EXHIBIT 99.1(b)
================================================================================
RECEIVABLES PURCHASE AGREEMENT
dated as of April 12, 2002
Among
VOLT FUNDING CORP.
as Seller
and
THREE RIVERS FUNDING CORPORATION,
as Buyer
and
VOLT INFORMATION SCIENCES, INC.
as Servicer
================================================================================
TABLE OF CONTENTS
Page
----
RECEIVABLES PURCHASE AGREEMENT
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.01 Certain Definitions................................................2
1.02 Interpretation and Construction...................................21
ARTICLE II
AGREEMENT TO PURCHASE AND SELL
2.01 Purchase Limits...................................................22
2.02 Amount of Purchases...............................................22
2.03 Reduction of the Maximum Net Investment and
Net Investment; Termination of the Agreement......................22
2.04 Fees Payable to the Buyer.........................................25
ARTICLE III
BUYER'S ALLOCATION
3.01 Buyer's Allocation................................................25
3.02 Frequency of Computation of the Buyer's Allocation................26
ARTICLE IV
CLOSING PROCEDURES
4.01 Purchase and Sale Procedures......................................26
4.02 Conditions Precedent to the First Purchase........................27
4.03 Conditions Precedent to Each Purchase and Reinvestment............29
4.04 Purchase Price....................................................30
4.05 Sale Without Recourse.............................................30
4.06 Non-Assumption by the Buyer of Obligations........................32
4.07 Character of Receivables Added to Receivables Pools...............32
(i)
ARTICLE V
SETTLEMENTS; ADJUSTMENTS
5.01 Settlement Statements.............................................32
5.02 Receivables Status................................................33
5.03 Non-Liquidation Settlements.......................................33
5.04 Liquidation Settlements...........................................35
5.05 Allocation of Collections.........................................35
5.06 Deferred Purchase Price...........................................36
5.07 Treatment of Collections and Deemed Collections...................36
ARTICLE VI
PROTECTION OF THE BUYER;
ADMINISTRATION AND COLLECTIONS
6.01 Maintenance of Information and Computer Records...................36
6.02 Protection of the Interests of the Buyer..........................37
6.03 Maintenance of the Location of Writings and Records...............38
6.04 Information.......................................................38
6.05 Performance of Undertakings Under the
Purchased Receivables; Indemnification............................39
6.06 Administration and Collections; Indemnification...................39
6.07 Complete Servicing Transfer.......................................41
6.08 Lockboxes.........................................................44
ARTICLE VII
REPURCHASES BY SELLER
7.01 Repurchases.......................................................44
7.02 Repurchase Price..................................................44
7.03 Reassignment of Repurchased Receivables...........................44
7.04 Obligations Not Affected..........................................45
(ii)
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.01 General Representations and Warranties of the Seller..............45
8.02 Representations and Warranties of the Seller
With Respect to Each Sale of Receivables..........................48
8.03 Representations and Warranties of the Servicer....................49
ARTICLE IX
COVENANTS
9.01 Affirmative Covenants of the Seller...............................51
9.02 Negative Covenants of the Seller..................................60
9.03 Affirmative Covenants of the Servicer.............................62
9.04 Negative Covenants of the Servicer................................68
ARTICLE X
TERMINATION
10.01 Termination Events................................................69
10.02 Consequences of a Termination Event...............................72
ARTICLE XI
MISCELLANEOUS
11.01 Expenses..........................................................73
11.02 Payments..........................................................74
11.03 Indemnity for Taxes, Reserves and Expenses........................74
11.04 Indemnity.........................................................76
11.05 Holidays..........................................................79
11.06 Records...........................................................79
11.07 Amendments and Waivers............................................79
11.08 No Implied Waiver; Cumulative Remedies............................79
11.09 No Discharge......................................................80
(iii)
11.10 Notices...........................................................80
11.11 Severability......................................................80
11.12 Governing Law.....................................................80
11.13 Prior Understandings..............................................81
11.14 Survival..........................................................81
11.15 Counterparts......................................................81
11.16 Set-Off...........................................................81
11.17 Time of Essence...................................................82
11.18 Payments Set Aside................................................82
11.19 No Petition.......................................................82
11.20 No Recourse.......................................................83
11.21 Tax Treatment.....................................................83
11.22 Assignment........................................................83
EXHIBITS
--------
A Form of Certificate of Participation
B Form of Settlement Statement
C Form of Certificate of Responsible Officer
D Information Regarding Affiliates
E Accounting Period Report
F Form of Purchase Notice
G List of Permitted Lockbox Banks
H Excluded Obligors
(iv)
RECEIVABLES PURCHASE AGREEMENT
------------------------------
RECEIVABLES PURCHASE AGREEMENT dated as of April 12, 2002 among VOLT
FUNDING CORP., a Delaware corporation (the "Seller"), THREE RIVERS FUNDING
CORPORATION, a Delaware corporation (the "Buyer"), and VOLT INFORMATION
SCIENCES, INC., a New York corporation(the "Company").
WITNESSETH THAT:
WHEREAS, the Company is engaged in part, and the Company's Affiliates
(as hereinafter defined), Volt Management Corp., a Delaware corporation, and
Volt Technical Resources, LLC, a Delaware limited liability company formerly a
Delaware corporation known as Volt Human Resources, Inc. (collectively, the
"Subsidiary Originators", and, collectively with the Company, the
"Originators"), are engaged in full, in the business of providing staffing
solutions to their customers (the "Staffing Solutions Business"); and
WHEREAS, the Originators, in the ordinary course of the Staffing
Solutions Business, generate trade receivables resulting from their sale of
merchandise and the rendering of services to their customers with regard to such
business (the "Staffing Solutions Receivables"); and
WHEREAS, the Subsidiary Originators may from time to time transfer
their respective Staffing Solutions Receivables to the Company; and
WHEREAS, the Company may from time to time transfer to the Seller the
Staffing Solutions Receivables generated by the Subsidiary Originators, as well
as Staffing Solutions Receivables generated by the Company, pursuant to the
Receivables Sale and Contribution Agreement dated as of April 12, 2002 between
the Company and the Seller, as the same may from time to time be amended,
supplemented or otherwise modified (the "Sale Agreement"); and
WHEREAS, the Seller may create a pool of such Staffing Solutions
Receivables; and
WHEREAS, the Buyer may from time to time purchase from the Seller
undivided percentage ownership interests in the pool of receivables pursuant to
and in accordance with the terms hereof;
NOW, THEREFORE, the parties hereto, in consideration of their mutual
covenants hereinafter set forth and intending to be legally bound, hereby agree
as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
-------------------------
1.01 Certain Definitions. In addition to other words and terms defined
in the recitals hereof and elsewhere in this Agreement, as used herein, the
following words and terms shall have the following meanings respectively, unless
otherwise required by context:
"Account Balance" shall mean, in respect of a Receivable which is
included in the Receivables Pool, all amounts shown as owing by the related
Obligor on the accounting records of the Company and the Seller, and all other
amounts which are shown on the most recent Settlement Statement and in respect
of which the related Obligor is obligated, excluding each Defaulted Receivable.
"Accounting Period" shall mean, with respect to any Settlement Date,
the period beginning on the first Monday and ending on the last Sunday of the
Fiscal Month of the Company or the Seller most recently ended prior to such
Settlement Date.
"Affected Party" shall mean each of the Buyer, any permitted assignee
of the Buyer, and each Person providing liquidity or credit support to the Buyer
pursuant to a Liquidity Agreement or a Program Support Agreement and each of
their respective Affiliates and assigns.
"Affiliate" shall mean, with respect to a Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Agreement" shall mean this Receivables Purchase Agreement, as the
same may from time to time be amended, supplemented or otherwise modified.
"Business Day" shall mean any day other than a Saturday, Sunday,
public holiday under the Laws of the Commonwealth of Pennsylvania or the State
of New York or other
2
day on which banking institutions are authorized or obligated to close in the
Commonwealth of Pennsylvania or the State of New York.
"Buyer's Allocation" shall have the meaning ascribed to such term in
Section 3.01 hereof.
"Certificate of Participation" shall mean, with respect to the
Participation Interest, the written evidence of the Buyer's interest in the
Receivables Pool related to such Participation Interest, in substantially the
form attached as Exhibit A hereto.
"Chief Executive Office" shall mean, with respect to any referenced
Person, the place where such Person would be deemed to be located, within the
meaning of Section 9-307(b) of Revised UCC Article 9 as in effect in New York,
if not a registered organization (as defined in Revised UCC Article 9) as in
effect in New York.
"Closing Date" shall mean the date on which the Participation Interest
is initially purchased by the Buyer in the Receivables Pool pursuant to the
terms of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collections" shall mean, for any Purchased Receivable as of any date,
(i) the sum of all amounts, whether in the form of cash, checks, drafts, or
other instruments (excluding promissory notes), received by any Originator, the
Seller or the Servicer or in a Permitted Lockbox or in a Lockbox Account in
payment of, or applied to, any amount owed by an Obligor on account of such
Purchased Receivable (including but not limited to all amounts received on
account of any Defaulted Receivable), including, without limitation, all amounts
received on account of such Purchased Receivable and other fees and charges, and
(ii) all amounts deemed to have been received by the Company, the Seller or the
Servicer as a Collection pursuant to Sections 5.03(c) or 6.04 hereof.
"Company Entity" shall have the meaning assigned to such term in
Section 9.01(s) hereof.
"Complete Servicing Transfer" shall have the meaning ascribed to such
term in Section 6.07 hereof.
3
"Concentration Limit" shall mean, as of any date of determination,
with respect to all of the Eligible Receivables owing from a single Obligor
(except for an Obligor listed on Exhibit H), together with Receivables owing
from its subsidiaries and other Affiliates, an amount equal to four percent (4%)
of the aggregate of the Account Balances of the Eligible Receivables in the
Receivables Pool outstanding as of the last day of the most recently completed
Accounting Period; provided that such percentage shall be increased for any
applicable Obligor to the highest level for which such Obligor qualifies, as
determined at the end of the Accounting Period most recently completed, in
accordance with the following table:
-------------------------------------------------------------------------------------------
Concentration Limit of Short-Term Debt Long-Term Debt Obligation Rating
Particular Obligor Obligation Rating S&P/Moody's
(and subsidiaries and of S&P/Moody's
other Affiliates)
-------------------------------------------------------------------------------------------
10% A-1/P-1 at least AA/
at least Aa2
-------------------------------------------------------------------------------------------
8% A-2/P-2 at least A, but less than AA/
at least A2, but less than Aa2
-------------------------------------------------------------------------------------------
6% A-3/P-3 at least BBB, but less than A/
at least Baa2, but less than A2
-------------------------------------------------------------------------------------------
4% Not Applicable Not Applicable
-------------------------------------------------------------------------------------------
If the Obligor's short-term debt obligations are rated by both S&P and Moody's,
the applicable concentration level is the highest level in respect of which the
short-term debt obligation rating in respect of the Obligor by each agency is at
least equal to the rating set forth in the second column; however, if rated by
only one such agency, the concentration level is one level lower than the level
satisfied for that agency (but not below 4%). If the Obligor's short-term debt
obligations are unrated by either agency but its long-term debt obligations are
rated by one or both agencies, then the applicable concentration level is the
highest level in respect of which the long-term debt obligation rating in
respect of the Obligor by each agency is at least equal to the rating set forth
in the third column; however, if rated by only one such agency, the
concentration level is one level lower than the level satisfied for that agency
(but not below 4%).
4
"Contract" shall mean a written or oral contract, which shall be
legally binding, between one or more Originators and an Obligor which gives rise
to a Receivable arising from the sale by the Originators of goods or services in
the ordinary course of the Staffing Solutions Business.
"Cost of Funds" shall mean, with respect to any Settlement Period, an
amount, as notified in writing by the Buyer to the Seller in respect of the
related Settlement Date, equal to the interest or discount cost for funds
borrowed or obtained during such Settlement Period, either from the issuance of
commercial paper notes, the taking of loans or otherwise, by the Buyer for the
purpose of maintaining or acquiring the Participation Interest, including in the
computation of such cost any dealer's discount or fees and any and all other
fees which are attributable to such borrowing and are specified from time to
time in writing by the Buyer to the Seller.
