.
"Contributed Receivables" shall have the meaning assigned to it in
-----------------------
Section 2.01(d) of the CGS Transfer Agreement.
---------------
"▇▇ ▇▇▇▇▇▇" shall mean any Person that holds record or beneficial
---------
ownership of Commercial Paper.
"CP Interest Amount" shall have the meaning assigned to it in Annex 3
------------------ -------
to the Purchase Agreement.
"Credit and Collection Policies" shall mean the credit, collection,
------------------------------
customer relations and service policies of the CGS Originator in effect on the
Closing Date, as the same may from time to time be amended, restated,
supplemented or otherwise modified with the written consent of the Operating
Agent.
"Credit Agreement" shall mean that certain Amended and Restated Credit
----------------
Agreement dated as of February 10, 1999, among Callaway Golf Company, as
borrower, the lenders party thereto and GE Capital, as agent for itself and the
other lenders party thereto, together with such amendments, restatements,
supplements or modifications thereto or any refinancings, replacements or
refundings thereof as may be agreed to by the Purchaser and the Operating Agent.
-6-
"Credit Facility" shall mean the Credit Agreement and the other loan
---------------
documents executed in connection therewith, together with such amendments,
restatements, supplements or modifications thereto or any refinancings,
replacements or refundings thereof as may be agreed to by the Purchaser and the
Operating Agent.
"Credit Facility Liens" shall mean Liens permitted by the Credit
---------------------
Facility, except Liens against Receivables, as in effect on the date hereof.
"Daily Yield" shall have the meaning assigned to it in Annex 3 to the
----------- -------
Purchase Agreement.
"Daily Yield Rate" shall have the meaning assigned to it in Annex 3 to
---------------- -------
the Purchase Agreement.
"Dealer" shall mean any dealer party to a Dealer Agreement.
------
"Dealer Agreement" shall mean any dealer agreement entered into by
----------------
Redwood for the distribution of Commercial Paper.
"Debt" of any Person shall mean, without duplication, (a) all
----
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services payment for which is deferred 90 days or more, but
excluding obligations to trade creditors incurred in the ordinary course of
business that are not overdue by more than 90 days unless being contested in
good faith, (b) all reimbursement and other obligations with respect to letters
of credit, bankers' acceptances and surety bonds, whether or not matured, (c)
all obligations evidenced by notes, bonds, debentures or similar instruments,
(d) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property), (e)
all Capital Lease Obligations, (f) all obligations of such Person under
commodity purchase or option agreements or other commodity price hedging
arrangements, in each case whether contingent or matured, (g) all obligations of
such Person under any foreign exchange contract, currency swap agreement,
interest rate swap, cap or collar agreement or other similar agreement or
arrangement designed to alter the risks of that Person arising from fluctuations
in currency values or interest rates, in each case whether contingent or
matured, (h) all liabilities of such Person under Title IV of ERISA, (i) all
Guaranteed Indebtedness of such Person, (j) all indebtedness referred to in
clauses (a) through (i) above secured by (or for which the holder of such
----------- ---
indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property or other assets (including accounts and contract
rights) owned by such Person, even though such Person has not assumed or become
liable for the payment of such indebtedness, (k) the "Obligations," as that term
is defined in the Credit Facility and (l) the Seller Secured Obligations.
-7-
"Defaulted Receivable" shall mean any Receivable (a) with respect to
--------------------
which any payment, or part thereof, remains unpaid for more than 60 days after
its Maturity Date, (b) with respect to which the Obligor thereunder has taken
any action, or suffered any event to occur, of the type described in Sections
--------
9.01(c) or 9.01(d) of the Purchase Agreement, or (c) that otherwise is
------- -------
determined to be uncollectible and is written off in accordance with the Credit
and Collection Policies.
"Default Ratio" shall mean, as of any date of determination, the ratio
-------------
(expressed as a percentage) of:
(a) (i) the average of the respective Outstanding Balances of all
Transferred Receivables with respect to which any payment, or part thereof,
remained unpaid for more than 90 days past their respective Maturity Dates as of
the last day of the three Settlement Periods immediately preceding such date,
plus (ii) the aggregate Outstanding Balance of Transferred Receivables that were
----
written off as uncollectible during such Settlement Periods
to
--
(b) the average of the respective Outstanding Balances of all
Transferred Receivables as of the last day of the three Settlement Periods
immediately preceding such date.
"Deferred Purchase Price" shall mean, as of any Purchase Date, the
-----------------------
amount equal to (a) the Outstanding Balance of Transferred Receivables to be
purchased multiplied by (b) the Deferred Purchase Price Rate, in each case as of
-------------
such date.
"Deferred Purchase Price Adjustment" shall mean, as of any date of
----------------------------------
determination during the Revolving Period, the amount (positive or negative)
equal to (a)(i)(A) the Deferred Purchase Price Rate as of the last day on which
a Deferred Purchase Price Adjustment was calculated, minus (B) the Deferred
-----
Purchase Price Rate as of such date of determination; multiplied by (ii)(A) the
-------------
aggregate Outstanding Balance of Transferred Receivables as of the end of the
last day on which a Deferred Purchase Price Adjustment was calculated, minus (B)
-----
Collections received from the end of the last day on which a Deferred Purchase
Price Adjustment was calculated through and including the end of the day
immediately preceding such date of determination, minus (C)(1) the aggregate
-----
Outstanding Balance of Transferred Receivables that became Defaulted
Receivables, plus (2) Dilution Factors, in each case from the beginning of the
----
last day on which a Deferred Purchase Price Adjustment was calculated through
and including the end of the day immediately preceding such date of
determination, minus (b) the Deferred Purchase Price Shortfall, if any, plus (c)
----- ----
the Capital Investment Shortfall, if any.
"Deferred Purchase Price Collections" shall mean, as of any date of
-----------------------------------
determination, the amount equal to (a)(i) Collections received during the
immediately preceding day, minus (ii) amounts disbursed to the Retention Account
-----
pursuant to Section 6.02(b) of the Purchase
---------------
-8-
Agreement for the immediately preceding day, multiplied by (b) the Deferred
-------------
Purchase Price Rate as of such date of determination.
"Deferred Purchase Price Outstanding" shall mean, as of any date of
-----------------------------------
determination, the amount equal to (a) the Outstanding Balance of Transferred
Receivables as of the end of the immediately preceding day, multiplied by (b)
-------------
the Deferred Purchase Price Rate as of such date.
"Deferred Purchase Price Rate" shall mean, (a) as of any date of
----------------------------
determination during the Revolving Period, a fraction (expressed as a
percentage) (i) the numerator of which equals the Outstanding Balance of
Transferred Receivables minus Availability, in each case as of the end of the
-----
immediately preceding day, and (ii) the denominator of which equals the
Outstanding Balance of Transferred Receivables as of the end of the immediately
preceding day; or (b) for any day from and after the Facility Termination Date,
the Deferred Purchase Price Rate calculated according to clause (a) above for
----------
the Facility Termination Date.
"Deferred Purchase Price Shortfall" shall mean, for any day with
---------------------------------
respect to which the Deferred Purchase Price Adjustment for the immediately
preceding day was less than zero and was not satisfied, the amount, if any, by
which the Deferred Purchase Price Adjustment exceeded the amount of Collections
on deposit in the Deferred Purchase Price Sub-Account after disbursement of any
amounts pursuant to Sections 6.03(b)(i) and (ii) of the Purchase Agreement, in
------------------- ----
each case as of the end of the immediately preceding day.
"Deferred Purchase Price Sub-Account" shall mean that certain sub-
-----------------------------------
account of the Collection Account designated as such.
"Delinquency Ratio" shall mean, as of any date of determination, the
-----------------
ratio (expressed as a percentage) of:
(a) the average of the respective Outstanding Balances of all
Transferred Receivables with respect to which any payment, or part thereof,
remained unpaid for more than 30 but less than 91 days past their respective
Maturity Dates as of the last day of the three Settlement Periods immediately
preceding such date
to
--
(b) the average of the Outstanding Balances of all Transferred
Receivables as of the last day of the three Settlement Periods immediately
preceding such date.
"Delinquent Receivable" shall mean any Receivable, other than a
---------------------
Defaulted Receivable, with respect to which any payment, or part thereof,
remains unpaid for more than 60 days past its Maturity Date.
-9-
"Depositary" shall mean Bankers Trust Company, or any other Person
----------
designated as the successor Depositary pursuant to and in accordance with the
terms of the Depositary Agreement, in its capacity as issuing and paying agent
or trustee in connection with the issuance of Commercial Paper.
"Deposit Bank" shall have the meaning assigned to it in Section
------------ -------
6.01(b) of the Purchase Agreement.
"Depositary Agreement" shall mean that certain Depositary Agreement
--------------------
dated March 15, 1994, by and between Redwood and the Depositary and consented to
by the Liquidity Agent.
"Dilution Factors" shall mean, with respect to any Receivable, any net
----------------
credits, rebates, freight charges, cash discounts, volume discounts, cooperative
advertising expenses, royalty payments, warranties, cost of parts required to be
maintained by agreement (whether express or implied), warehouse and other
allowances, disputes, setoffs, chargebacks, defective returns, other returned or
repossessed goods, inventory transfers, allowances for early payments and other
similar allowances that are reflected on the books of the CGS Originator and
made or coordinated with the usual practices of the CGS Originator; provided,
--------
that any allowances or adjustments in accordance with the Credit and Collection
Policies made on account of the insolvency of the Obligor thereunder or such
Obligor's inability to pay shall not constitute a Dilution Factor.