"Credit and Collection Policy" shall mean the objective receivable
credit and collection practices utilized in connection with the Staffing
Solutions Business and Staffing Solutions Receivables by the Originators, the
Seller and the Servicer as of the date hereof and approved by the Buyer, as the
same may be modified in strict compliance with this Agreement.
"Credit Enhancement Floor" shall mean, with respect to any Settlement
Date, sixteen percent (16%).
"Credit Enhancement Reserve" shall mean, with respect to any
Settlement Date, the product of (A) the greater of (1) the Credit Loss Reserve
as of such Settlement Date and (2) the Credit Enhancement Floor as of such
Settlement Date, and (B) the positive result, if any, of (1) the aggregate
outstanding Account Balance of Eligible Receivables in the Receivables Pool as
of the last day of the Accounting Period immediately preceding such Settlement
Date, minus (2) the sum of (x) the Yield Reserve with respect to the related
Settlement Period, plus (y) the Servicer's Compensation Reserve as of such
Settlement Date, minus (3) the aggregate amount by which the Account Balance of
Eligible Receivables of each Obligor as of the last day of the Accounting Period
immediately preceding such Settlement Date exceeds the Concentration Limit for
such Obligor.
"Credit Loss Reserve" shall mean, with respect to any Settlement Date,
the product, expressed as a percentage, of (i) 2.0, (ii) the Loss Ratio as of
such Settlement Date and (iii) the Loss Horizon Ratio as of such Settlement
Date.
5
"Days Sales Outstanding" shall mean, as of any date of calculation,
the product of (A) the quotient of (x) the aggregate Account Balances of all
Purchased Receivables outstanding as of the last day of the most recently ended
Accounting Period divided by (y) the aggregate amount of net sales of the
Originators, attributable to the Staffing Solutions Business, during that
Accounting Period and the two Accounting Periods immediately preceding it
(collectively, the "Three Accounting Periods"); and (B) the number of days in
the Three Accounting Periods.
"Default Ratio" shall mean, with respect to any Settlement Date, a
fraction, expressed as a percentage, the numerator of which is the aggregate
outstanding balance of Eligible Receivables which were in the Receivables Pool
as of the first day of the Accounting Period immediately preceding such
Settlement Date and which became Defaulted Receivables during such Accounting
Period and the denominator of which is the aggregate amount of net sales of the
Originators, attributable to the Staffing Solutions Business, during the fifth
Accounting Period immediately preceding such Settlement Date.
"Defaulted Receivable" shall mean a Purchased Receivable (a) the
Obligor of which is not entitled to purchase additional merchandise or services
from the Company, by reason of any default or nonperformance by such Obligor,
under the terms of the Credit and Collection Policy, (b) which has become
uncollectible or has been written off the books of the Company or the Seller by
reason of such Obligor's inability to pay, as determined by the Buyer or the
Servicer, in either case in accordance with the Credit and Collection Policy,
(c) in respect of which an Event of Bankruptcy has occurred with respect to the
related Obligor or (d) in respect of which the Obligor is more than 90 days past
due.
"Deferred Purchase Price" shall mean the amount calculated pursuant to
Section 5.06 hereof.
"Dilution" shall mean a reduction of the Account Balance of an
Eligible Receivable given to an Obligor in accordance with the Credit and
Collection Policy as a result of credits, cancellations, cash discounts,
warranties, allowances, disputes, rebates, charge backs, billing errors,
returned or repossessed goods, or other allowances, adjustments and deductions
(including, without limitation, any special or other discounts or any
reconciliations) that are given to an Obligor in accordance with the Credit and
Collection Policy.
6
"Dispute" shall mean any dispute, deduction, claim, offset, defense,
counterclaim, set-off or obligation of any kind, contingent or otherwise,
relating to a Receivable, including, without limitation, any dispute relating to
goods or services already paid for.
"Dollar", "Dollars" and the symbol "$" shall mean lawful money of the
United States of America.
"Eligible Receivable" shall mean any Receivable which:
(a) duly complies with all applicable Laws and other legal
requirements, whether Federal, state or local, including, without
limitation, usury laws, the Federal Consumer Credit Protection
Act, the Fair Credit Billing Act and the Federal Truth in Lending
Act;
(b) constitutes an "account" or a "general intangible" as defined in
Revised UCC Article 9 as in effect in the State of New York and,
if different, the jurisdiction whose Law governs the perfection
of the Buyer's Participation Interest in such Receivable;
(c) (i) was originated by one or more of the Originators in the
ordinary course of the Staffing Solutions Business in a
transaction which complied with the Credit and Collection Policy,
or (ii) was originated by a business subsequently acquired by or
merged into one of the Originators in a transaction which
complied with the policies and procedures of such business in
effect at the time such Receivable was originated, provided that
the eligibility of such Receivable under this clause (ii) is
approved in advance in writing by the Referral Agent;
(d) arises from a Contract (the form of which, if not entered into in
the ordinary course of the Staffing Solutions Business, has been
approved by the Referral Agent) and has been billed, or will be
billed to the related Obligor, or in respect of which the related
Obligor is otherwise liable, in accordance with the terms of such
Contract;
(e) constitutes a legal, valid, binding and irrevocable payment
obligation of the related
7
Obligor, enforceable in accordance with its terms (subject to
contractual discounts, allowances, quality and quantity
adjustments);
(f) provides for payment in Dollars by the related Obligor;
(g) is payable by the Obligor (or by a Paying Agent) into a Permitted
Lockbox or Lockbox Account;
(h) has not been repurchased by the Seller or deemed collected
pursuant to the provisions of this Agreement;
(i) if it were a Purchased Receivable, would not be a Defaulted
Receivable;
(j) has an Obligor who is entitled to purchase additional merchandise
or receive additional services from the Originators under the
terms of the Credit and Collection Policy; provided, that a
Receivable which has an Obligor who is not entitled to purchase
additional merchandise or receive additional services from the
Originators because such Obligor has reached the individual or
aggregate credit limit established by the Originators shall be
deemed to satisfy this paragraph (j);
(k) was not originated in or subject to the Laws of a jurisdiction
whose Laws would make such Receivable, the related Contract, the
transfer of such Receivable by the Company to the Seller pursuant
to the Sale Agreement or the sale of the Participation Interest
in such Receivable to the Buyer hereunder unlawful, invalid or
unenforceable;
(l) is owned solely by the Seller free and clear of all Liens, except
for the Lien arising in connection with this Agreement and any
Program Support Agreement and other Permitted Liens;
(m) other than with respect to warranty claims being handled in
accordance with the Credit and Collection Policy, no rejection or
return of the goods or services which give rise to such
Receivable has occurred and all goods and
8
services in connection therewith have been finally performed or
delivered to and accepted by the Obligor without Dispute;
(n) is not an obligation of the United States, any state or
municipality or any agency or instrumentality or political
subdivision thereof, unless otherwise agreed to in writing by the
Buyer, the Seller and the Affected Parties;
(o) is not subject to any contractual right of set-off;
(p) is an obligation representing part or all of the sales price of
merchandise or services;
(q) such Receivable must, by its terms, require full payment in
respect thereof to be paid no later than 45 days after the date
the original invoice with respect thereto was sent to the related
Obligor;
(r) has an Obligor who is located in the United States, including
Puerto Rico, or in Canada;
(s) has an Obligor who is not an Affiliate of the Company or the
Seller;
(t) was acquired by the Seller from the Company pursuant to and in
accordance with the terms of the Sale Agreement; and
(u) the Obligor of which has not been deemed to be ineligible by the
Buyer, in its reasonable discretion, upon ten (10) Business Days'
prior written notice to the Seller.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that is a member of a group of which the Seller is a member and
which is treated as a single employer under Section 414 of the Code.
"Event of Bankruptcy" shall mean, for any Person:
9
(a) if such Person shall fail generally to, or admit in writing its
inability to, pay its debts as they become due; or
(b) a proceeding shall have been instituted in a court having
jurisdiction in the premises seeking a decree or order for relief
in respect of such Person in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or for the appointment of a receiver,
liquidator, assignee, custodian, trustee, sequestrator,
conservator (under the Bank Conservation Act, as amended, or
otherwise) or other similar official of such Person or for any
substantial part of its property, or for the winding-up or
liquidation of its affairs; or
(c) the commencement by such Person of a voluntary case under any
applicable bankruptcy, insolvency or other similar Law now or
hereafter in effect, or such Person's consent to the entry of an
order for relief in an involuntary case under any such Law, or
consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator,
conservator (under the Bank Conservation Act, as amended, or
otherwise) or other similar official of such Person or for any
substantial part of its property, or any general assignment for
the benefit of creditors, or, if a corporation or similar entity,
any corporate action in furtherance of any of the foregoing; or
(d) a decree or order of a court or agency or supervisory authority
having jurisdiction in the premises for the appointment of a
receiver, liquidator, assignee, trustee, custodian, sequestrator,
or conservator in any insolvency, readjustment of debt,
marshalling of assets and liabilities, or similar proceedings,
shall have been entered against such Person.
"Expiration Date" means the earliest of (i) April 8, 2005, which may
be extended from time to time for an additional period or periods for up to 360
days commencing on the then scheduled Expiration Date, by written notice of
request given by the Seller to the Buyer, specifying the duration of the period
10
of extension requested, at least 120 days before such scheduled Expiration Date,
and by written notice of acceptance (which notice may be given or withheld by
the Buyer in its sole discretion) by the Buyer to the Seller not later than
ninety (90) days prior to such scheduled Expiration Date, provided, that the new
scheduled Expiration Date shall in no event result in a remaining term of this
Agreement from any date of acceptance thereof that exceeds 360 days, (ii) the
date that the Buyer shall give notice of the termination of the Buyer's
obligation to purchase the Participation Interest or make Reinvestments
hereunder pursuant to Section 10.02, and (iii) the first date on which there
shall no longer be any Liquidity Agreement or Program Support Agreement in
effect (as to which the Buyer shall notify the Seller at least six months prior
to any scheduled expiration thereof if the agreement is not to be renewed, and
promptly notify the Seller after obtaining notice of any other termination
thereof); provided, further, that if any Expiration Date is not a Business Day
it shall occur on the next preceding Business Day.
"Facility Fee" shall mean the facility fee set forth in a separate
letter agreement between the Seller and the Buyer.
"Facility Fee Amount" shall mean, for any Settlement Period or part
thereof, an amount equal to the product of (i) the Facility Fee; (ii) the
average daily Net Investment during the days elapsed in such Settlement Period
and (iii) the quotient of (a) the number of days elapsed during such Settlement
Period, divided by (b) 360.
"Financial Officer" of a referenced Person means the chief financial
officer, principal accounting officer, treasurer or controller of such Person,
or such other officer of such Person as the Buyer may permit in its reasonable
discretion.
"Fiscal Month" shall mean, with respect to the Company or any of its
subsidiaries, including the Seller, each of the twelve (12) monthly accounting
periods, each of which accounting periods contains either four (4) or five (5)
weeks, into which the particular Fiscal Year of the Company or such subsidiary
is divided.
"Fiscal Year" shall mean, with respect to the Company or any of its
subsidiaries, including the Seller, the 52-week or 53-week period ending on the
Sunday nearest to October 31st of such year.
"Fitch" shall mean Fitch Ratings.
11
"GAAP" shall mean generally accepted accounting principles in the
United States of America, applied on a consistent basis and applied to both
classification of items and amounts, and shall include, without limitation, the
official interpretations thereof by the Financial Accounting Standards Board,
its predecessors and successors.
"Income Taxes" shall mean any federal, state, local or foreign taxes
based upon, measured by, or imposed upon gross or net income, gross or net
receipts, capital or net worth, in each case, attributable solely to cash
received by the Affected Party that is not remitted or deemed remitted to the
Company or the Seller (regardless of the name of the tax imposed), including any
penalties, interest or additions to tax imposed with respect thereto.
"Investment" shall mean, on each date of determination, the sum of (i)
the Net Investment and (ii) the Deferred Purchase Price, if any, as determined
on the Closing Date or as set forth on the most recently delivered Settlement
Statement.
"Law" shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or
award of any Official Body (including any law, rule, regulation or governmental
order relating to the protection of the environment or to public or employee
health or safety).
"Lien", in respect of the property of any Person, shall mean any
ownership interest of any other Person, any mortgage, deed of trust,
hypothecation, pledge, lien, security interest, grant of a power to confess
judgment, preference, right to priority payment, filing of any financing
statement, charge or other encumbrance or security arrangement of any nature
whatsoever, including, without limitation, any conditional sale or title
retention arrangement, any assignment, deposit arrangement, consignment or lease
intended as, or having the effect of, security, or the filing of a financing
statement in connection with any of the foregoing.
"Liquidation Day" shall mean each day which occurs on or after (i) the
date designated in a notice given by the Buyer to the Seller stating that the
conditions contained in Section 4.03 hereof are not satisfied, (ii) the
Expiration Date, (iii) the date on which a Termination Event occurs and is
continuing and the Buyer has, pursuant to Section 10.02 hereof, by notice to the
Seller, terminated its obligation to purchase
12
the Participation Interest or make Reinvestments hereunder or such obligation
was automatically terminated pursuant to clause (i) of Section 10.01(j), or (iv)
the date on which the Seller gives written notice to the Buyer that it no longer
wishes to sell interests in the Receivables Pool to the Buyer or permit
Reinvestments to be made; provided, however, there shall be no Liquidation Day
after the Net Investment shall equal zero.
"Liquidation Period" shall mean one or more consecutive Liquidation
Days.
"Liquidity Agreement" shall mean the Funding Agreement dated as of
April 12, 2002 among the Buyer, Mellon Bank, as funding institution, and the
Referral Agent, as the same may from time to time be amended, supplemented,
modified, replaced or superseded.
"Lockbox Account" shall mean an account owned and maintained by the
Seller with a Permitted Lockbox Bank for the purpose of depositing payments made
by Obligors.
"Lockbox Servicing Agreement" shall mean an agreement relating to
lockbox services in connection with a Permitted Lockbox which is in form and
substance satisfactory to the Buyer and which has been executed and delivered to
the Buyer by a Permitted Lockbox Bank.
"Loss Horizon Ratio" shall mean, with respect to any Settlement Date,
a fraction, expressed as a percentage, the numerator of which is the aggregate
amount of net sales of the Originators, attributable to the Staffing Solutions
Business, during the four Accounting Periods immediately preceding such
Settlement Date and the denominator of which is the aggregate outstanding
balance of Eligible Receivables in the Receivables Pool as of the last day of
the Accounting Period immediately preceding such Settlement Date.
"Loss Ratio" shall mean, with respect to any Settlement Date, the
highest average Default Ratio for any three consecutive Accounting Periods
during the period of twelve consecutive Accounting Periods immediately preceding
such Settlement Date; provided, that for any Accounting Period earlier than
Fiscal Month August 2001, ended September 2, 2001, the parties hereto shall
agree on an approximation to use in calculating the Loss Ratio.
"Maximum Net Investment" shall mean $100,000,000 or such greater
amount as shall be established with the consent of
13
the Buyer or such lesser amount as shall be established in accordance with
Section 2.03 hereof.
"Mellon Bank" shall mean Mellon Bank, N.A., a national banking
association.
"Moody's" shall mean ▇▇▇▇▇'▇ Investors Service, Inc.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which the Seller or any ERISA Affiliate (other
than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Code) is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions.
"Net Investment" shall mean (a) for the Closing Date, an amount equal
to the Purchase Price (not including the Deferred Purchase Price, if any) paid
for the Participation Interest on the Closing Date, and (b) for any other day,
an amount equal to the sum of (i) the Net Investment on the Closing Date, plus
(ii) amounts paid to the Seller pursuant to Section 5.01 hereof since the
Closing Date as an increase in the Net Investment, less (iii) all Collections
and other amounts paid to the Buyer and not reinvested (which shall not include
any amounts paid to the Buyer as Cost of Funds or fees) pursuant to Sections
2.03(b), 5.03(b),(d)and (e) and 5.04 hereof since the Closing Date. In the event
that any amount received by the Buyer constituting any portion of Collections is
rescinded or must otherwise be returned or restored for any reason to any
Person, the Net Investment shall be increased by the amount of Collections so
rescinded, returned or restored.
"Obligor" shall mean, with respect to any Receivable, the Person who
purchased goods or services under a Contract giving rise to such Receivable and
who is obligated to make payments (either directly or through a Paying Agent) to
an Originator or the Seller on such Contract in respect of such Receivable.
"Office" shall mean, when used in connection with the Buyer, its
office located at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or
when used in connection with the Company or the Seller, its respective office
located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other
office or offices of the Buyer, the Company or the Seller or branch, subsidiary
or Affiliate of any thereof as may be
14
designated in writing from time to time by any party hereto to the other parties
hereto.
"Official Body" shall mean any government or political subdivision or
any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"Participation Interest" shall mean, at any time, an undivided
percentage ownership interest equal to the Buyer's Allocation at such time in
all then outstanding Purchased Receivables included in the Receivables Pool,
including, without limitation, all Collections, and all collateral security,
insurance policies, letters of credit and surety bonds given on behalf of
Obligors to secure or support payment of such Receivables, and any proceeds of
any of the foregoing.
"Paying Agent" shall mean any subsidiary of the Company whose
principal business is acting as a paying agent intermediary between an Obligor
and an Originator. (As of the Closing Date, ProcureStaff, Ltd., a Delaware
corporation, is the only Paying Agent.)
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA or any successor thereto.
"Permitted Lien" means any of the following:
(a) liens, charges or other encumbrances for taxes and assessments
which are not yet due and payable;
(b) liens of or resulting from any judgment or award, the time for
the appeal or petition for rehearing of which shall not have
expired, or in respect of which the Seller and/or the Originator
shall at any time in good faith be prosecuting an appeal or
proceeding for a review and in respect of which a stay of
execution pending such appeal or proceeding for review shall have
been secured, provided, that the interest sold hereunder or any
portion thereof sold or intended to be sold hereunder is not, in
the opinion of the Buyer, jeopardized thereby;
(c) liens, charges or other encumbrances or priority claims
incidental to the conduct of business or the ownership of
properties and assets (including
15
warehousemen's and attorneys' liens and statutory landlords' liens)
and deposits, pledges or liens to secure statutory obligations, surety
or appeal bonds or other liens of like general nature incurred in the
ordinary course of business and not in connection with the borrowing
of money, provided in each case, the obligation secured is not overdue
or, if overdue, is being contested in good faith by appropriate
actions or proceedings, and provided, further, that the interest sold
hereunder or any portion thereof sold or intended to be sold hereunder
is not, in the opinion of the Buyer, jeopardized thereby; and
(d) liens, charges or encumbrances created pursuant to this Agreement
or a Program Support Agreement.
"Permitted Lockbox" shall mean a post office box owned and maintained
by the Seller for the purpose of receiving payments made by Obligors.
"Permitted Lockbox Bank" shall mean any bank at which a Lockbox
Account is maintained, the short-term unsecured debt obligations of which are
rated at least A-1 by S&P, at least P-1 by Moody's and, if rated by Fitch, at
least F-1 by Fitch, appointed from time to time by the Seller and approved by
the Buyer.
"Person" shall mean an individual, corporation, partnership (general
or limited), trust, business trust, unincorporated association, joint venture,
joint-stock company, Official Body, or any other entity of whatever nature.
"Plan" shall mean any pension plan (other than a Multiemployer Plan)
subject to the provisions of Title IV of ERISA or Section 412 of the Code that
is maintained for employees of the Seller or any ERISA Affiliate.
"Potential Servicer Event" shall mean any event or condition which,
with the giving of notice, the passage of time or both, would constitute a
Servicer Event.
"Potential Termination Event" shall mean any event or condition which,
with the giving of notice, the passage of time or both, would constitute a
Termination Event.
"Program Fee" shall mean, for any Settlement Period, the rate per
annum set forth in a separate letter agreement between the Seller and the Buyer.
16
"Program Fee Amount" shall mean, for any Settlement Period or part
thereof, an amount equal to the product of (i) the Program Fee and (ii) the
average daily Net Investment during the days elapsed in such Settlement Period
and (iii) the quotient of the number of days elapsed during such Settlement
Period divided by 360.
"Program Support Agreement" means, collectively, all liquidity
agreements, funding agreements (other than the Liquidity Agreement), credit
agreements, letter of credit agreements, surety agreements, security agreements,
letters of credit and all other agreements which may be in effect from time to
time and which provide liquidity or credit support in respect of the commercial
paper issued by the Buyer.
"Purchase Availability Amount" shall mean, as of any date, an amount
equal to the excess, if any, of (i) the Maximum Net Investment as of such date
over (ii) the Net Investment as of such date.
"Purchase Documents" shall mean this Agreement, the Certificate of
Participation, the Sale Agreement and such other agreements, documents and
instruments entered into and delivered by the Seller or the Company in
connection with the transactions contemplated by this Agreement.
"Purchase Notice" shall mean each notice delivered pursuant to Section
4.02(e) hereof, in such form and with such detail as the Buyer may require from
time to time.
"Purchase Obligation" shall have the meaning ascribed to such term in
Section 2.01 hereof.
"Purchase Price" shall mean, with respect to the purchase of the
Participation Interest, the amount of cash consideration set forth on the
Purchase Notice as the cash amount to be paid by the Buyer for such
Participation Interest on the Closing Date.
"Purchased Receivable" shall mean a Receivable included in the
Receivables Pool in which the Buyer is maintaining the Participation Interest
pursuant to the terms of this Agreement.
"Rate of Collections" shall mean, for any Accounting Period, a
fraction, expressed as a percentage, the numerator of which is equal to the
total Collections in respect of all Purchased Receivables in the Receivables
Pool (including deemed
17
Collections to the extent actually received by the Servicer pursuant to Section
5.07) during such Accounting Period and the denominator of which is equal to the
aggregate Account Balances of all Purchased Receivables in the Receivables Pool
as of the close of business on the last day of the immediately preceding
Accounting Period.
"Receivable" shall mean, with respect to any Contract, all
receivables, contract rights, general intangibles, payment intangibles,
accounts, chattel paper, documents, instruments (including, without limitation,
promissory notes), amounts due and to become due to one or more of the
Originators or the Seller arising under such Contract (including but not limited
to finance charges accrued with respect to such amounts and fees), and all other
rights, powers and privileges of the Originators or the Seller arising
thereunder or related thereto and in the merchandise (including returned goods)
and contracts relating thereto, assertable against any Person whatsoever, all
supporting obligations, security interests, insurance policies, letters of
credit, letter-of-credit rights, surety bonds, guaranties, investment property
and property securing or supporting payment of such Receivable, all Records
relating to such Receivable and all proceeds and products of any of the
foregoing; provided, that the term shall not include any Receivable the Obligor
of which is listed on Exhibit H hereto, as such exhibit may be amended,
supplemented or modified from time to time.
"Receivables Pool" shall mean, at any time, the group of Purchased
Receivables then outstanding which have, on the Closing Date, been identified by
the Seller as constituting a pool and each additional Receivable thereafter
added to such pool.
"Records" shall mean correspondence, memoranda, computer programs,
tapes, discs, papers, books or other documents or transcribed information of any
type whether expressed in ordinary or machine readable language.
"Reference Rate" shall mean the rate of interest established by the
Referral Agent from time to time as its reference rate; any change in the
reference rate shall become effective as of the opening of business when such
change occurs. The "Reference Rate" is not intended to be the lowest rate of
interest charged by the Referral Agent in connection with extensions of credit
to debtors.
18
"Referral Agent" shall mean Mellon Bank, together with its successors
or assigns, in its capacity as referral agent for the Buyer.
"Reinvestment" shall mean the purchase by the Buyer and the sale by
the Seller of additional undivided percentage ownership interests in each and
every Purchased Receivable utilizing the proceeds of Collections that were
allocated to the Buyer for such purpose pursuant to Section 5.03(a).
"Remainder" shall have the meaning assigned to such term in Section
5.03(a) hereof.
"Reportable Event" shall mean any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate that is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Code).
"Responsible Officer" shall mean, as to any referenced Person, the
chief executive officer, chief financial officer, chief accounting officer,
controller, or treasurer of such Person.
"Revised UCC Article 9" shall mean Uniform Commercial Code, Article 9,
1999 Official Text, and the corresponding provisions as revised and in effect in
connection therewith as amended, supplemented or otherwise modified from time to
time.