"Dilution Funded Amount" shall mean, as of any date of determination,
----------------------
the amount equal to (a)(i)(A) the Outstanding Balance of Transferred Receivables
that have become Defaulted Receivables on or before the end of the immediately
preceding day, plus (B) other non-cash reductions of the Outstanding Balance of
----
Transferred Receivables occurring during the immediately preceding day,
multiplied by (ii) 100% minus the Deferred Purchase Price Rate as of such date
------------- -----
of determination, plus (b) the Dilution Funded Amount Shortfall, if any, as of
----
such date of determination.
"Dilution Funded Amount Shortfall" shall mean, as of any date of
--------------------------------
determination, the amount, if any, by which (a) the Dilution Funded Amount
exceeds (b) the amount, if any, by which Deferred Purchase Price Collections
exceeds the amount calculated in accordance with Section 6.03(b)(i) of the
------------------
Purchase Agreement.
"Dilution Ratio" shall mean, as of any date of determination, the
--------------
ratio (expressed as a percentage) of:
(a) the aggregate Dilution Factors during the first Settlement Period
immediately preceding such date
to
--
-10-
(b) the aggregate Billed Amount of all Transferred Receivables
originated during the first Settlement Period immediately preceding such date.
"Dilution Reserve Ratio" shall mean, as of any date of determination,
----------------------
the ratio (expressed as a percentage) calculated in accordance with the
following formula:
[(ADR x 2.00) + [(HDR - ADR) x HDR]] x DILHOR
--- ------
ADR NRPB
where:
ADR = the average of the respective Dilution Ratios as of the last
day of the 12 Settlement Periods immediately preceding such
date.
HDR = the highest Dilution Ratio during the 12 Settlement Periods
immediately preceding such date.
DILHOR = the aggregated Billed Amount of (a) Eligible Receivables
that are not Winter Dating Receivables originated during the
two Settlement Periods immediately preceding such date plus
(b) Eligible Receivables that are Winter Dating Receivables
in accordance with the following schedule:
Month Additional DILHOR
----- -----------------
August 100% of Eligible Receivables originated with Winter
Dating Payment Terms
September 100% of Eligible Receivables originated with Winter
Dating Payment Terms during the two Settlement
Periods immediately preceding such date.
October 100% of Eligible Receivables originated with Winter
Dating Payment Terms during the three Settlement
Periods immediately preceding such date.
November 100% of Eligible Receivables originated with Winter
Dating Payment Terms during the four Settlement
Periods immediately preceding such date.
December 50% of Eligible Receivables originated with Winter
Dating Payment Terms during the third, fourth and
fifth Settlement Periods immediately preceding such
date.
-11-
January 50% of Eligible Receivables originated with Winter
Dating Payment Terms during the fourth, fifth and
sixth Settlement Periods immediately preceding such
date.
February 50% of Eligible Receivables originated with Winter
Dating Payment Terms during the fifth, sixth and
seventh Settlement Periods immediately preceding
such date.
March 50% of Eligible Receivables originated with Winter
Dating Payment Terms during the sixth, seventh and
eighth Settlement Periods immediately preceding such
date.
April 50% of Eligible Receivables originated with Winter
Dating Payment Terms during the seventh, eighth and
ninth Settlement Periods immediately preceding such
date.
NRPB = the Outstanding Balance of Eligible Receivables as of the
last day of the first Settlement Period immediately
preceding such date.
Notwithstanding the foregoing, the Dilution Reserve Ratio may be changed at any
time at the sole discretion of the Operating Agent, exercised in good faith,
and, in the case of a decrease only, upon satisfaction of the Rating Agency
Condition with respect thereto.
"Dollars" or "$" shall mean lawful currency of the United States of
------- -
America.
"Dynamic Purchase Discount Rate" shall mean, as of any date of
------------------------------
determination, the rate equal to (a) 100% minus (b)(i) the Loss Reserve Ratio
-----
plus (ii) the Dilution Reserve Ratio, plus (c) the Available LOC Percentage.
---- ----
"Election Notice" shall have the meaning assigned to it in Section
--------------- -------
2.01(d) of the CGS Transfer Agreement.
-------
"Eligible Receivable" shall mean, as of any date of determination, a
-------------------
Transferred Receivable:
(a) that is not a liability of an Excluded Obligor;
-12-
(b) that is not a liability of an Obligor (i) organized under the laws
of any jurisdiction outside of the United States of America or (ii) having its
principal place of business outside of the United States of America;
(c) that is only denominated and payable in Dollars in the United
States of America;
(d) that is not and will not be subject to any right of rescission,
set-off, recoupment, counterclaim or defense, whether arising out of
transactions concerning the Contract therefor or otherwise (provided, that if
--------
the maximum amount of such right of rescission, set-off, recoupment,
counterclaim or defense is less than the Outstanding Balance of such Receivable,
such Receivable shall be deemed not to be an Eligible Receivable only to the
extent of such maximum amount);
(e) that is not a Delinquent Receivable, a Defaulted Receivable or an
Unapproved Receivable;
(f) that does not represent "billed but not yet shipped" goods or
merchandise, unperformed services, consigned goods or "sale or return" goods and
does not arise from a transaction for which any additional performance by the
CGS Originator, or acceptance by or other act of the Obligor thereunder, remains
to be performed as a condition to any payments on such Receivable;
(g) as to which the representations and warranties of Sections
--------
4.01(v)(ii)-(iv) of the CGS Transfer Agreement are true and correct in all
----------------
respects as of the Transfer Date therefor;
(h) that is not the liability of an Obligor that has any claim of a
material nature against or affecting the CGS Originator or the property of the
CGS Originator;
(i) that is a true and correct statement of a bona fide indebtedness
---- ----
incurred in the amount of the Billed Amount of such Receivable for merchandise
sold to or services rendered and accepted by the Obligor thereunder;
(j) that was originated in accordance with and satisfies in all
material respects all applicable requirements of the Credit and Collection
Policies;
(k) that represents the genuine, legal, valid and binding obligation
of the Obligor thereunder enforceable by the holder thereof in accordance with
its terms;
(l) that is entitled to be paid pursuant to the terms of the Contract
therefor, has not been paid in full or been compromised, adjusted, extended,
satisfied, subordinated,
-13-
rescinded or modified, and is not subject to compromise, adjustment, extension,
satisfaction, subordination, rescission, or modification by the CGS Originator;
(m) with respect to which the CGS Originator thereof has submitted all
necessary documentation for payment to the Obligor thereunder and the CGS
Originator has fulfilled all of its other obligations in respect thereof;
(n) the stated term of which, if any, is not greater than 90 days
after its Billing Date, except with regard to Winter Dating Receivables;
(o) that does not contravene in any material respect any laws, rules
or regulations applicable thereto (including laws, rules and regulations
relating to usury, consumer protection, truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt collection practices
and privacy) and with respect to which no party to the Contract therefor is in
violation of any such law, rule or regulation that could have a material adverse
effect on the collectibility, value or payment terms of such Receivable;
(p) with respect to which no proceedings or investigations are pending
or threatened before any Governmental Authority (i) asserting the invalidity of
such Receivable or the Contract therefor, (ii) asserting the bankruptcy or
insolvency of the Obligor thereunder, (iii) seeking payment of such Receivable
or payment and performance of such Contract or (iv) seeking any determination or
ruling that might materially and adversely affect the validity or enforceability
of such Receivable or such Contract;
(q) with respect to which the Obligor thereunder is not: (i) bankrupt
or insolvent, (ii) unable to make payment of its obligations when due, (iii) a
debtor in a voluntary or involuntary bankruptcy proceeding, or (iv) the subject
of a comparable receivership or insolvency proceeding;
(r) that is an "account" within the meaning of the UCC of the
jurisdiction in which the chief executive office of the CGS Originator is
located;
(s) that is payable solely and directly to the CGS Originator and not
to any other Person (including any shipper of the merchandise or goods that gave
rise to such Receivable), except to the extent that payment thereof may be made
to the Collection Account or otherwise as directed pursuant to Article VI of the
----------
Purchase Agreement;
(t) with respect to which all material consents, licenses, approvals
or authorizations of, or registrations with, any Governmental Authority required
to be obtained, effected or given in connection with the creation of such
Receivable or the Contract therefor have been duly obtained, effected or given
and are in full force and effect;
-14-
(u) that is created through the provision of merchandise, goods or
services (i) by the CGS Originator in the ordinary course of its business in a
current transaction or (ii) by another Person from whom the CGS Originator
acquired such Receivables where those Receivables have been approved in writing
by the Operating Agent;
(v) that complies with such other criteria and requirements as the
Operating Agent may from time to time specify to the Seller or the CGS
Originator upon 10 days' prior written notice or, if so required by any Rating
Agency, upon such notice as may be specified by such Rating Agency;
(w) that is not the liability of an Obligor that, under the terms of
the Credit and Collection Policies, is receiving or should receive merchandise,
goods or services on a "cash on delivery" basis, and
(x) that is not subject to any right, claim, security interest or
other interest of any other Person, other than Liens in favor of the Purchaser.