"Servicer" shall mean the Company, or any Person other than the
Company or its Affiliates which, upon the termination of the Company as
Servicer, succeeds to the functions performed by the Company as the servicer of
the Purchased Receivables pursuant to a Complete Servicing Transfer and a
Successor Servicing Agreement.
"Servicer Event" shall mean a Termination Event (other than the
Termination Event under Section 10.01(k) relating to the Buyer).
"Servicer's Compensation" shall have the meaning ascribed to such term
in Section 6.06(e) hereof.
"Servicer's Compensation Reserve" shall mean, as of any Settlement
Date, an amount equal to the product of (i) .50%, (ii) the aggregate outstanding
balance of Eligible Receivables in the Receivables Pool as of the last day of
the Accounting Period immediately preceding such Settlement Date, and (iii) a
19
fraction, the numerator of which is the product of (a) the Days Sales
Outstanding at the close of business as of the last day of such Accounting
Period and (b) 1.5 and the denominator of which is 360.
"Settlement Date" shall mean (a) in the case of the first Settlement
Period, May 14, 2002, and (b) in the case of any subsequent Settlement Period,
the fourteenth (14th) calendar day (or, if not a Business Day, the next
succeeding Business Day) of the calendar month immediately following the
calendar month in which the immediately preceding Settlement Date occurred.
"Settlement Period" shall mean (a) the period from and including the
Closing Date and ending on the day immediately preceding the first Settlement
Date, and (b) thereafter, the period from and including the Settlement Date
relating to the immediately preceding Settlement Period and ending on the day
immediately preceding the next Settlement Date. References in this Agreement to
the Settlement Date relating to a referenced Settlement Period shall mean the
Settlement Date occurring one day after the close of such Settlement Period.
"Settlement Statement" shall mean a statement substantially in the
form of Exhibit B hereto, which, among other things, will identify any and all
Purchased Receivables included in the Receivables Pool as of the last day of the
Accounting Period most recently completed, duly completed and executed by a
Responsible Officer of the Company or, if the Company is no longer the Servicer,
of the Seller and delivered to the Buyer pursuant to Section 5.01 hereof.
"▇▇▇▇ Family" shall mean ▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇, and their
respective spouses and descendants and trusts established principally for the
benefit of one or more of the foregoing, whether or not constituting a "group"
within the meaning of the Securities Exchange Act of 1934, as amended, and the
rules promulgated thereunder.
"S&P" shall mean Standard & Poor's Ratings Services.
"Successor Servicing Agreement" shall mean any agreement between the
Buyer and any Person, other than the Company or its Affiliate, which contains
provisions concerning the servicing of the Purchased Receivables substantially
similar to the provisions contained herein, including Sections 5.03, 5.04, 5.06,
6.01, 6.02, 6.04, 6.06 and 6.07 hereof, pursuant to which such Person performs
servicing functions in respect of the
20
Purchased Receivables, and all agreements, instruments and documents attached
thereto or delivered in connection therewith, as any of the same may from time
to time be amended, supplemented or otherwise modified and in effect.
"Termination Event" shall have the meaning ascribed to such term in
Section 10.01 hereof.
"Transaction Costs" shall have the meaning ascribed to such term in
Section 11.01 hereof.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I Subtitle E of Title IV of ERISA.
"Yield Reserve" shall mean, with respect to any Settlement Period, an
amount equal to the result of (X) the sum of (i) the Cost of Funds for such
Settlement Period, (ii) the Program Fee Amount for such Settlement Period, and
(iii) the Facility Fee Amount for such Settlement Period, divided by (Y) the
actual number of days in of such Settlement Period, times (Z) the product of the
Days Sales Outstanding as of the last day of its most recently ended Accounting
Period times 1.5.
1.02 Interpretation and Construction. Unless the context of this
Agreement otherwise clearly requires, references to the plural include the
singular, the singular the plural and the part the whole. References in this
Agreement to "determination" by the Buyer shall be conclusive absent manifest
error and include good faith estimates by the Buyer (in the case of quantitative
determinations) and good faith beliefs by the Buyer (in the case of qualitative
determinations). The words "hereof", "herein", "hereunder" and similar terms in
this Agreement refer to this Agreement as a whole and not to any particular
provision of this Agreement. The section and other headings, and table of
contents, contained in this Agreement are for reference purposes only and shall
not control or affect the construction of this Agreement or the interpretation
hereof in any respect. Section, subsection and appendix references are to this
Agreement unless otherwise specified. As used in this Agreement, the masculine,
feminine or neuter gender shall each be deemed to include the others whenever
the context so indicates. Terms not otherwise defined herein which are defined
in Revised UCC Article 9 as in effect in New York on the date hereof shall have
the respective meanings ascribed to such terms therein unless the context
otherwise clearly requires. This
21
Agreement shall be construed as a whole and in accordance with its fair meaning.
ARTICLE II
AGREEMENT TO PURCHASE AND SELL
------------------------------
2.01 Purchase Limits. Subject to the terms and conditions hereof, the
Seller may at its option sell to the Buyer, and the Buyer agrees to purchase
from the Seller (such agreement being referred to herein as the "Purchase
Obligation"), at any time and from time to time on and after the date hereof and
to but excluding the Expiration Date, undivided percentage ownership interests
in the Receivables Pool by the Seller selling and the Buyer purchasing the
Participation Interest in such Receivables Pool. Subject to the terms and
conditions hereof, the Buyer shall also (i) make Reinvestments by permitting the
Servicer to cause Collections allocated to the Buyer to be applied to the
purchase of additional undivided percentage ownership interests in the
Receivables Pool, and (ii) increase its Net Investment in the Participation
Interest on any Settlement Date at the request of the Seller (without regard to
a minimum amount). The Buyer shall not purchase the Participation Interest on
the Closing Date, or permit a Reinvestment to be made on any day, or increase
its Net Investment on any Settlement Date, to the extent that the amount of such
purchase or Reinvestment shall exceed the Purchase Availability Amount, or shall
cause the Buyer's Allocation (after giving effect to such purchase or
Reinvestment) to exceed 100%. The Buyer shall not be obligated to increase the
Maximum Net Investment. The Buyer shall not purchase the Participation Interest
if the Buyer can neither issue its commercial paper notes or short-term
promissory notes nor otherwise borrow in order to fund the Purchase Price of
such Participation Interest, or to make any such purchase or any Reinvestment or
increase its Net Investment on any Settlement Date at or after the earlier to
occur of (i) the Expiration Date, and (ii) the reduction of the Maximum Net
Investment to zero pursuant to Section 2.03 hereof.
2.02 Amount of Purchases. The sale of the Participation Interest on
the Closing Date by the Seller to the Buyer shall be for a minimum Purchase
Price of $25,000,000.
2.03 Reduction of the Maximum Net Investment and Net Investment;
Termination of the Agreement.
(a) Reduction of Maximum Net Investment. The Maximum Net Investment shall
be reduced to zero (i) on the Expiration
22
Date, or (ii) in accordance with Section 10.02 hereof. In addition, upon written
notice from the Seller to the Buyer, the Seller may reduce in whole or in part
the Maximum Net Investment, effective as of the next Settlement Date on or after
the thirtieth (30th) day following the date on which such notice is given;
provided, however, that (i) any partial reduction must be in an amount equal to
$5,000,000 or any greater amount which is an integral multiple of $5,000,000,
and (ii) if the Maximum Net Investment at the time of such notice is less than
or equal to $20,000,000, the Seller may only elect to reduce the amount of the
Maximum Net Investment to zero. Notwithstanding any other provision of this
Agreement, the Maximum Net Investment may not at any time be reduced below the
amount of the aggregate Net Investment in effect at such time.
23
(b) Reduction of the Net Investment. If at any time the Seller shall wish
to cause the reduction of the Net Investment (but not to commence the permanent
liquidation of the Participation Interest), the Seller may do so upon ten (10)
days prior written notice thereof to the Buyer (such notice to include the
amount of such proposed reduction and the proposed date on which such reduction
will commence, which date shall be agreed to by the Buyer). On the proposed date
of commencement of such reduction and on each day thereafter, the Servicer shall
refrain from making Reinvestments of Collections until the amount of such
Collections not so reinvested shall equal the desired amount of reduction. The
Servicer shall pay to the Buyer Collections in respect of the Buyer's Allocation
received on each day during the period in which Reinvestment of Collections has
been suspended pursuant to this Section 2.03(b) on the date which is two (2)
Business Days after the day on which such Collections are received by the
Servicer. The Net Investment shall be deemed reduced in the amount to be paid to
the Buyer only when in fact so paid. The Seller shall use reasonable efforts to
attempt to choose a reduction amount, and the date of the commencement thereof,
so that such reduction shall commence and conclude in the same Settlement
Period. The Seller shall pay to the Buyer an amount equal to any actual loss,
cost or expense incurred by the Buyer as the result of the repayment of the Net
Investment prior to the maturity date of any (x) loans made to the Buyer by
third parties or (y) commercial paper notes or short-term promissory notes
issued by the Buyer, in each case for the purpose of maintaining the
Participation Interest. The Buyer agrees to give the Seller prompt written
notice (in reasonable detail consistent with its customary practices) of any
such loss, cost or expense.
(c) Termination of the Agreement. This Agreement shall terminate at the
latest to occur of (i) the Expiration Date, (ii) the first day on which the Net
Investment equals zero, all other amounts accrued and owing to the Buyer under
this Agreement have been paid in full and the Maximum Net Investment has been
reduced to zero, or (iii) the first day on which all Eligible Receivables in the
Receivables Pool have been collected or written off by the Seller and the
Maximum Net Investment has been reduced to zero; provided, however, that the
covenants, representations, warranties and indemnities of the Company, the
Servicer and the Seller, as the case may be, to the Buyer contained herein or
made pursuant hereto shall survive such termination in accordance with Section
11.14. Upon such termination, the Buyer shall convey to the Seller, without
recourse, its Participation Interest in all Purchased
24
Receivables and shall deliver to the Seller all instruments and documents
relating thereto. Upon such reconveyance, the Deferred Purchase Price shall be
deemed to have been paid in full.
2.04 Fees Payable to the Buyer.
(a) Facility Fee. The Seller agrees to pay to the Buyer, in consideration
for the Purchase Obligation hereunder, from and including the date of execution
of this Agreement to but excluding the Expiration Date, the Facility Fee Amount.
The accrued Facility Fee Amount shall be due and payable in accordance with
Sections 5.03 and 5.04 hereof until the earlier of the Expiration Date or the
date on which the Maximum Net Investment is reduced to zero pursuant to Section
2.03(a) hereof. To the extent the Facility Fee Amount is not paid from
Collections in accordance with Section 5.03 or 5.04 hereof, the Facility Fee
Amount shall be an absolute and unconditional obligation of the Seller.
(b) Fees Non-Refundable. The fees to be paid to the Buyer pursuant to this
Section 2.04 are non-refundable and shall not be refunded for any reason
whatsoever, including, without limitation, the later reduction or termination of
the Maximum Net Investment in whole or in part in accordance with the provisions
of this Agreement.
ARTICLE III
BUYER'S ALLOCATION
------------------
3.01 Buyer's Allocation. The "Buyer's Allocation" on any day of
determination shall be a percentage, not in excess of 100%, equal to the
quotient of (i) the Investment, divided by (ii) the positive result of (a) the
aggregate Account Balances of all Eligible Receivables included in the
Receivables Pool on the date of determination before giving effect to
Collections on such date, less (b) the sum (without duplication) of (i) the
aggregate amount by which the Account Balance of Eligible Receivables of each
Obligor exceeds the Concentration Limit for such Obligor, (ii) the amount by
which the aggregate Account Balances of Eligible Receivables of all Obligors
located in Canada exceeds 2% of the aggregate Account Balances of all Eligible
Receivables and (iii) the amount by which the aggregate Account Balances of
Eligible Receivables payable to a Paying Agent exceeds 10% of the aggregate
Account Balances of all Eligible Receivables.
25
3.02 Frequency of Computation of the Buyer's Allocation. The Buyer's
Allocation shall be initially computed as of the opening of business of the
Servicer on the Closing Date. Thereafter, until the Net Investment shall be
reduced to zero, the Buyer's Allocation shall be automatically recomputed as of
the close of business of the Servicer on each Business Day, and the Buyer's
Allocation shall constitute the percentage ownership interest of the Buyer in
the Receivables Pool on such date; provided, however, that on and after a
Liquidation Day and during the continuance of a Liquidation Period, the Buyer's
Allocation shall be equal to the Buyer's Allocation as computed on the Business
Day immediately preceding the commencement of such Liquidation Period. The
Buyer's Allocation shall be reduced to zero at such time as the related Net
Investment shall be reduced to zero and the Maximum Net Investment has been
reduced to zero, the Buyer shall have received all amounts in respect of accrued
and unpaid Cost of Funds and Program Fee and all other amounts payable to it
pursuant to this Agreement, and the Servicer, provided the Company is not the
Servicer, shall have received the accrued Servicer's Compensation.
ARTICLE IV
CLOSING PROCEDURES
------------------
4.01 Purchase and Sale Procedures.
(a) General. The sale of the Participation Interest hereunder shall, with
respect to the Receivables Pool, transfer ownership to the Buyer of an undivided
percentage ownership interest in each Receivable in such Receivables Pool,
effective: (i) upon the Closing Date, in the case of Receivables included in the
Receivables Pool on such date; and (ii) upon the creation of such Receivable and
the simultaneous acquisition thereof by the Seller, in the case of each
Receivable subsequently created.
(b) Indemnity for Failure to Close. If a sale of the Participation Interest
fails to occur on the Closing Date as specified in the Purchase Notice delivered
pursuant to Section 4.02(e) hereof and agreed to by the Buyer pursuant to
Section 4.04 hereof (other than by virtue of any breach by the Buyer), the
Seller shall reimburse the Buyer on demand for any loss, cost or expense
(including loss of margin) incurred by the Buyer with respect to this Agreement,
its obligations hereunder or its funding of the proposed Purchase Price
(including, without limitation, any loss, cost or expense in obtaining,
liquidating or employing deposits as loans from third parties or the loss, cost
or expense of issuing its commercial paper notes
26
or short-term promissory notes in order to fund such Purchase Price) until the
earlier of (A) the Closing Date as specified in a subsequent Purchase Notice
delivered pursuant to Section 4.02(e) hereof and agreed to by the Buyer pursuant
to Section 4.04 hereof or (B) the date on which (i) the Buyer redeploys any
funds committed to fund such Purchase Price at a rate of return greater than or
equal to the Cost of Funds, or (ii) such commercial paper notes or short-term
promissory notes become due and payable, as the case may be. The Buyer shall
notify the Seller (in reasonable detail consistent with its customary practices)
of the amount determined by the Buyer to be necessary to compensate the Buyer
for such loss, cost or expense. Such amount shall be due and payable by the
Seller to the Buyer ten (10) Business Days after such notice is given.
4.02 Conditions Precedent to the First Purchase. The obligation of the
Buyer to purchase the Participation Interest from the Seller on the Closing Date
shall be subject to the satisfaction on or before April 15, 2002 of the
conditions set forth in Section 4.03 hereof and the following further
conditions:
(a) Standing. The Buyer shall have received (i) from each of the Seller and
the Company, a certificate, dated a recent date relative to the Closing Date as
determined by the Buyer, of the Secretary of State or other similar official as
to its good standing under the Laws of its jurisdiction of organization, and
(ii) from the Company, certificates, dated a recent date relative to the Closing
Date as determined by the Buyer, of the Secretary of State or other similar
official of each other state, if any, in which the Company maintains its Chief
Executive Office or principal accounting office.
(b) Opinions of Counsel. The Buyer shall have received favorable written
opinions of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq., General Counsel of the Company, and of
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ LLP, counsel for the Company and the Seller,
each dated the Closing Date, each in form and substance acceptable to the Buyer.
(c) Financing Statements, etc. The Buyer shall have received evidence
satisfactory to it of the completion of all recordings, registrations and
filings as may be necessary or, in the opinion of the Buyer, desirable, to
evidence or perfect the ownership interests to be acquired by the Buyer
hereunder, including, without limitation:
27
(i) acknowledgment copies of proper financing statements on Form UCC-1
filed on or prior to the Closing Date, naming the Company as debtor and/or
assignor and the Seller as secured party and/or assignee (in respect of the
transfer of Receivables contemplated by the Sale Agreement) and naming the
Seller as debtor and/or assignor and the Buyer as secured party and/or
assignee (in respect of the transfer of the Participation Interest
contemplated by this Agreement), or such other similar instruments or
documents as may be necessary or, in the opinion of the Buyer, advisable,
under Revised UCC Article 9 or any comparable law of all appropriate
jurisdictions to evidence or perfect the Buyer's Participation Interest;
and
(ii) evidence of searches satisfactory to the Buyer listing all
effective financing statements which name the Company (or any predecessor
entity of the Company) or the Seller as debtor and/or assignor in the
jurisdictions in which filings are made pursuant to subsection (i) above
(or any other jurisdiction that would have been a necessary or an advisable
filing jurisdiction prior to the adoption of Revised UCC Article 9 as in
effect in New York), together with copies of such financing statements,
none of which (other than the filings made pursuant to subsection (i)
above) shall cover any Receivables or the related Contracts, and of tax
lien searches satisfactory to the Buyer.
(d) Lockbox Agreements. The Buyer shall have received duly executed copies
of Lockbox Servicing Agreements with each of one or more Permitted Lockbox
Banks.
(e) Purchase Notice. The Buyer shall have received from the Seller, no less
than two (2) Business Days prior to the Closing Date, a notice (the "Purchase
Notice") in substantially the form of Exhibit F hereto, utilizing information as
of the last day of the most recently completed Accounting Period, together with
such written documentation of the procedures utilized and calculations made in
connection with the preparation of such Purchase Notice as the Buyer may
request.
(f) Responsible Officer Certificate. The Buyer shall have received a
certificate of a Responsible Officer, dated the Closing Date, from each of the
Seller and the Company, in substantially the form attached hereto as Exhibit C,
and as to
28
such other matters incident to the transactions contemplated by the Purchase
Documents as the Buyer may reasonably request, in form and substance
satisfactory to the Buyer. The Buyer may conclusively rely on any such
certificate unless and until a later certificate revising the prior certificate
is received by the Buyer.
(g) Certificate of Participation. The Buyer shall have received on the
Closing Date, a Certificate of Participation executed on behalf of the Seller by
a Responsible Officer.
(h) Buyer's Review. The Buyer shall have completed to its satisfaction a
review of the Servicer's billing and collection operations and reporting
systems.
(i) Regulatory Approvals. The Company and the Seller shall have received
all necessary and desirable regulatory approvals, if any, of the transactions
under this Agreement and the Sale Agreement.
(j) Creditors' Consent. The Buyer shall have received evidence that the
required lenders under that certain Credit Agreement, dated as of September 11,
2001, as amended and in effect from time to time, among the Company, the
subsidiary borrower party thereto, the guarantors party thereto and the lenders
and the agents party thereto, or under any successor or replacement credit
facility, as amended and in effect from time to time (collectively, the "Senior
Credit Facility"), and any other creditors whose consent is required, have
granted their consent to the execution and delivery of the Purchase Documents
and the consummation of the transactions contemplated hereby and thereby in form
and substance satisfactory to the Buyer.
4.03 Conditions Precedent to Each Purchase and Reinvestment. The
obligation of the Buyer to purchase the Participation Interest from the Seller
on the Closing Date, to make a Reinvestment on any date, or to increase the Net
Investment in the Receivables Pool on any Settlement Date, is subject to the
performance by each of the Company, the Servicer and the Seller of its
respective obligations hereunder on or before the Closing Date, such date on
which a Reinvestment will be made or such Settlement Date, and to the
satisfaction of the following further conditions:
(a) Details, Proceedings and Documents. All legal details and proceedings
in connection with the transactions contemplated by the Purchase Documents or
the Receivables to be
29
included in the Receivables Pool on the Closing Date, such Settlement Date or
such date of such Reinvestment shall be in form and substance satisfactory to
the Buyer, and the Buyer shall have received all such originals or certified
copies or other copies of such documents and proceedings in connection with such
transactions, in form and substance satisfactory to the Buyer.
(b) Representations and Warranties. On and as of such date (i) the
representations and warranties of the Seller contained in Article VIII hereof
and of the Company contained in the Sale Agreement shall be true and correct in
all material respects with the same force and effect as though made on and as of
the Closing Date, such Settlement Date or such date of Reinvestment (except to
the extent that such representations and warranties relate solely to an earlier
date), (ii) the Servicer and the Seller shall be in compliance with the
respective covenants contained in Article IX hereof, and the Company shall be in
compliance with its respective covenants contained in the Sale Agreement, and
(iii) no Termination Event or Potential Termination Event shall occur as a
result of the purchase and sale of the Participation Interest in the Receivables
Pool on the Closing Date, such Settlement Date or such date of Reinvestment, or
shall have occurred and be continuing or shall exist on the Closing Date, such
Settlement Date or such date of Reinvestment.
(c) Sale Agreement. The Sale Agreement shall be in full force and effect.
4.04 Purchase Price. Subject to the terms and conditions hereof, and
relying upon the representations and warranties set forth herein, on the Closing
Date, the Buyer shall purchase the Participation Interest in the Receivables
Pool described in the Purchase Notice delivered by the Seller to the Buyer and
agreed upon by the Buyer. On the date of purchase of the Participation Interest,
the Buyer shall make available to the Seller at the Seller's Office, or such
other place as the Seller has notified the Buyer, the Purchase Price therefor.
4.05 Sale Without Recourse.
(a) The sale of the Participation Interest hereunder shall, except to the
extent specified in Section 5.06 hereof, be made without recourse to the Seller
with respect to any loss arising from Defaulted Receivables, provided, that
nothing contained herein shall limit the rights of the Buyer provided in
30
Section 2.04, Article V, Section 6.04 and Articles VII and XI hereof.
(b) The parties hereto intend that the transactions contemplated by this
Agreement shall constitute, and be treated as, true sales by the Seller to the
Buyer of undivided percentage ownership interests in the Receivables Pool. The
parties acknowledge that Revised UCC Article 9 as in effect in New York
nevertheless may apply to such true sales, pursuant to Section 9-109(a)(3)
thereof and the official comments thereto. Accordingly, the provisions of
Section 9-318(a) of Revised UCC Article 9, as in effect in New York are intended
to apply. The execution and delivery of this Agreement, and the filing of
appropriate financing statements, are intended to avoid the applicability of
Section 9-318(b) of Revised UCC Article 9, as in effect in New York in
connection with such true sale (insofar as such execution and delivery, and such
filings, would be necessary for "perfection" of such ownership interest for
purposes of that subsection).
(c) Notwithstanding subsection (b), in the event that it nevertheless shall
be determined that the transactions contemplated by this Agreement do not
constitute true sales and instead constitute financing arrangements from the
Buyer in favor of the Seller, then the parties hereto intend that such financing
arrangements be secured by a Lien in favor of the Buyer against all Purchased
Receivables (including proceeds). To that end, this Agreement also is intended
to constitute a security agreement under Revised UCC Article 9, as in effect in
New York for purposes of the attachment of such Lien. In furtherance thereof,
the Seller hereby grants to the Buyer, on the terms and conditions of this
Agreement a first priority security interest in and against all of the Seller's
right, title and interest in and to the Purchased Receivables (including the
proceeds thereof) for the purposes of securing the obligations of the Seller and
the rights of the Buyer under this Agreement. For avoidance of doubt, it is
understood that the Purchased Receivables covered under this Agreement include
those in existence as of the Closing Date, as well as those thereafter arising,
created or acquired, and that, insofar as this Agreement is held to secure
indebtedness, the collateral also secures future advances.
(d) The Seller hereby authorizes the Buyer to file appropriate initial
financing statements, and amendments thereto, to the extent provided in Section
9-509(b) of Revised UCC Article 9, as in effect in New York, in connection with
the transactions referenced in subsections (b) and (c) above.