"Environmental Laws" shall mean all applicable federal, state, local
------------------
and foreign laws, statutes, ordinances, codes, rules, standards and regulations,
now or hereafter in effect, and in each case as amended or supplemented from
time to time, and any applicable judicial or administrative interpretation
thereof, including any applicable judicial or administrative order, consent
decree, order or judgment, imposing liability or standards of conduct for or
relating to the regulation and protection of human health, safety, the
environment and natural resources (including ambient air, surface water,
groundwater, wetlands, land surface or subsurface strata, wildlife, aquatic
species and vegetation). Environmental Laws include, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. (S)(S) 9601 et seq.) "CERCLA"); the Hazardous Materials Transportation
-------
Authorization Act of 1994 (49 U.S.C. (S)(S) 5101 et seq.); the Federal
-------
Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. (S)(S) 136 et seq.); the
-------
Solid Waste Disposal Act (42 U.S.C. (S)(S) 6901 et seq.); the Toxic Substance
-------
Control Act (15 U.S.C. (S)(S) 2601 et seq.); the Clean Air Act (42 U.S.C.
-------
(S)(S) 7401 et seq.); the Federal Water Pollution Control Act (33 U.S.C. (S)(S)
-------
1251 et seq.); the Occupational Safety and Health Act (29 U.S.C. (S)(S) 651 et
------- --
seq.); and the Safe Drinking Water Act (42 U.S.C. (S)(S) 300(f) et seq.), each
---- -------
as from time to time amended, and any and all regulations promulgated
thereunder, and all analogous state, local and foreign counterparts or
equivalents and any transfer of ownership notification or approval statutes.
"Environmental Permits" shall mean all permits, licenses,
---------------------
authorizations, certificates, approvals, registrations or other written
documents required by any Governmental Authority under any Environmental Laws.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974
-----
and any regulations promulgated thereunder.
-15-
"ERISA Affiliate" shall mean, with respect to the CGS Originator, any
---------------
trade or business (whether or not incorporated) that, together with the CGS
Originator, are treated as a single employer within the meaning of Sections
414(b), (c), (m) or (o) of the IRC.
"ERISA Event" shall mean, with respect to the CGS Originator or any
-----------
ERISA Affiliate, (a) any event described in Section 4043(c) of ERISA with
respect to a Title IV Plan; (b) the withdrawal of the CGS Originator or ERISA
Affiliate from a Title IV Plan subject to Section 4063 of ERISA during a plan
year in which it was a "substantial employer," as defined in Section 4001(a)(2)
of ERISA; (c) the complete or partial withdrawal of the CGS Originator or any
ERISA Affiliate from any Multiemployer Plan; (d) the filing of a notice of
intent to terminate a Title IV Plan or the treatment of a plan amendment as a
termination under Section 4041 of ERISA; (e) the institution of proceedings to
terminate a Title IV Plan or Multiemployer Plan by the PBGC; (f) the failure by
the CGS Originator or ERISA Affiliate to make when due required contributions to
a Multiemployer Plan or Title IV Plan unless such failure is cured within 30
days; (g) any other event or condition that might reasonably be expected to
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Title IV Plan or Multiemployer Plan
or for the imposition of liability under Section 4069 or 4212(c) of ERISA; (h)
the termination of a Multiemployer Plan under Section 4041A of ERISA or the
reorganization or insolvency of a Multiemployer Plan under Section 4241 of
ERISA; or (i) the loss of a Qualified Plan's qualification or tax exempt status.
"ESOP" shall mean a Plan that is intended to satisfy the requirements
----
of Section 4975(e)(7) of the IRC.
"Event of Servicer Termination" shall have the meaning assigned to it
-----------------------------
in Section 9.02 of the Purchase Agreement.
------------
"Excluded Obligor" shall mean any Obligor (i) that is an Affiliate or
----------------
employee of the CGS Originator or the Seller, (ii) that is a Governmental
Authority, (iii) with respect to which 50% or more of the aggregate Outstanding
Balance of all Receivables owing by such Obligor are Delinquent Receivables or
Defaulted Receivables, or (iv) listed on Annex 2 to the Purchase Agreement as
-------
revised from time to time pursuant to a letter in the form of Exhibit A thereto.
---------
"Extended Term Reserve" shall mean the Outstanding Balance of those
---------------------
Receivables which are not due within 90 days, except for Winter Dating
Receivables.
"Facility Termination Date" shall mean the earliest of (a) the date so
-------------------------
designated pursuant to Section 9.01 of the Purchase Agreement, (b) 90 days prior
------------
to the Final Purchase Date and (c) 90 days prior to the date of termination of
the Maximum Purchase Limit specified in a notice from the Seller to the
Purchaser delivered pursuant to and in accordance with Section 2.02(b) of the
---------------
Purchase Agreement.
-16-
"Fair Labor Standards Act" shall mean the provisions of the Fair Labor
------------------------
Standards Act, 29 U.S.C. (S) (S) 201 et seq.
-------
"Federal Reserve Board" shall mean the Board of Governors of the
---------------------
Federal Reserve System.
"Fee Letter" shall mean that certain letter agreement dated February
----------
10, 1999, between the Seller and the Purchaser.
"Final Purchase Date" shall mean February 11, 2004.
-------------------
"GAAP" shall mean generally accepted accounting principles in the
----
United States of America as in effect on the Closing Date, consistently applied
as such term is further defined in Section 2(a) of this Annex X.
------------ -------
"GE Capital" shall mean General Electric Capital Corporation, a New
----------
York corporation.
"General Trial Balance" shall mean, with respect to the CGS Originator
---------------------
and as of any date of determination, the CGS Originator's accounts receivable
trial balance (whether in the form of a computer printout, magnetic tape or
diskette) as of such date, listing Obligors and the Receivables owing by such
Obligors as of such date together with the aged Outstanding Balances of such
Receivables, in form and substance satisfactory to GFC.
"GFC Loan" shall have the meaning specified in Section 6.01 of the CGS
-------- ------------
Transfer Agreement.
"Golf Funding Corporation" or "GFC" shall mean Golf Funding
------------------------ ---
Corporation, a Delaware corporation.
"GFC Indemnified Person" shall have the meaning assigned to it in
----------------------
Section 5.01 of the CGS Transfer Agreement.
------------
"GFC Loan" shall have the meaning assigned to it in Section 6.01 of
-------- ------------
the CGS Transfer Agreement.
"Governmental Authority" shall mean any nation or government, any
----------------------
state or other political subdivision thereof, and any agency, department or
other entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any obligation
-----------------------
of such Person guaranteeing any indebtedness, lease, dividend, or other
obligation ("primary obligation") of any other Person (the "primary obligor") in
------------------ ---------------
any manner, including any obligation or
-17-
arrangement of such Person to (a) purchase or repurchase any such primary
obligation, (b) advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet condition of the primary obligor, (c) purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation, or (d) indemnify the owner of such primary obligation
against loss in respect thereof. The amount of any Guaranteed Indebtedness at
any time shall be deemed to be the amount equal to the lesser at such time of
(x) the stated or determinable amount of the primary obligation in respect of
which such Guaranteed Indebtedness is incurred and (y) the maximum amount for
which such Person may be liable pursuant to the terms of the instrument
embodying such Guaranteed Indebtedness; or, if not stated or determinable, the
maximum reasonably anticipated liability (assuming full performance) in respect
thereof.
"Incipient Servicer Termination Event" shall mean any event that, with
------------------------------------
the passage of time or notice or both, would, unless cured or waived, become an
Event of Servicer Termination.
"Incipient Termination Event" shall mean any event that, with the
---------------------------
passage of time or notice or both, would, unless cured or waived, become a
Termination Event.
"Indemnified Amounts" shall mean, with respect to any Person, any and
-------------------
all suits, actions, proceedings, claims, damages, losses, liabilities and
expenses (including attorneys' fees and disbursements and other costs of
investigation or defense, including those incurred upon any appeal).
"Indemnified Taxes" shall have the meaning assigned to it in Section
-----------------
2.08 of the Purchase Agreement.
"Intercreditor Agreement" shall mean that certain Intercreditor
-----------------------
Agreement dated as of February 10, 1999, entered into by and among the CGS
Originator, the Seller, the Purchaser and GE Capital, in various capacities.
"Interest Payment Date" shall mean, with respect to any GFC Loan, the
---------------------
first Business Day of each calendar month while such loan is outstanding;
provided, that in addition to the foregoing, each of (a) the date upon which all
--------
GFC Loans have been paid in full and (b) the Facility Termination Date shall be
deemed to be an "Interest Payment Date" with respect to any accrued interest
thereunder.
"Interest Rate" shall have the meaning assigned to it in Section
------------- -------
6.06(a) of the CGS Transfer Agreement.
-------
-18-
"Investment Base" shall mean, as of any date of determination, the
---------------
amount equal to the Outstanding Balance of Eligible Receivables minus the
-----
Reserves with respect thereto, in each case as disclosed in the most recently
submitted Investment Base Certificate or as otherwise determined by the
Purchaser, the Operating Agent or the Collateral Agent based on Seller
Collateral information available to any of them, including any information
obtained from any audit or from any other reports with respect to the Seller
Collateral, which determination shall be final, binding and conclusive on all
parties to the Purchase Agreement (absent manifest error).
"Investment Base Certificate" shall have the meaning assigned to it in
---------------------------
Section 2.03(a) of the Purchase Agreement.
---------------
"Investment Company Act" shall mean the provisions of the Investment
----------------------
Company Act of 1940, 15 U.S.C. (S) (S) 80a et seq., and any regulations
-------
promulgated thereunder.
"Investment Reports" shall mean the reports with respect to the
------------------
Transferred Receivables and the Seller Collateral referred to in Annex 5.02(b)
-------------
to the Purchase Agreement.
"Investments" shall mean, with respect to any Seller Blocked Account
-----------
Collateral, the certificates, instruments, investment property or other
investments in which amounts constituting such collateral are invested from time
to time.
"IRC" shall mean the Internal Revenue Code of 1986 and any regulations
---
promulgated thereunder.
"IRS" shall mean the Internal Revenue Service.
---
"Letter of Credit" shall mean that certain Irrevocable Letter of
----------------
Credit No. RRC-2 dated June 29, 1995, issued by the Letter of Credit Providers
at the request of Redwood in favor of the Collateral Agent pursuant to the
Letter of Credit Agreement.
"Letter of Credit Agent" shall mean GE Capital, in its capacity as
----------------------
agent for the Letter of Credit Providers under the Letter of Credit Agreement.
"Letter of Credit Agreement" shall mean that certain Second Amended
--------------------------
and Restated Letter of Credit Reimbursement Agreement dated as of June 29, 1995,
among Redwood, the Letter of Credit Agent, the Letter of Credit Providers and
the Collateral Agent, as amended pursuant to that certain Amendment No. 1 to
Second Amended and Restated Letter of Credit Reimbursement Agreement dated as of
February 27, 1996, as amended pursuant to that certain Amendment No. 2 to Second
Amended and Restated Letter of Credit Reimbursement Agreement dated as of
January 24, 1997.
-19-
"Letter of Credit Providers" shall mean, initially, GE Capital, in its
--------------------------
capacity as issuer of the Letter of Credit under the Letter of Credit Agreement,
and thereafter its successors and permitted assigns in such capacity.
"Lien" shall mean any mortgage or deed of trust, pledge,
----
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the UCC or comparable law of any jurisdiction).
"Liquidity Agent" shall mean GE Capital, in its capacity as agent for
---------------
the Liquidity Lenders pursuant to the Liquidity Loan Agreement.
"Liquidity Lenders" shall mean, collectively, GE Capital and any other
-----------------
provider of Liquidity Loans under the Liquidity Loan Agreement.
"Liquidity Loan Agreement" shall mean that certain Liquidity Loan
------------------------
Agreement dated as of February 10, 1999, among Redwood and GE Capital, in its
capacities as (a) the operating agent for Redwood, (b) the Collateral Agent, (c)
the initial Liquidity Lender and (d) the Liquidity Agent, as amended, restated,
supplemented or otherwise modified from time to time.
"Liquidity Loans" shall mean any and all borrowings by Redwood under
---------------
the Liquidity Loan Agreement.
"Litigation" shall mean, with respect to any Person, any action,
----------
claim, lawsuit, demand, investigation or proceeding pending or threatened
against such Person before any court, board, commission, agency or
instrumentality of any federal, state, local or foreign government or of any
agency or subdivision thereof or before any arbitrator or panel of arbitrators.
"Lockbox Account" shall mean that certain lockbox account number 2470-
---------------
5-04484 in the name of Odyssey held at the Lockbox Bank.
"Lockbox Account Agreement" shall mean that certain Three Party
-------------------------
Agreement relating to Lockbox Services dated February 10, 1999 between the
Lockbox Bank, Odyssey, CGS, GFC, Redwood, the Operating Agent and the Collateral
Agent.
"Lockbox Bank" shall mean the Bank of America National Trust and
------------
Savings Association.
"Loss Reserve Ratio" shall mean, as of any date of determination, the
------------------
ratio (expressed as a percentage) calculated in accordance with the following
formula:
-20-
2 x ARR x DEFHOR
------
NRPB
where:
ARR = the highest Three Month Aged Receivables Ratio during the 12
Settlement Periods immediately preceding such date.
DEFHOR = the aggregate Billed Amount of (a) Eligible Receivables that
are not Winter Dating Receivables originated during the four
Settlement Periods immediately preceding such date plus (b)
Eligible Receivables that are Winter Dating Receivables in
accordance with the following schedule:
Month Additional DEFHOR
----- -----------------
August 100% of Eligible Receivables originated with Winter
Dating Payment Terms
September 100% of Eligible Receivables originated with Winter
Dating Payment Terms during the two Settlement
Periods immediately preceding such date.
October 100% of Eligible Receivables originated with Winter
Dating Payment Terms during the three Settlement
Periods immediately preceding such date.
November 100% of Eligible Receivables originated with Winter
Dating Payment Terms during the four Settlement
Periods immediately preceding such date.
December 50% of Eligible Receivables originated with Winter
Dating Payment Terms during the third, fourth and
fifth Settlement Periods immediately preceding such
date.
January 50% of Eligible Receivables originated with Winter
Dating Payment Terms during the fourth, fifth and
sixth Settlement Periods immediately preceding such
date.
February 50% of Eligible Receivables originated with Winter
Dating Payment Terms during the fifth, sixth and
seventh Settlement Periods immediately preceding
such date.
-21-
March 50% of Eligible Receivables originated with Winter
Dating Payment Terms during the sixth, seventh and
eighth Settlement Periods immediately preceding
such date.
April 50% of Eligible Receivables originated with Winter
Dating Payment Terms during the seventh, eighth
and ninth Settlement Periods immediately preceding
such date.
NRPB = the Outstanding Balance of Eligible Receivables as of the
last day of the first Settlement Period immediately
preceding such date.
Notwithstanding the foregoing, the Loss Reserve Ratio may be changed at any time
at the sole discretion of the Operating Agent, exercised in good faith, and, in
the case of a decrease only, upon satisfaction of the Rating Agency Condition
with respect thereto.
"Margin" shall mean, for any period, the sum of the "Margin Amounts"
------
(as such term is defined in Annex 3 to the Purchase Agreement) for each day in
-------
such period.
"Material Adverse Effect" shall mean a material adverse effect on (a)
-----------------------
the business, assets, liabilities, operations, prospects or financial or other
condition of (i) the CGS Originator or the Parent Guarantor, (ii) the Seller,
(iii) the Servicer and its Subsidiaries considered as a whole, or (iv) the
Parent Guarantor and its Subsidiaries considered as a whole, (b) the ability of
the CGS Originator, the Parent Guarantor, the Seller or the Servicer to perform
any of its obligations under the Related Documents in accordance with the terms
thereof, (c) the validity or enforceability of any Related Document or the
rights and remedies of GFC, the Purchaser, the Operating Agent or the Collateral
Agent under any Related Document, (d) the federal income tax attributes of the
sale, contribution or pledge of the Transferred Receivables pursuant to any
Related Document or (e) the Transferred Receivables, the Contracts therefor, the
Transfer Agreement Collateral, the Seller Collateral or the ownership interests
or Liens of GFC or the Purchaser thereon or the priority of such interests or
Liens.
"Maturity Date" shall mean, with respect to any Receivable, the due
-------------
date for payment therefor specified in the Contract therefor, or, if no date is
so specified, 60 days from the Billing Date.
"Maximum Purchase Limit" shall mean $80,000,000, as such amount may be
----------------------
reduced in accordance with Section 2.02(a) of the Purchase Agreement.
---------------
"Monthly Report" shall have the meaning assigned to it in paragraph
-------------- ---------
(a) of Annex 5.02(a) to the Purchase Agreement.
--- -------------
-22-
"Moody's" shall mean ▇▇▇▇▇'▇ Investors Service, Inc. or any successor
-------
thereto.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
------------------
Section 4001(a)(3) of ERISA with respect to which the CGS Originator or ERISA
Affiliate is making, is obligated to make, or has made or been obligated to
make, contributions on behalf of participants who are or were employed by any of
them.
"Net Proceeds Amount" shall mean, with respect to issuances of any
-------------------
Commercial Paper, (a) the face amount of such Commercial Paper, minus (b) (i)
-----
the discount on the face amount thereof offered to the public plus (ii) Dealer
----
fees for such issuances of Commercial Paper.
"Nevada Bob's" shall mean Nevada Bob's Pro Shop, a Nevada corporation.
------------
"Obligations" shall have the meaning assigned to it in Section 2.03 of
----------- ------------
the CGS Transfer Agreement.
"Obligor" shall mean, with respect to any Receivable, the Person
-------
primarily obligated to make payments in respect thereof.
"Odyssey" shall mean Odyssey Golf, Inc., a California corporation.
-------
"Odyssey Collection Date" shall mean one year and one day after the
-----------------------
date on which all Odyssey Sold Receivables have either been collected in full or
written off as uncollectible and all outstanding payment obligations of Odyssey
under the Agreement have been satisfied in full.
"Odyssey General Trial Balance" shall mean, with respect to Odyssey
-----------------------------
and as of any date of determination, Odyssey's accounts receivable trial balance
(whether in the form of a computer printout, magnetic tape or diskette) as of
such date, listing Obligors and the Receivables owing by such Obligors as of
such date together with the aged Outstanding Balances of such Receivables, in
form and substance satisfactory to CGS.