31
4.06 Non-Assumption by the Buyer of Obligations. No obligation or
liability of the Seller to any Obligor under any Purchased Receivable or
Contract shall be assumed by the Buyer hereunder or under the Certificate of
Participation, and any such assumption is hereby expressly disclaimed. The Buyer
shall be indemnified by the Seller in accordance with Section 11.04 hereof in
respect of any losses, claims, damages, liabilities, costs or expenses arising
out of or incurred in connection with any Obligor's assertion of such obligation
or liability against the Buyer.
4.07 Character of Receivables Added to Receivables Pools. All
Receivables acquired by the Seller pursuant to the Sale Agreement shall be
included in the Receivables Pool immediately upon the Seller's acquisition
thereof. All such Receivables will comprise only one Receivables Pool.
ARTICLE V
SETTLEMENTS; ADJUSTMENTS
------------------------
5.01 Settlement Statements. The Seller shall, or shall cause the
Servicer to, submit to the Buyer not less than two (2) Business Days prior to
each Settlement Date, a Settlement Statement signed by a Responsible Officer
dated as of such Settlement Date and including information in respect of the
Receivables Pool as of the last day of the Accounting Period most recently
completed. The execution and delivery of any Settlement Statement shall
constitute a representation and warranty by the Seller and the Servicer that the
information contained therein is true and correct as of the date thereof. Such
Settlement Statement shall be accompanied by such other information as the Buyer
may reasonably request. Subject to the terms and conditions of this Agreement,
if the Seller requests on a Settlement Statement relating to a Settlement Period
then ending that the Net Investment be increased to an amount in excess of the
Net Investment as of the Settlement Date relating to the immediately preceding
Settlement Period, the Buyer shall make available to the Seller at the Seller's
Office, or such other place as the Seller has notified to the Buyer, on the
Settlement Date relating to the Settlement Period then ending, the amount of
such increase in the Net Investment; provided, that such increase in the Net
Investment shall not cause the Net Investment to exceed the Maximum Net
Investment then in effect. The Seller may request a reduction in the Net
Investment in accordance with Section 2.03(b).
32
5.02 Receivables Status. Upon ten (10) Business Days' notice from the
Buyer, the Seller or the Servicer will furnish or cause to be furnished to the
Buyer a written report, signed by a Responsible Officer, containing such
information as the Buyer may reasonably request (in such form as the Buyer may
reasonably request), which shall include, without limitation, with respect to
the Participation Interest (a) the Account Balances of all Purchased
Receivables, together with all Collections, Dilutions, and other adjustments to
such Receivables since the date of the last written report furnished to the
Buyer, and an aging of all Purchased Receivables as of a date no later than the
date of such notice; and (b) an analysis and explanation of significant
variances, if any, between actual Collections of Purchased Receivables during
such Settlement Period and historical collections experience.
5.03 Non-Liquidation Settlements.
(a) Daily Settlements. On each day (other than a Liquidation Day) with
regard to each Settlement Period, the Buyer shall be allocated an amount of
Collections equal to the product of (i) the Buyer's Allocation, expressed as a
decimal, and (ii) Collections, if any, with respect to the Purchased Receivables
on such day. The Servicer shall hold in trust for the benefit of the Buyer out
of such amount in respect of such Buyer's Allocation an amount equal to the Cost
of Funds and Program Fee Amount accrued through such day and not previously so
held (whether or not accrued during the current Settlement Period), and
(following such allocation) shall hold in trust for its own account an amount,
if available, equal to the Servicer's Compensation accrued through such day for
the Participation Interest and not previously so held and (following such
allocation) shall hold in trust for the account of the Buyer an amount, if
available, equal to the Facility Fee Amount accrued through such day and not
previously so held. The remainder of such amount in respect of the Buyer's
Allocation (the "Remainder") shall, subject to the terms and conditions of this
Agreement, be utilized by the Servicer to make a Reinvestment in the Receivables
Pool in the amount of the Remainder, subject to Sections 2.01 and 4.03 hereof,
and after giving effect to any allocation of new Receivables to the Receivables
Pool. Any portion of the Remainder not applied to a Reinvestment shall be held
by the Servicer in accordance with subsection (d) below. The Remainder, or any
portion thereof, which is applied to a Reinvestment, and any amount of
Collections which were not allocated to the Buyer pursuant to the first sentence
of this Section 5.03(a), shall be remitted by the Servicer to the
33
Seller. Notwithstanding the foregoing, in the event that at the end of any
Settlement Period the amounts held in trust for the benefit of the Buyer
pursuant to the second sentence of this Section 5.03(a) and not previously paid
to the Buyer are less than the accrued and unpaid Cost of Funds and Program Fee
Amount for such Settlement Period, then any amount which had been deemed to be a
Remainder during such Settlement Period (up to the amount of such deficit in the
amount available to pay the Cost of Funds and Program Fee Amount) shall be
deemed to have been held in trust for the benefit of the Buyer pursuant to the
second sentence of this Section 5.03(a).
(b) Settlement Period. On each Settlement Date (other than a Settlement
Date relating to a Settlement Period during which a Liquidation Day occurs), the
Servicer shall pay to the Buyer and the Servicer the amounts held in trust for
the benefit of the Buyer and the Servicer, respectively, pursuant to subsection
(a) above and not previously paid to the Buyer and the Servicer, respectively.
(c) Deemed Collections. If on any day the Account Balance of a Purchased
Receivable is reduced as a result of a Dilution with respect to such Purchased
Receivable, the Servicer shall be deemed to have received on such day a
Collection of Purchased Receivables in the amount of such reduction. If on any
day any of the representations and warranties of the Seller set forth in Section
8.02(b) and (c) is no longer true or was not true when made with respect to such
Purchased Receivable, or if any of the representations and warranties of the
Seller set forth in Section 8.02(a) was not true when made, the Seller shall be
deemed to have received on such day a Collection of such Purchased Receivable in
full.
(d) Unreinvested Collections. Any portion of the Remainder which may not be
immediately applied to Reinvestments in the Participation Interest in accordance
with Section 5.03(a) for any reason, shall be so reinvested as soon as
practicable without violating any provisions of this Agreement; provided,
however, that if any portion of the Remainder has not been applied to
Reinvestments in the Participation Interest for any reason on or before the date
which is two (2) Business Days after the Servicer receives such portion of the
Remainder, the Servicer shall pay such portion of the Remainder to the Buyer on
such second Business Day. The Net Investment shall be deemed reduced in the
amount to be paid to the Buyer only when in fact so paid.
34
(e) Notwithstanding anything to the contrary contained herein, if, on any
Settlement Date which is not a Liquidation Day (after giving effect to all
payments required to be made by the Seller or the Servicer to or for the account
of the Buyer pursuant to this Section 5.03 and any increase in the Net
Investment effected on such day), the Buyer's Allocation shall exceed one
hundred percent (100%), the Seller shall make a payment of an amount in
immediately available funds to the Referral Agent for the account of the Buyer
as a reduction of the Net Investment such that, after giving effect to such
payment, the Buyer's Allocation is equal to one hundred percent (100%).
5.04 Liquidation Settlements.
(a) Notwithstanding the provisions of Sections 5.03(a) and (b) hereof, on
each Liquidation Day with regard to each Settlement Period, the Servicer shall
allocate to, and hold in trust for the benefit of, the Buyer for payment in
accordance with Section 5.04(b), an amount of Collections equal to the product
of (i) the Buyer's Allocation, and (ii) Collections in respect of the Purchased
Receivables for such Liquidation Day. The Collections allocated to the Buyer
pursuant to this section shall be allocated on a daily basis (i) first, to the
payment of any Cost of Funds and Program Fee accrued and owing to the Buyer,
(ii) second, subject to Section 6.06(e), to the payment of any Servicer's
Compensation accrued and owing to the Servicer, (iii) third, to make payment in
respect of any Facility Fee accrued and owing to the Buyer, (iv) fourth, to make
payment in respect of the Net Investment, and (v) fifth, to the payment of any
other amount accrued and owing to the Buyer under this Agreement. Any amount of
such Collections which were not allocated to the Buyer pursuant to the first
sentence of this Section 5.04 on such Liquidation Day, shall be remitted by the
Servicer to the Seller.
(b) Collections held by the Servicer on behalf of the Buyer pursuant to
this Section 5.04 shall be remitted to the Buyer on or before the date which is
two (2) Business Days after the Servicer receives such Collections.
5.05 Allocation of Collections.
(a) Except as required by Law or the underlying Contract, if any Obligor is
obligated under one or more Purchased Receivables and also under one or more
Contracts not constituting Purchased Receivables, then any payment received from
or on behalf of such Obligor shall be applied (i) to a
35
specific Contract if the Obligor designates such payment to be so applied, or
(ii) to the Purchased Receivables in the order in which payments are due
thereunder if the application of such payment is not so designated.
(b) Notwithstanding any other provision of this Agreement, the Buyer is not
entitled to receive any portion of Collections once the Net Investment is
reduced to zero and the Seller has no remaining payment obligations to the Buyer
under this Agreement.
5.06 Deferred Purchase Price. On the Closing Date, and, thereafter, in
each Settlement Statement, the Servicer shall calculate, as of the last day of
the Accounting Period most recently completed, the amount (the "Deferred
Purchase Price") equal to the sum of (1) the Credit Enhancement Reserve, plus
(2) the Yield Reserve, plus (3) the Servicer's Compensation Reserve; provided,
that on and after a Liquidation Day and during the continuance of a Liquidation
Period, the Deferred Purchase Price shall be equal to the Deferred Purchase
Price as computed on the Business Day immediately preceding the commencement of
such Liquidation Period..
5.07 Treatment of Collections and Deemed Collections. Any Collections
deemed to be received pursuant to this Agreement shall be paid by the Seller to
the Servicer in same day funds on the date of such deemed receipt. The Servicer
shall hold or distribute all Collections deemed received pursuant to Sections
5.03 and 6.04 hereof to the same extent as if such Collections had actually been
received. So long as the Servicer shall hold any Collections or deemed
Collections required to be paid to the Buyer, it shall hold such Collections in
trust and separate and apart from its own funds and shall clearly ▇▇▇▇ its
records to reflect such trust.
ARTICLE VI
PROTECTION OF THE BUYER;
ADMINISTRATION AND COLLECTIONS
------------------------------
6.01 Maintenance of Information and Computer Records. The Seller will,
or will cause the Servicer to, hold in trust and keep safely for the Buyer all
evidence of the Buyer's right, title and interest in the Receivables Pool. The
Seller will, or will cause the Servicer to, on or prior to the Closing Date, and
with respect to all Receivables that are added to the
36
Receivables Pool after the Closing Date, on each respective date such
Receivables are added, place an appropriate code or notation in its Records to
indicate those Receivables which are or which will be included in the
Receivables Pool.
6.02 Protection of the Interests of the Buyer.
(a) The Seller will, or will cause the Servicer to, from time to time do
and perform any and all acts and execute any and all documents (including,
without limitation, the execution, amendment or supplementation of any financing
statements, continuation statements, the Certificate of Participation and
notices of Certificate of Participation relating to the Participation Interest
for filing under the provisions of Revised UCC Article 9 of any applicable
jurisdiction, the execution, amendment or supplementation of any instrument of
transfer, and the making of notations on the Records of the Seller) as may be
reasonably requested by the Buyer in order to effect the purposes of this
Agreement and the sale of the Participation Interest hereunder and to perfect
the Buyer's right, title and interest in the Receivables Pool and all
Collections with respect thereto against all Persons whomsoever.
(b) To the fullest extent permitted by applicable Law, the Seller hereby
irrevocably grants to the Buyer and the Referral Agent an irrevocable power of
attorney, with full power of substitution, coupled with an interest, to sign and
file in the name of the Seller, or in its own name, financing statements and
continuation statements and amendments thereto with respect to the Buyer's
Participation Interest in the Purchased Receivables and, to the extent that
Section 4.05(c) hereof is applicable, with respect to the Buyer's security
interest in the Purchased Receivables.