"Odyssey Sale Price" shall have the meaning assigned to it in Section
------------------ -------
2.01(b) of the Odyssey Transfer Agreement.
-------
"Odyssey Sold Receivable" shall have the meaning assigned to it in
-----------------------
Section 2.01(a) of the Odyssey Transfer Agreement.
---------------
"Odyssey Transfer Agreement" shall mean that certain Receivables
--------------------------
Transfer Agreement dated February 10, 1999 between Odyssey and CGS.
"Officer's Certificate" shall mean, with respect to any Person, a
---------------------
certificate signed by an Authorized Officer of such Person.
-23-
"Operating Agent" shall mean GE Capital, in its capacity as operating
---------------
agent for the Purchaser under the Purchase Agreement and the other Related
Documents.
"Operating Agent Agreement" shall mean that certain Operating Agent
-------------------------
Agreement dated as of March 15, 1994, between Redwood and the Operating Agent.
"Other Funding Agreements" shall mean any agreements entered into from
------------------------
time to time by the Purchaser for the purchase or financing of receivables.
"Outstanding Balance" shall mean, with respect to any Receivable and
-------------------
as of any date of determination, the amount (which amount shall not be less than
zero) equal to (a) the Billed Amount thereof, minus (b) all Collections received
-----
from the Obligor thereunder, minus (c) all discounts to or any other
-----
modifications that reduce such Billed Amount; provided, that if the Operating
--------
Agent or the Servicer makes a determination that all payments by such Obligor
with respect to such Billed Amount have been made, the Outstanding Balance shall
be zero.
"Parent Group" shall mean CGS and each of its respective Affiliates.
------------
"Parent Guarantor" shall mean Callaway Golf Company, a California
----------------
corporation.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
----
"Pension Plan" shall mean a Plan described in Section 3(2) of ERISA.
------------
"Permitted Encumbrances" shall mean the following encumbrances: (a)
----------------------
Liens for taxes or assessments or other governmental charges not yet due and
payable; (b) pledges or deposits securing obligations under workmen's
compensation, unemployment insurance, social security or public liability laws
or similar legislation; (c) pledges or deposits securing bids, tenders,
contracts (other than contracts for the payment of money) or leases to which the
CGS Originator, the Seller or the Servicer is a party as lessee made in the
ordinary course of business; (d) deposits securing statutory obligations of the
CGS Originator, the Seller or the Servicer; (e) inchoate and unperfected
workers', mechanics', suppliers' or similar Liens arising in the ordinary course
of business; (f) carriers', warehousemen's or other similar possessory Liens
arising in the ordinary course of business and securing liabilities in an
outstanding aggregate amount not in excess of $100,000 at any one time; (g)
deposits securing, or in lieu of, surety, appeal or customs bonds in proceedings
to which the CGS Originator, the Seller or the Servicer is a party; (h) any
attachment or judgment Lien not constituting a Termination Event under Section
-------
9.01(f) of the Purchase Agreement; (i) Liens existing on the Closing Date and
-------
listed on Schedule 4.03(b) of the CGS Transfer Agreement or the Odyssey Transfer
----------------
Agreement or Schedule 5.03(b) of the Purchase
----------------
-24-
Agreement; and (j) presently existing or hereinafter created Liens in favor of
GFC, the Purchaser, the Operating Agent or the Collateral Agent.
"Permitted Investments" shall mean any of the following:
---------------------
(a) obligations of, or guaranteed as to the full and timely payment of
principal and interest by, the United States of America or obligations of any
agency or instrumentality thereof if such obligations are backed by the full
faith and credit of the United States of America, in each case with maturities
of not more than 90 days from the date acquired;
(b) repurchase agreements on obligations of the type specified in
clause (a) of this definition; provided, that the short-term debt obligations of
---------- --------
the party agreeing to repurchase are rated at least A-1+ or the equivalent by
S&P and P-1 or the equivalent by Moody's;
(c) federal funds, certificates of deposit, time deposits and bankers'
acceptances of any depository institution or trust company incorporated under
the laws of the United States of America or any state, in each case with
original maturities of not more than 90 days or, in the case of bankers'
acceptances, original maturities of not more than 365 days; provided, that the
--------
short-term obligations of such depository institution or trust company are rated
at least A-1+ or the equivalent by S&P and P-1 or the equivalent by Moody's;
(d) commercial paper of any corporation incorporated under the laws of
the United States of America or any state thereof with original maturities of
not more than 30 days that on the date of acquisition are rated at least A-1+ or
the equivalent by S&P and P-1 or the equivalent by Moody's;
(e) securities of money market funds rated at least Aam or the
equivalent by S&P and P-1 or the equivalent by Moody's; and
(f) such other investments with respect to which each Rating Agency
shall have confirmed in writing to the Purchaser and Collateral Agent that such
investments shall not result in a withdrawal or reduction of the then current
rating by such Rating Agency of the Commercial Paper.
"Person" shall mean any individual, sole proprietorship, partnership,
------
joint venture, unincorporated organization, trust, association, corporation
(including a business trust), limited liability company, institution, public
benefit corporation, joint stock company, Governmental Authority or any other
entity of whatever nature.
"Plan" shall mean, at any time, an "employee benefit plan," as defined
----
in Section 3(3) of ERISA, that the CGS Originator or ERISA Affiliate maintains,
contributes to or has an obligation to contribute to on behalf of participants
who are or were employed by the CGS Originator or ERISA Affiliate.
-25-
"Program Documents" shall mean the Letter of Credit Agreement, the
-----------------
Liquidity Loan Agreement, the Collateral Agent Agreement, the Depositary
Agreement, the Commercial Paper, the Operating Agent Agreement, each Accession
Agreement and the Dealer Agreements.
"Projections" shall mean Parent Guarantor's forecasted consolidated
-----------
and consolidating: (a) balance sheets; (b) profit and loss statements; (c) cash
flow statements; and (d) capitalization statements, all prepared on a
Subsidiary-by-Subsidiary or division-by-division basis, if applicable, and
otherwise consistent with the historical financial statements of the CGS
Originators, together with appropriate supporting details and a statement of
underlying assumptions.
"Purchase" shall have the meaning assigned to it in Section 2.01 of
-------- ------------
the Purchase Agreement.
"Purchase Agreement" shall mean that certain Receivables Purchase and
------------------
Servicing Agreement dated as of February 10, 1999, among the Seller, the
Purchaser, the Servicer, the Operating Agent and the Collateral Agent.
"Purchase Assignment" shall mean that certain Purchase Assignment
-------------------
dated as of the Closing Date by and between the Seller and the Purchaser in the
form attached as Exhibit 2.04(a) to the Purchase Agreement.
---------------
"Purchase Date" shall mean each day on which a Purchase is made.
-------------
"Purchase Discount Rate" shall mean, as of any date of determination,
----------------------
a rate equal to the lesser of (a) the Dynamic Purchase Discount Rate and (b) the
Purchase Discount Rate Cap.
"Purchase Discount Rate Cap" shall mean a rate equal to eighty percent
--------------------------
(80%); provided, that the Purchase Discount Rate Cap may be changed at any time
--------
upon the Operating Agent's prompt delivery of notice to the Seller of such
change, at the sole discretion of the Operating Agent, exercised in good faith,
and, in the case of an increase only, upon satisfaction of the Rating Agency
Condition with respect thereto.
"Purchase Excess" shall mean, as of any date of determination, the
---------------
extent to which the Capital Investment exceeds the Availability, in each case as
disclosed in the most recently submitted Investment Base Certificate or as
otherwise determined by the Purchaser, the Operating Agent or the Collateral
Agent based on Seller Collateral information available to any of them, including
any information obtained from any audit or from any other reports with respect
to the Seller Collateral, which determination shall be final, binding and
conclusive on all parties to the Purchase Agreement (absent manifest error).
"Purchaser" shall mean Redwood, in its capacity as the Purchaser under
---------
the Purchase Agreement.
-26-
"Purchase Request" shall have the meaning assigned to it in Section
---------------- -------
2.03(b) of the Purchase Agreement.
-------
"Purchaser Indemnified Person" shall have the meaning assigned to it
----------------------------
in Section 12.01(a) of the Purchase Agreement.
----------------
"Purchaser Secured Parties" shall mean the Collateral Agent, the CP
-------------------------
Holders, the Depositary, the Liquidity Agent, the Liquidity Lenders, the Letter
of Credit Agent and the Letter of Credit Providers.
"Qualified Plan" shall mean a Pension Plan that is intended to be tax-
--------------
qualified under Section 401(a) of the IRC.
"Qualifying Winter Dating Obligor" shall mean, for any year, any
--------------------------------
Obligor with respect to which, (a) no payment, or part thereof, with respect to
any Receivables of such Obligor originated during the previous year remained
unpaid for more than 30 days past its Maturity Date, or (b) no payment, or part
thereof, with respect to any Receivables of such Obligor remained unpaid for
more than 30 days past its Maturity Date during the one (1) year period prior to
the placement of a Winter Dating Order by such Obligor in such year.
"Rating Agency" shall mean Moody's or S&P.
-------------
"Rating Agency Condition" shall mean, with respect to any action, that
-----------------------
each Rating Agency has notified the Purchaser and the Operating Agent in writing
that such action will not result in a reduction or withdrawal of the rating of
any outstanding Commercial Paper.