(c) At any reasonable time and from time to time at the Buyer's reasonable
request upon notice to the Seller, the Company or the Servicer, the Seller, the
Company or the Servicer, as the case may be, shall permit such Person as the
Buyer may designate to conduct audits or visit and inspect any of the properties
of the Seller, the Company or the Servicer, as the case may be, to examine the
Records, internal controls and procedures maintained by the Seller, the Company
or the Servicer, as the case may be, and take copies and extracts therefrom, and
to discuss the Seller's, the Company's or the Servicer's, as the case may be,
affairs with its officers,
37
employees and independent accountants. Each of the Seller, the Company and the
Servicer hereby authorizes such officers, employees and independent accountants
to discuss with the Buyer the affairs of the Seller, the Company or the
Servicer, as the case may be. The Seller shall reimburse the Buyer for all
reasonable fees, costs and expenses incurred by or on behalf of the Buyer in
connection with the foregoing actions, subject to the limitations contained in
Section 11.01, promptly upon receipt of a written invoice therefor.
(d) The Buyer shall have the right to do all such acts and things as it
reasonably may deem necessary to protect its interests under this Agreement,
including, without limitation, confirmation and verification of Purchased
Receivables; provided, however, that Buyer hereby agrees not to contact any
Obligor unless permitted by Section 6.07(e).
6.03 Maintenance of the Location of Writings and Records. The Seller
will at all times until completion of a Complete Servicing Transfer keep or
cause to be kept at its Chief Executive Office, or at such other office of the
Seller or an office of the Servicer designated in advance to the Buyer, separate
and apart from all other Records of the Servicer or the Company, each writing or
Record which evidences, and which is necessary or desirable to establish or
protect, including such books of account and other Records as will enable the
Buyer or its designee to determine at any time the status of, the Participation
Interest of the Buyer in each Purchased Receivable; provided, that any Records
may be stored at other locations to the extent temporary location elsewhere is
necessary in connection with litigation, repossession, other collection
activities or other usual business purposes. The Seller shall, if requested by
the Buyer, at its own expense prepare and maintain machine-readable magnetic
tapes in such format as the Buyer, in its sole discretion, may require
pertaining to the Purchased Receivables.
6.04 Information. The Seller will, or will cause the Servicer to,
furnish to the Buyer such additional information with respect to the Purchased
Receivables (including but not limited to the Credit and Collection Policy) as
the Buyer may reasonably request. The Seller will also furnish to the Buyer all
modifications, adjustments or supplements to the Credit and Collection Policy as
in effect on the date hereof; provided, however, that neither the Seller nor the
Company shall, without the Buyer's prior written consent, alter its credit,
enforcement and other policies (pertaining to the Staffing Solutions Business)
as in effect from time to time if the effect of any alteration thereof would be
to materially adversely affect the collectibility of the Purchased Receivables.
If any such
38
alteration made without the Buyer's consent is later determined by the Buyer to
have had a material adverse effect on the collectibility of Purchased
Receivables, then the Seller or the Company, as the case may be, shall promptly
revise such policies in order to prevent any such material adverse effect from
occurring thereafter, and the Purchased Receivables that, in the sole judgment
of the Buyer, became uncollectible due to such change shall be deemed collected
and shall be treated as deemed Collections pursuant to Section 5.07 hereof.
Promptly upon becoming aware of any Termination Event or Potential Termination
Event, the Servicer shall give the Buyer notice thereof.
6.05 Performance of Undertakings Under the Purchased Receivables;
Indemnification. The Company will at all times observe and perform, or cause to
be observed and performed, all obligations and undertakings to the Obligors
arising in connection with each Purchased Receivable or related Contract and
neither the Company nor the Seller will take any action or cause any action to
be taken to impair the rights of the Seller to the Receivables or the rights of
the Buyer to its Participation Interest in the Purchased Receivables, in each
case except as otherwise provided in this Agreement. In such connection, the
Buyer shall be indemnified by the Seller in accordance with Section 11.04 hereof
and by the Company in accordance with the Sale Agreement in respect of any
losses, claims, damages, liabilities, costs or reasonable expenses incurred or
arising out of any action taken or caused to be taken by the Company or the
Seller which impairs the Seller's rights to the Receivables or the Buyer's
rights to its Participation Interest in the Purchased Receivables.
6.06 Administration and Collections; Indemnification.
(a) General. Until a Complete Servicing Transfer shall have occurred, the
Company hereby is appointed as the initial Servicer hereunder and, in such
capacity, will be responsible for the administration, servicing and collection
of the Purchased Receivables; provided, however, that upon written approval by
the Buyer such duties may be delegated by the Company to any of its Affiliates
or a third party (without impairment of the Company's obligations as Servicer).
If and to the extent that the Company or any of its Affiliates or any such third
party is performing such functions, the Company agrees to exercise or cause such
Affiliate or third party to exercise the same degree of skill and care and apply
the same standards, policies, procedures and diligence that it applies to the
performance of the same functions with respect to accounts owned by the Company.
39
(b) Administration. The Servicer shall, to the maximum extent permitted by
Law, have the power and authority, on behalf of the Buyer as part of the
Servicer's administrative and servicing obligations hereunder, to take such
action in respect of any such Purchased Receivable as the Servicer may deem
advisable, including the resale of any repossessed, returned or rejected goods;
provided, however, that the Servicer may not under any circumstances compromise,
rescind, cancel, adjust or modify (including by extension of time for payment or
granting any discounts, allowances or credits) the Account Balance of the
related Contract for any Purchased Receivable, except in accordance with the
Credit and Collection Policy or otherwise with the Buyer's prior written
consent. The Servicer undertakes to comply with each of the covenants of the
Seller included herein in respect of which the Seller undertakes to cause the
Servicer to take or avoid taking actions specified therein, and further agrees
to perform the Servicer's obligations under Article II of the Sale Agreement.
(c) Enforcement Proceedings. In the event of a default under any Purchased
Receivable before a Servicer Event, the Servicer shall, at the Seller's expense,
to the maximum extent permitted by Law, have the power and authority, on behalf
of the Buyer as part of the Servicer's administrative and servicing obligations
hereunder, to take any action in respect of any such Purchased Receivable as the
Servicer may deem advisable; provided, however, that the Servicer or the Seller,
as the case may be, shall take no enforcement action (judicial or otherwise)
with respect to such Purchased Receivable, except in accordance with the Credit
and Collection Policy or otherwise with the written consent of the Buyer. The
Servicer or the Seller, as the case may be, will apply or will cause to be
applied at all times before a Servicer Event the same standards and follow the
same procedures with respect to deciding to commence, and in prosecuting,
litigation on such Purchased Receivables as is applied and followed with respect
to like accounts not owned by the Buyer. In no event shall the Servicer or the
Seller, as the case may be, be entitled to make or authorize any Person to make
the Buyer a party to any litigation without the Buyer's express prior written
consent.
(d) Obligations of the Buyer. The Buyer may (consistent with this
Agreement), but shall have no obligation to, take any action or commence any
proceeding to realize upon any Purchased Receivable. At such time as the
Servicer or the Seller, as the case may be, has any obligation to pursue the
collection of Purchased Receivables and the Buyer possesses any
40
documents necessary therefor, the Buyer agrees to furnish such documents to the
Servicer or the Seller, as the case may be, to the extent and for the period
necessary for the Servicer or the Seller, as the case may be, to comply with its
obligations hereunder.
(e) Servicer's Compensation. The "Servicer's Compensation" for performing
its responsibilities as the servicer with respect to any Purchased Receivables
on any day shall be equal to the quotient of (A) the product of (1) one-half of
one percent (0.50%), and (2) the Account Balances of Purchased Receivables on
such day, divided by (B) 360. Subject to Section 6.07(a), the Servicer's
Compensation shall be retained by the Servicer in accordance with Section 5.03
hereof or paid to the Servicer by the Buyer in the event Collections are applied
in accordance with Section 5.04 hereof; provided, however, that if the Company
is the Servicer, the Servicer's Compensation shall not be paid on or after any
day on which a Termination Event shall have occurred and be continuing.
(f) Indemnity. The Servicer shall indemnify the Buyer in respect of any
losses, claims, damages, liabilities, costs or reasonable expenses incurred or
arising out of any action taken or caused to be taken by the Servicer under this
Section 6.06.
6.07 Complete Servicing Transfer.
(a) General. If at any time a Servicer Event shall have occurred and be
continuing, the Buyer may, by notice in writing to the Seller and the Company,
terminate the Company's capacity as Servicer in respect of the Purchased
Receivables (such termination referred to herein as a "Complete Servicing
Transfer"), notify Obligors of its interest in the Purchased Receivables, take
control of the Lockbox Accounts and exercise all other incidences of ownership
in the Purchased Receivables. After a Complete Servicing Transfer, the Buyer may
administer, service and collect the Purchased Receivables itself, and in such
event may retain the Servicer's Compensation for its own account, in any manner
it sees fit consistent with applicable law, including, without limitation, by
compromise, extension or settlement of such Purchased Receivables.
Alternatively, the Buyer may engage Mellon Bank to perform all or any part of
the administration, servicing and collection of the Purchased Receivables and
pay to Mellon Bank all or a portion of the Servicer's Compensation in
consideration thereof.
41
(b) Transition. The Company, within ten (10) Business Days after receiving
a notice pursuant to Section 6.07(a) hereof, shall, at its own cost and expense,
deliver or cause to be delivered to the Buyer or its designated agent (i) a
schedule of the Purchased Receivables indicating as to each such Purchased
Receivable information as to the related Obligor, the Account Balance as of such
date of the related Contract and the location of the evidences of such Purchased
Receivable and related Contract, together with such other information as the
Buyer may reasonably request and (ii) all evidence of such Purchased Receivables
and related Contracts and such other Records related thereto (including, without
limitation, true copies of any computer tapes and data in computer memories) as
the Buyer may reasonably deem necessary to enable it to protect and enforce its
rights to, or its position as owner of, a Participation Interest therein. After
any such delivery, neither the Seller nor the Company will hold or retain any
executed counterpart or any document evidencing such Purchased Receivables or
related Contracts without clearly marking the same to indicate conspicuously
that the same is not the original and that transfer thereof does not transfer
any rights against the related Obligor or any other Person.
(c) Collections. From and after the occurrence of a Complete Servicing
Transfer, the Seller and the Servicer will cause to be transmitted and delivered
directly to the Buyer or its designated agent, for the Buyer's own account,
forthwith upon receipt and in the exact form received, all Collections (properly
endorsed, where required, so that such items may be collected by the Buyer) on
account of its Participation Interest in the Purchased Receivables. Such
Collections shall remain subject to the provisions herein pertaining to
allocation and application of Collections, including without limitation Sections
5.03 and 5.04 hereof. All such Collections consisting of cash shall not be
commingled with other items or monies of the Seller or the Company for a period
longer than two (2) Business Days. If the Buyer or its designated agent receives
items or monies that are not payments on account of its Participation Interest
in the Purchased Receivables, such items or monies shall be delivered promptly
to the Seller after being so identified by the Buyer or its designated agent.
The Seller hereby irrevocably grants the Buyer or its designated agent, if any,
an irrevocable power of attorney, with full power of substitution, coupled with
an interest, to take in the name of the Seller all steps with respect to the
Purchased Receivable consistent with applicable law and which the Buyer, in its
reasonable discretion, may deem necessary or advisable to
42
negotiate or otherwise realize on any right of any kind held or owned by the
Seller or transmitted to or received by the Buyer or its designated agent
(whether or not from the Seller or any Obligor) in connection with its
Participation Interest in such Purchased Receivable; provided, however, that the
Buyer hereby agrees not to exercise, and not to permit its designated agents to
exercise, such power of attorney unless a Servicer Event shall have occurred and
be continuing. The Buyer will provide such periodic accountings and other
information related to disposition of funds so collected as the Seller may
reasonably request.
(d) Collection and Administration at Expense of Company. The Company agrees
that, in the event of a Complete Servicing Transfer, it will reimburse the Buyer
for all reasonable out-of-pocket expenses (including, without limitation,
attorneys' and accountants' and other third parties' fees and expenses, expenses
incurred by the Referral Agent's credit recovery group (or any successor),
expenses of litigation or preparation therefor, and expenses of audits and
visits to the offices of the Company) incurred by the Buyer or the Referral
Agent in connection with and following the transfer of functions following a
Complete Servicing Transfer (excluding, however, the fees of any successor
Servicer), except insofar as arising out of or relating to their gross
negligence or willful misconduct.