"Ratios" shall mean, collectively, the Default Ratio, the Delinquency
------
Ratio, the Dilution Ratio, the Dilution Reserve Ratio, the Loss Reserve Ratio,
the Receivable Collection Turnover and the Three Month Aged Receivables Ratio.
"Receivable" shall mean, with respect to any Obligor:
----------
(a) indebtedness of such Obligor (whether constituting an account,
chattel paper, document, instrument or general intangible) arising from the
provision of merchandise, goods or services to such Obligor, including the right
to payment of any interest or finance charges and other obligations of such
Obligor with respect thereto;
(b) all Liens and property subject thereto from time to time securing
or purporting to secure any such indebtedness of such Obligor;
(c) all guaranties, indemnities and warranties, insurance policies,
financing statements and other agreements or arrangements of whatever character
from time to time supporting or securing payment of any such indebtedness;
-27-
(d) all Collections with respect to any of the foregoing; and
(e) all Records with respect to any of the foregoing.
"Receivable Collection Turnover" shall mean, as of any date of
------------------------------
determination, the amount (expressed in days) equal to:
(a) a fraction, (i) the numerator of which is equal to the average of
the Outstanding Balances of Transferred Receivables on the first day of the 12
Settlement Periods immediately preceding such date and (ii) the denominator of
which is equal to aggregate Collections received during such 12 Settlement
Periods with respect to all Transferred Receivables,
multiplied by
-------------
(b) the number of days contained in such 12 Settlement Periods.
"Receivables Assignment" shall have the respective meanings assigned
----------------------
to them in Section 2.01(a) of the CGS Transfer Agreement and in Section 2.01(a)
--------------- ---------------
of the Odyssey Transfer Agreement.
"Records" shall mean all Contracts and other documents, books, records
-------
and other information (including computer programs, tapes, disks, data
processing software and related property and rights) prepared and maintained by
the CGS Originator, the Servicer, any Sub-Servicer or the Seller with respect to
the Receivables and the Obligors thereunder, the Transfer Agreement Collateral
and the Seller Collateral.
"Redwood" shall mean Redwood Receivables Corporation, a Delaware
-------
corporation.
"Redwood Yield" shall have the meaning assigned to it in Annex 3 to
------------- -------
the Purchase Agreement.
"Regulatory Change" shall mean any change after the Closing Date in
-----------------
any federal, state or foreign law or regulation (including Regulation D of the
Federal Reserve Board) or the adoption or making after such date of any
interpretation, directive or request under any federal, state or foreign law or
regulation (whether or not having the force of law) by any Governmental
Authority charged with the interpretation or administration thereof that, in
each case, is applicable to any Affected Party.
"Rejected Amount" shall have the meaning assigned to it in Section
--------------- -------
4.04 of the CGS Transfer Agreement.
----
-28-
"Related Documents" shall mean each Blocked Account Agreement, the CGS
-----------------
Transfer Agreement, the Odyssey Transfer Agreement, the Lockbox Agreement, the
Purchase Agreement, each Receivables Assignment, the Purchase Assignment, the
CGS Note, the Ancillary Services and Lease Agreement and all other agreements,
instruments, documents and certificates identified in the Schedule of Documents
and including all other pledges, powers of attorney, consents, assignments,
contracts, notices, and all other written matter whether heretofore, now or
hereafter executed by or on behalf of any Person, or any employee of any Person,
and delivered in connection with the CGS Transfer Agreement, the Odyssey
Transfer Agreement, the Purchase Agreement or the transactions contemplated
thereby. Any reference in the CGS Transfer Agreement, the Odyssey Transfer
Agreement, the Purchase Agreement or any other Related Document to a Related
Document shall include all Appendices thereto, and all amendments, restatements,
supplements or other modifications thereto, and shall refer to such Related
Document as the same may be in effect at any and all times such reference
becomes operative.
"Repayment Notice" shall have the meaning assigned to it in Section
---------------- -------
2.03(c) of the Purchase Agreement.
-------
"Reportable Event" shall mean any of the events set forth in Section
----------------
4043(b) of ERISA.
"Reserves" shall mean the aggregate Concentration Discount Amount for
--------
all Obligors of Transferred Receivables, the Extended Term Reserve and such
other reserves as the Operating Agent may establish from time to time in its
sole discretion.
"Retained Monthly Yield" shall mean, as of any date of determination
----------------------
within a Settlement Period, the sum of all amounts transferred to or retained in
the Retention Account with respect to Daily Yield from and including the first
day of such Settlement Period through and including such date pursuant to
Sections 6.03(b)(i)(A) or 6.04(a)(iv) of the Purchase Agreement.
---------------------- -----------
"Retained Servicing Fee" shall mean, as of any date of determination
----------------------
within a Settlement Period, the sum of all amounts transferred to or retained in
the Retention Account with respect to the Servicing Fee from and including the
first day of such Settlement Period through and including such date pursuant to
Sections 6.03(b)(i)(C) or 6.04(a)(iv) of the Purchase Agreement.
---------------------- -----------
"Retained Unused Facility Fee" shall mean, as of any date of
----------------------------
determination within a Settlement Period, the sum of all amounts transferred to
or retained in the Retention Account with respect to the Unused Facility Fee
from and including the first day of such Settlement Period through and including
such date in accordance with Sections 6.03(b)(i)(E) or 6.04(a)(iv) of the
---------------------- -----------
Purchase Agreement.
"Retention Account" shall mean that certain segregated deposit account
-----------------
established by the Purchaser and maintained with the Depositary designated as
the "Redwood
-29-
Receivables Corporation - Retention Account (GFC)," account number 27064, ABA
No. ▇▇▇▇▇▇▇▇▇.
"Retention Account Deficiency" shall mean, as of any Settlement Date,
----------------------------
the amount, if any, by which the amounts necessary to make the payments required
under Sections 6.04(a)(i), (ii), (iii) and (iv) of the Purchase Agreement exceed
------------------- ---- ----- ----
the amounts on deposit in the Retention Account.
"Retiree Welfare Plan" shall mean, at any time, a Welfare Plan that
--------------------
provides for continuing coverage or benefits for any participant or any
beneficiary of a participant after such participant's termination of employment,
other than continuation coverage provided pursuant to Section 4980B of the IRC
and at the sole expense of the participant or the beneficiary of the
participant.
"Revolving Period" shall mean the period from and including the
----------------
Closing Date through and including the day immediately preceding the Facility
Termination Date.
"S&P" means Standard & Poor's Ratings Services, a division of The
---
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., or any successor thereto.
"Sale" shall mean, (i) with respect to a Sale under the CGS Transfer
----
Agreement, a sale of Receivables by the CGS Originator to GFC in accordance with
the terms of the CGS Transfer Agreement, or (ii) with respect to a Sale under
the Odyssey Transfer Agreement, the sale of Receivables by Odyssey to CGS in
accordance with the terms of the Odyssey Transfer Agreement.
"Sale Price" shall mean, with respect to any Sale of Sold Receivables,
----------
the price calculated by GFC and approved from time to time by the Operating
Agent equal to:
(a) the Outstanding Balance of such Sold Receivables, minus
-----
(b) the expected costs to be incurred by GFC in financing the purchase
of such Sold Receivables until the Outstanding Balance of such Sold Receivables
is paid in full, minus
-----
(c) the portion of such Sold Receivables that are reasonably expected
by the CGS Originator to become Defaulted Receivables, minus
-----
(d) the portion of such Sold Receivables that are reasonably expected
by the CGS Originator to be reduced by means other than the receipt of
Collections thereon or pursuant to clause (c) above, minus
---------- -----
(e) amounts expected to be paid to the Servicer with respect to the
servicing, administration and collection of such Sold Receivables;
-30-
provided, that such calculations shall be determined based on the historical
--------
experience of (y) the CGS Originator, with respect to the calculations required
in each of clauses (c) and (d) above, and (z) GFC, with respect to the
----------- ---
calculations required in clauses (b) and (e) above.
----------- ---
"Schedule of Documents" shall mean the schedule, including all
---------------------
appendices, exhibits or schedules thereto, listing certain documents and
information to be delivered in connection with the CGS Transfer Agreement, the
Odyssey Transfer Agreement, the Purchase Agreement and the other Related
Documents and the transactions contemplated thereunder, substantially in the
form attached as Annex Y to the Purchase Agreement.
-------
"Securities Act" shall mean the provisions of the Securities Act of
--------------
1933, 15 U.S.C. Sections 77a et seq., and any regulations promulgated
-------
thereunder.
"Securities Exchange Act" shall mean the provisions of the Securities
-----------------------
Exchange Act of 1934, 15 U.S.C. Sections 78a et seq., and any regulations
-------
promulgated thereunder.
"Seller" shall mean GFC, in its capacity as the Seller under the
------
Purchase Agreement.
"Seller Assigned Agreements" shall have the meaning assigned to it in
--------------------------
Section 8.01(b) of the Purchase Agreement.
---------------
"Seller Collateral" shall have the meaning assigned to it in Section
----------------- -------
8.01 of the Purchase Agreement.
----
"Seller Blocked Account Collateral" shall have the meaning assigned to
---------------------------------
it in Section 8.01(c) of the Purchase Agreement.
---------------
"Seller LOC Draws" shall mean any payments made to the Purchaser in
----------------
connection with the Letter of Credit and allocated to the Seller.
"Seller Secured Obligations" shall mean all loans, advances, debts,
--------------------------
liabilities and obligations for the performance of covenants, tasks or duties or
for payment of monetary amounts (whether or not such performance is then
required or contingent, or such amounts are liquidated or determinable) owing by
the Seller to any Affected Party under the Purchase Agreement and any document
or instrument delivered pursuant thereto, and all amendments, extensions or
renewals thereof, and all covenants and duties regarding such amounts, of any
kind or nature, present or future, whether or not evidenced by any note,
agreement or other instrument, arising thereunder, including Capital Investment,
Daily Yield, Yield Shortfall, Unused Facility Fees, Unused Facility Fee
Shortfall, Margin, amounts in reduction of Purchase Excess, Successor Servicing
Fees and Expenses, Additional Amounts and Indemnified Amounts. This term
includes all principal, interest (including all interest that accrues after the
commencement of any case or proceeding by or against the Seller in bankruptcy,
whether or not allowed in such case or
-31-
proceeding), fees, charges, expenses, attorneys' fees and any other sum
chargeable to the Seller thereunder, whether now existing or hereafter arising,
voluntary or involuntary, whether or not jointly owed with others, direct or
indirect, absolute or contingent, liquidated or unliquidated, and whether or not
from time to time decreased or extinguished and later increased, created or
incurred, and all or any portion of such obligations that are paid to the extent
all or any portion of such payment is avoided or recovered directly or
indirectly from the Purchaser, the Operating Agent or the Collateral Agent as a
preference, fraudulent transfer or otherwise.
"Seller's Share" shall mean the ratio of (a) the Maximum Purchase
--------------
Limit under the Purchase Agreement to (b) the aggregate maximum purchase limits
--
or commitments under the Purchase Agreement and all Other Funding Agreements.
"Servicer" shall mean CGS, in its capacity as the Servicer under the
--------
Purchase Agreement, or any other Person designated as a Successor Servicer.
"Servicer's Certificate" shall mean an Officer's Certificate
----------------------
substantially in the form of Exhibit 3.01(a)(iii) to the Purchase Agreement.
--------------------
"Servicer Termination Notice" shall mean any notice by the Operating
---------------------------
Agent to the Servicer that (a) an Event of Servicer Termination has occurred and
(b) the Servicer's appointment under the Purchase Agreement has been terminated.
"Servicing Fee" shall mean, for any day within a Settlement Period,
-------------
the amount equal to (a) (i) the Servicing Fee Rate divided by (ii) 360,
----------
multiplied by (b) the Outstanding Balance of all Transferred Receivables on such
-------------
day.
"Servicing Fee Rate" shall mean 1.00%.
------------------
"Servicing Fee Shortfall" shall mean, as of any date of determination
-----------------------
within a Settlement Period, the amount, if any, by which the Accrued Servicing
Fee exceeds the Retained Servicing Fee, in each case as of such date.
"Servicing Officer" shall mean any officer of the Servicer involved
-----------------
in, or responsible for, the administration and servicing of the Transferred
Receivables and whose name appears on any Officer's Certificate listing
servicing officers furnished to the Operating Agent by the Servicer, as such
certificate may be amended from time to time.
"Servicing Records" shall mean all documents, books, Records and other
-----------------
information (including computer programs, tapes, disks, data processing software
and related property and rights) prepared and maintained by the Servicer with
respect to the Transferred Receivables and the Obligors thereunder.
-32-
"Settlement Date" shall mean the fifth Business Day following the end
---------------
of each Settlement Period.
"Settlement Period" shall mean (a) solely for purposes of determining
-----------------
the Ratios, (i) with respect to all Settlement Periods other than the final
Settlement Period, each calendar month, whether occurring before or after the
Closing Date, and (ii) with respect to the final Settlement Period, the period
ending on the Final Purchase Date and beginning with the first day of the
calendar month in which the Final Purchase Date occurs, and (b) for all other
purposes, (i) with respect to the initial Settlement Period, the period from and
including the Closing Date through and including the last day of the calendar
month in which the Closing Date occurs, (ii) with respect to the final
Settlement Period, the period ending on the Final Purchase Date and beginning
with the first day of the calendar month in which the Final Purchase Date
occurs, and (iii) with respect to all other Settlement Periods, each calendar
month.
"Sold Receivable" and "Sold Receivables" shall have the meaning
--------------- ----------------
assigned to it in Section 2.01(b) of the CGS Transfer Agreement.
---------------
"Solvency Certificate" shall mean an Officer's Certificate
--------------------
substantially in the form of Exhibit 3.01(a)(i) to the Purchase Agreement.
------------------
"Solvent" shall mean, with respect to any Person on a particular date,
-------
that on such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including contingent liabilities, of such
Person; (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its Debts as they become absolute and matured; (c) such Person does
not intend to, and does not believe that it will, incur Debts or liabilities
beyond such Person's ability to pay as such Debts and liabilities mature; and
(d) such Person is not engaged in a business or transaction, and is not about to
engage in a business or transaction, for which such Person's property would
constitute an unreasonably small capital. The amount of contingent liabilities
(such as Litigation, guaranties and pension plan liabilities) at any time shall
be computed as the amount that, in light of all the facts and circumstances
existing at the time, represents the amount that can reasonably be expected to
become an actual or matured liability.
"Stock" shall mean all shares, options, warrants, general or limited
-----
partnership interests or other equivalents (regardless of how designated) of or
in a corporation, partnership or equivalent entity whether voting or nonvoting,
including common stock, preferred stock or any other "equity security" (as such
term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated
by the Securities and Exchange Commission under the Securities Exchange Act).
"Stockholder" shall mean, with respect to any Person, each holder of
-----------
Stock of such Person.
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"Stockholder Originator" shall have the meaning designated in Recital
----------------------
D of the CGS Transfer Agreement.
"Sub-Servicer" shall mean any Person with whom the Servicer enters
------------
into a Sub-Servicing Agreement.
"Sub-Servicing Agreement" shall mean any written contract entered into
-----------------------
between the Servicer and any Sub-Servicer pursuant to and in accordance with
Section 7.01 of the Purchase Agreement relating to the servicing, administration
------------
or collection of the Transferred Receivables.
"Subsidiary" shall mean, with respect to any Person, any corporation
----------
or other entity (a) of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
Persons performing similar functions are at the time directly or indirectly
owned by such Person or (b) that is directly or indirectly controlled by such
Person within the meaning of control under Section 15 of the Securities Act.
"Successor Servicer" shall have the meaning assigned to it in Section
------------------ -------
11.02 of the Purchase Agreement.
-----
"Successor Servicing Fees and Expenses" shall mean the fees and
-------------------------------------
expenses payable to the Successor Servicer as agreed to by the Seller, the
Purchaser, the Operating Agent and the Collateral Agent.
"Termination Date" shall mean the date on which (a) Capital Investment
----------------
has been permanently reduced to zero, (b) all other Seller Secured Obligations
under the Purchase Agreement and the other Related Documents have been
indefeasibly repaid in full and completely discharged and (c) the Maximum
Purchase Limit has been irrevocably terminated in accordance with the provisions
of Section 2.02(b) of the Purchase Agreement.
---------------
"Termination Event" shall have the meaning assigned to it in Section
----------------- -------
9.01 of the Purchase Agreement.
----
"Third Party Interactives" shall mean all Persons with whom any of the
------------------------
CGS Originator, the Servicer, or the Seller exchanges data electronically in the
ordinary course of business, including, without limitation, customers,
suppliers, third-party vendors, subcontractors, processors-converters, shippers
and warehousemen.
"Three Month Aged Receivables Ratio" shall mean, as of any date of
----------------------------------
determination, the ratio (expressed as a percentage) of:
(a) the sum of the respective Outstanding Balances of Transferred
Receivables with respect to which any payment, or part thereof,
remained unpaid for more than
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60 but less than 91 days past their respective Maturity Dates as of
the last day of the three Settlement Periods immediately preceding
such date
to
--
(b) the aggregate Billed Amount of Transferred Receivables originated
during the fourth, fifth, and sixth Settlement Periods immediately
preceding such date.
"Title IV Plan" shall mean a Pension Plan (other than a Multiemployer
-------------
Plan) that is covered by Title IV of ERISA and that the CGS Originator or ERISA
Affiliate maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by any of them.
"Transfer" shall mean (i) with respect to a transaction under the CGS
--------
Transfer Agreement, any Sale or capital contribution of Transferred Receivables
by the CGS Originator to GFC pursuant to the terms of the CGS Transfer
Agreement, or (ii) with respect to a transaction under the Odyssey Transfer
Agreement, the Sale of Odyssey Sold Receivables by Odyssey to CGS pursuant to
the terms of the Odyssey Transfer Agreement.
"Transfer Agreement Collateral" shall have the meaning assigned to it
-----------------------------
in Section 7.01 of the CGS Transfer Agreement.
------------
"Transfer Date" shall have the meaning assigned to it in Section
------------- -------
2.01(a) of each of the CGS Transfer Agreement and the Odyssey Transfer
-------
Agreement.
"Transferred Receivable" shall mean any Sold Receivable or Contributed
----------------------
Receivable; provided, that any Receivable repurchased by the CGS Originator
--------
pursuant to Section 4.04 of the CGS Transfer Agreement shall not be deemed to be
------------
a Transferred Receivable from and after the date of such repurchase unless such
Receivable has subsequently been repurchased by or recontributed to GFC.
"UCC" shall mean, with respect to any jurisdiction, the Uniform
---
Commercial Code as the same may, from time to time, be enacted and in effect in
such jurisdiction.
"Unapproved Receivable" shall mean any receivable (a) with respect to
---------------------
which the obligor thereunder is not an Obligor on any Transferred Receivable and
whose customer relationship with the CGS Originator arises as a result of the
acquisition by such Originator of another Person or (b) that was originated in
accordance with standards established by another Person acquired by the CGS
Originator, in each case, solely with respect to any such acquisitions that have
not been approved in writing by the Operating Agent and then only for the period
prior to any such approval.
"Underfunded Plan" shall mean any Plan that has an Underfunding.
----------------
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"Underfunding" shall mean, with respect to any Plan, the excess, if
------------
any, of (a) the present value of all benefits under the Plan (based on the
assumptions used to fund the Plan pursuant to Section 412 of the IRC) as of the
most recent valuation date over (b) the fair market value of the assets of such
Plan as of such valuation date.
"Unfunded Pension Liability" shall mean, at any time, the aggregate
--------------------------
amount, if any, of the sum of (a) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits in accordance with Title
IV of ERISA, all determined as of the most recent valuation date for each such
Title IV Plan using the actuarial assumptions for funding purposes in effect
under such Title IV Plan, and (b) for a period of five years following a
transaction that might reasonably be expected to be covered by Section 4069 of
ERISA, the liabilities (whether or not accrued) that could be avoided by the CGS
Originator or any ERISA Affiliate as a result of such transaction.
"Unused Facility Fee" shall have the meaning assigned to it in the Fee
-------------------
Letter.
"Unused Facility Fee Shortfall" shall mean, as of any date of
-----------------------------
determination within a Settlement Period, the amount, if any, by which the
Accrued Unused Facility Fee exceeds the Retained Unused Facility Fee, in each
case as of such date.
"Welfare Plan" shall mean a Plan described in Section 3(1) of ERISA.
------------
"Winter Dating Order" shall mean, for any year, any order for the
--------------------
provision of merchandise or goods by the CGS Originator in an amount greater
than or equal to $5,000 that is (a) an order placed for shipment between August
1 and September 30 of such year or (b) a back order placed for shipment during
the period referenced in clause (a) above, if shipped on or before October 31 of
such year.
"Winter Dating Payment Terms" shall mean, for any year and with
---------------------------
respect to Receivables of any Qualifying Winter Dating Obligor originated in
connection with a Winter Dating Order, payment terms that require either (a)
that fifty percent (50%) of all amounts due in connection with such Receivables
are due and payable on December 26 of such year and that the remainder of such
amounts is due and payable on May 1 of the following year or (b) that ninety-
eight percent (98%) of all amounts due in connection with such Receivables are
due and payable on December 26 of such year, the payment of which on such date
shall constitute payment in full of one hundred percent (100%) of all amounts
due in connection with such Receivables.
"Winter Dating Receivable" shall mean any Receivable originated in
------------------------
connection with a Winter Dating Order of any Qualifying Winter Dating Obligor in
accordance with Winter Dating Payment Terms.
"Year 2000 Assessment" shall mean, as to the CGS Originator, the
--------------------
Servicer or the Seller, a comprehensive written assessment of the nature and
extent of the material Year 2000
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Problems and Year 2000 Date-Sensitive Systems/Components of such Person,
including, without limitation, Year 2000 Problems regarding data exchanges with
Third Party Interactives.
"Year 2000 Corrective Actions" shall mean, as to the CGS Originator,
----------------------------
the Servicer or the Seller, all actions necessary to eliminate such Person's
material Year 2000 Problems, including, without limitation, computer code
enhancements and revisions, upgrades and replacements of Year 2000 Date-
Sensitive Systems/Components, and coordination of such enhancements, revisions,
upgrades and replacements with Third Party Interactives.
"Year 2000 Corrective Plan" shall mean, with respect to the CGS
-------------------------
Originator, the Servicer or the Seller, a comprehensive plan to eliminate all of
its material Year 2000 Problems on or before September 30, 1999, including,
without limitation (i) computer code enhancements or revisions, (ii) upgrades or
replacements of Year 2000 Date-Sensitive Systems/Components, (iii) test and
validation procedures, (iv) an implementation time line and budget and (v)
designation of specific employees who will be responsible for planning,
coordinating and implementing each phase or subpart of the Year 2000 Corrective
Plan.
"Year 2000 Date-Sensitive System/Component" shall mean, as to any
-----------------------------------------
Person, any system software, network software, applications software, data base,
computer file, embedded microchip, firmware or hardware that accepts, creates,
manipulates, sorts, sequences, calculates, compares or outputs calendar-related
data accurately; such systems and components shall include, without limitation,
mainframe computers, file server/client systems, computer workstations, routers,
hubs, other network-related hardware, and other computer-related software,
firmware or hardware and information processing and delivery systems of any kind
and telecommunications systems and other communications processors, security
systems, alarms, elevators and HVAC systems.
"Year 2000 Implementation Testing" shall mean, as to the CGS
--------------------------------
Originator, the Servicer or the Seller, (i) the performance of test and
validation procedures regarding Year 2000 Corrective Actions on a unit basis and
on a systemwide basis; (ii) the performance of test and validation procedures
regarding data exchanges among such Person's material Year 2000 Date-Sensitive
Systems/Components and data exchanges with Third Party Interactives, and (iii)
the design and implementation of additional Year 2000 Corrective Actions, the
need for which has been demonstrated by test and validation procedures.
"Year 2000 Problems" shall mean, with respect to the CGS Originator,
------------------
the Servicer or the Seller, limitations on the capacity or readiness of any such
Person's Year 2000 Date-Sensitive Systems/Components to accurately accept,
create, manipulate, sort, sequence, calculate, compare or output calendar date
information with respect to calendar year 1999 or any subsequent calendar year
beginning on or after January 1, 2000 (including leap year computations),
including, without limitation, exchanges of information among Year 2000 Date-
Sensitive Systems/Components of the CGS Originator, the Servicer and the Seller
and exchanges of information among the CGS Originator, the Servicer and the
Seller and Year 2000 Date-
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Sensitive Systems/Components of Third Party Interactives and functionality of
peripheral interfaces, firmware and embedded microchips.
"Yield Discount Amount" shall mean the amount, as determined from time
---------------------
to time by the Operating Agent in its sole discretion, calculated in accordance
with Annex 4 of the Purchase Agreement.
-------
"Yield Shortfall" shall mean, as of any date of determination within a
---------------
Settlement Period, the amount, if any, by which the Accrued Monthly Yield
exceeds the Retained Monthly Yield, in each case as of such date.
SECTION 2. Other Terms and Rules of Construction.
-------------------------------------
(a) Accounting Terms. Rules of construction with respect to
----------------
accounting terms used in any Related Document shall be as set forth in Annex G
-------
to the Purchase Agreement. Unless otherwise specifically provided therein, any
accounting term used in any Related Document shall have the meaning customarily
given such term in accordance with GAAP, and all financial computations
thereunder shall be computed in accordance with GAAP consistently applied. That
certain items or computations are explicitly modified by the phrase "in
accordance with GAAP" shall in no way be construed to limit the foregoing.
(b) Other Terms. All other undefined terms contained in any of the
-----------
Related Documents shall, unless the context indicates otherwise, have the
meanings provided for by the UCC as in effect in the State of New York to the
extent the same are used or defined therein.
(c) Rules of Construction. Unless otherwise specified, references in
---------------------
any Related Document or any of the Appendices thereto to a Section, subsection
or clause refer to such Section, subsection or clause as contained in such
Related Document. The words "herein," "hereof" and "hereunder" and other words
of similar import used in any Related Document refer to such Related Document as
a whole, including all annexes, exhibits and schedules, as the same may from
time to time be amended, restated, modified or supplemented, and not to any
particular section, subsection or clause contained in such Related Document or
any such annex, exhibit or schedule. Wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include the
singular and the plural, and pronouns stated in the masculine, feminine or
neuter gender shall include the masculine, feminine and neuter genders. The
words "including," "includes" and "include" shall be deemed to be followed by
the words "without limitation"; the word "or" is not exclusive; references to
Persons include their respective successors and assigns (to the extent and only
to the extent permitted by the Related Documents) or, in the case of
Governmental Authorities, Persons succeeding to the relevant functions of such
Persons; and all references to statutes and related regulations shall include
any amendments of the same and any successor statutes and regulations.
-38-
(d) Rules of Construction for Determination of Ratios. The Ratios as
-------------------------------------------------
of the last day of the Settlement Period immediately preceding the Closing Date
shall be established by the Operating Agent on or prior to the Closing Date and
the underlying calculations for periods immediately preceding the Closing Date
to be used in future calculations of the Ratios shall be established by the
Operating Agent on or prior to the Closing Date in accordance with Schedule 1
----------
attached to this Annex X. For purposes of calculating the Ratios, (i) averages
-------
shall be computed by rounding to the third decimal place and (ii) the Settlement
Period in which the date of determination thereof occurs shall not be included
in the computation thereof and the first Settlement Period immediately preceding
such date of determination shall be deemed to be the Settlement Period
immediately preceding the Settlement Period in which such date of determination
occurs.
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