(e) Payments by Obligors. At any time, and from time to time following a
Complete Servicing Transfer, or if a Servicer Event or a Termination Event or a
Potential Termination Event pursuant to Section 10.01(j) shall have occurred and
be continuing, the Seller, the Company and the Servicer shall permit such
Persons as the Buyer may designate to open and inspect all mail (pertaining to
the Staffing Solutions Business) received by the Seller or the Servicer, or by
any Paying Agent that is an Affiliate of the Company or the Seller, at any of
its offices, and to remove therefrom any and all Collections or other
correspondence from Obligors or the Company in respect of Purchased Receivables.
All Collections received by the Buyer shall be applied in accordance with
Section 5.05 hereof. The Buyer shall be entitled to notify the Obligors of
Purchased Receivables to make payments directly to the Buyer of amounts due
thereunder at any time and from time to time following the occurrence of (i) a
Servicer Event, (ii) a Complete Servicing Transfer, or (iii) a violation by the
Seller of the provisions of Section 6.08 hereof.
43
6.08 Lockboxes. The Seller and the Company hereby agree (i) to direct
Obligors (or their Paying Agent) that all Collections which may be sent by mail
as payment on account of Purchased Receivables to be mailed by Obligors (or any
such Paying Agent) directly to a Permitted Lockbox; (ii) to cause the Servicer
to make the necessary bookkeeping entries to reflect such Collections on the
Records pertaining to such Purchased Receivables; (iii) to cause the Servicer to
apply all such Collections as provided in this Agreement; and (iv) not to amend
or modify any term, with respect to the disposition of such Collections or any
other amounts received by the Seller, the Company, the Servicer or any Permitted
Lockbox Bank, of this Agreement, the Lockbox Servicing Agreement or any other
related agreement (including instructions with respect thereto) without the
prior written consent of the Buyer to such amendment or modification.
ARTICLE VII
REPURCHASES BY SELLER
---------------------
7.01 Repurchases. If on the last day of a Settlement Period the Net
Investment shall be equal to or less than ten percent (10%) of the original
Maximum Net Investment, the Seller shall be entitled on such last day to
repurchase the Participation Interest from the Buyer upon at least ten (10)
Business Days' prior written notice to the Buyer.
7.02 Repurchase Price. In the case of a repurchase by the Seller
pursuant to Section 7.01 hereof, the Seller shall, on the date of such
repurchase, pay to the Buyer, as the repurchase price thereof, an amount equal
to the sum of (i) the Net Investment as of such date, plus (ii) the Cost of
Funds and Program Fee Amount accrued and owing as of such date, plus (iii) if
the Servicer is not the Company or an Affiliate, the accrued Servicer's
Compensation as of such date, plus (iv) all other amounts due to the Buyer
hereunder, plus (v) any loss, cost or expense incurred by the Buyer as the
result of the repayment of the Net Investment prior to the maturity date of any
(a) loans made to the Buyer by third parties or (b) commercial paper notes or
short-term promissory notes issued by the Buyer, in each case for the purpose of
maintaining the Participation Interest.
7.03 Reassignment of Repurchased Receivables. Upon receipt of the
purchase price of the Participation Interest pursuant to Section 7.02 hereof,
the Buyer shall reassign to the Seller the Buyer's Participation Interest in the
Purchased
44
Receivables, without recourse, representation or warranty (except for the
warranty that upon the reassignment to the Seller of the Buyer's Participation
Interest in such Purchased Receivables, no Lien created by the Buyer will affect
the Purchased Receivables).
7.04 Obligations Not Affected. The obligations of the Seller to the
Buyer under this Article VII shall not be affected by any invalidity, illegality
or irregularity of any Purchased Receivable, the related Contract or the sale
thereof, except and to the extent that any such invalidity, illegality or
irregularity is caused by the gross negligence or willful misconduct of the
Buyer.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
------------------------------
8.01 General Representations and Warranties of the Seller. The Seller,
in addition to its other representations and warranties contained herein or made
pursuant hereto, hereby represents and warrants to the Buyer, on and as of the
date hereof, the Closing Date, each Settlement Date on which the Net Investment
is increased, and each date on which a Reinvestment is made, that:
(a) Organization and Qualification. The Seller is a corporation duly
incorporated, validly existing and in good standing under the Laws of its
jurisdiction of incorporation. The Seller is duly qualified to do business as a
foreign corporation in good standing in each jurisdiction in which the ownership
of its properties or the nature of its activities, or both, requires it to be so
qualified or, if not so qualified, the failure to so qualify would not have a
material adverse effect on its business, operations, properties or financial
condition. All of the Seller's issued and outstanding stock is owned by the
Company, free of any Liens, except for liens in favor of the creditors under the
Senior Credit Facility referred to in Section 4.02(j), and has been fully paid
and is nonassessable.
(b) Authorization. The Seller has the corporate power and authority to
execute and deliver the Purchase Documents, to convey the Participation Interest
to the Buyer, and to perform its obligations hereunder and thereunder.
(c) Execution and Binding Effect. Each of the Purchase Documents (except
the Certificate of Participation) has
45
been duly and validly executed and delivered by the Seller and constitutes a
legal, valid and binding obligation of the Seller that is enforceable against
the Seller in accordance with its terms except (i) as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws which may be applied in the event of the bankruptcy or
insolvency of such Obligor, and (ii) as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in equity).
When duly executed and delivered by the Seller under the provisions hereof, the
Certificate of Participation will constitute a legal, valid and binding
assignment by the Seller that is enforceable against the Seller in accordance
with the terms thereof and hereof except (i) as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws which may be applied in the event of the bankruptcy or
insolvency of such Obligor, and (ii) as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in equity),
which will vest absolutely and unconditionally in the Buyer a valid
Participation Interests in accordance with the terms of this Agreement, in the
Purchased Receivables purported to be assigned thereby, subject to no Liens
whatsoever except as may arise under this Agreement and the Program Support
Agreements and other Permitted Liens. Upon the filing of the financing
statements required under Section 4.02(c) hereof, the Buyer's Participation
Interest will be perfected under Revised UCC Article 9 as in effect in New York,
prior to and enforceable against all creditors of and purchasers from the Seller
and all other Persons whatsoever except (i) as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws which may be applied in the event of the bankruptcy or
insolvency of such Obligor, and (ii) as such enforceability may be limited by
general principles of equity (whether considered in a suit at law or in equity).
(d) Authorizations and Filings. No authorization, consent, approval,
license, exemption or other action by, and no registration, qualification,
designation, declaration or filing with, any Official Body is or will be
necessary or, in the opinion of the Seller, advisable in connection with the
Seller's execution and delivery of the Purchase Documents, its consummation of
the transactions herein or therein contemplated or its performance of or its
compliance with the terms and conditions hereof or thereof, to ensure the
legality, validity or enforceability hereof or thereof as against the Seller, or
to ensure that the Buyer will have its Participation Interest in
46
and to the Purchased Receivables perfected and prior to all other Liens
(including competing ownership interests), other than the filing of financing
statements under Revised UCC Article 9 in the jurisdictions required under
Section 4.02(c) hereof.
(e) Absence of Conflicts. Neither the Seller's execution and delivery of
the Purchase Documents, nor its consummation of the transactions herein or
therein contemplated, nor its performance of or the compliance with the terms
and conditions hereof or thereof, will (i) violate any Law applicable to it or
(ii) conflict with or result in a breach of or a default under (A) the articles
or certificate of incorporation or by-laws of the Seller or (B) any agreement or
instrument, including, without limitation, any and all indentures, debentures,
loans or other agreements, to which the Seller is a party or by which it or any
of its properties (now owned or hereafter acquired) may be subject or bound.
(f) Location of Chief Executive Office, etc. As of the Closing Date (i) the
Seller's Chief Executive Office is located at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇, (ii) the Seller has only the Affiliates identified in Exhibit D
hereto, and (iii) the Seller has not changed its name, merged or consolidated
with any other corporation or been the subject of any proceeding under ▇▇▇▇▇ ▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ Code (Bankruptcy) within the past ten (10) years.
(g) No Termination Event. No event has occurred and is continuing and no
condition exists which constitutes a Termination Event or a Potential
Termination Event.
(h) Accurate and Complete Disclosure. No information, whether written or
oral, furnished by the Seller to the Buyer pursuant to or in connection with
this Agreement or any transaction contemplated hereby is false or misleading in
any material respect as of the date as of which such information was furnished
(including by omission of material information necessary to make such
information not misleading).
(i) No Proceedings. There are no proceedings or investigations pending (or,
to the Seller's knowledge, threatened) before any court, official body,
regulatory body, administrative agency, or other tribunal or governmental
instrumentality (A) asserting the invalidity of the Purchase Documents, (B)
seeking to prevent the consummation of any of the transactions contemplated by
the Purchase Documents, or (C) seeking any determination or ruling that could
materially and
47
adversely affect (i) the performance by the Seller or the Servicer of its
obligations under this Agreement, or (ii) the validity or enforceability of the
Purchase Documents, the Contracts or any material amount of the Receivables.
(j) Bulk Sales Act. No transaction contemplated hereby requires compliance
with any bulk sales act or similar law.
(k) Litigation. No injunction, decree or other decision has been issued or
made by any court, government or agency or instrumentality thereof with respect
to or affecting the Seller and no litigation, investigation or proceeding of the
type referred to in Section 9.01(j) exists.
(l) Margin Regulations. The use of all funds acquired by the Seller under
this Agreement will not conflict with or contravene any of Regulations T, U and
X of the Board of Governors of the Federal Reserve System, as the same may from
time to time be amended, supplemented or otherwise modified.
(m) Not an Investment Company. The Seller is not and will not become as a
result of the transactions contemplated by the Purchase Documents, an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
8.02 Representations and Warranties of the Seller With Respect to Each
Sale of Receivables. By selling the Participation Interest in the Receivables
Pool to the Buyer (including by Reinvestment), the Seller represents and
warrants to the Buyer as of the date of such sale or Reinvestment and as of each
Settlement Date on which the Net Investment is increased (in addition to its
other representations and warranties contained herein or made pursuant hereto)
that:
(a) Account Balances; Purchase Notice. If such sale is on the Closing Date,
the Account Balances of the related Contracts for the Purchased Receivables are
the respective amounts therefor set forth in the Purchase Notice, and all
information set forth on such Purchase Notice is true and correct as of such
Closing Date.
(b) Assignment. The Certificate of Participation vests in the Buyer all the
right, title and interest of the Seller in and to the Purchased Receivables (to
the extent of the Participation Interest), and constitutes a valid sale thereof,
in each case in accordance with the terms of this Agreement,
48
enforceable against all creditors of and purchasers from the Seller except (i)
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws which may be applied in the
event of the bankruptcy or insolvency of the Seller, and (ii) as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(c) No Liens. Each Purchased Receivable, together with the related Contract
and all purchase orders and other agreements related to such Purchased
Receivable, is owned by the Seller free and clear of any Lien, except as
provided herein, and when the Buyer purchases the Participation Interest in such
Purchased Receivables it shall have acquired and shall continue to have
maintained an undivided percentage ownership interest to the extent of its
Participation Interest in such Purchased Receivables and in the Collections with
respect thereto, in accordance with the terms of this Agreement, except (i) as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws which may be applied in the
event of the bankruptcy or insolvency of the Seller, and (ii) as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity) free and clear of any Lien, except as
provided herein.
(d) Eligible Receivable. At the time of purchase of the undivided ownership
interest in a Receivable which is identified as an Eligible Receivable for
purposes of the calculations hereunder, such Receivable is an Eligible
Receivable.
8.03 Representations and Warranties of the Servicer. The Servicer
represents and warrants (in the case of the initial Servicer, as of the date
hereof, and in the case of any Servicer appointed thereafter pursuant to Article
VI, as of the date of its acceptance of its appointment, and in each case as of
the date of each Settlement Statement during such service) as follows:
(a) Organization and Qualification. The Servicer is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation. The Servicer is duly qualified to do business as
a foreign corporation in good standing in each jurisdiction in which the
ownership of its properties or the nature of its activities or both, requires it
to be so qualified or, if not so
49
qualified, the failure to so qualify would not have a material adverse effect on
its business, operations, properties or financial condition.
(b) Authorization. The Servicer has the corporate power and authority to
execute and deliver this Agreement and to perform its obligations hereunder.
(c) Execution and Binding Effect. This Agreement has been duly and validly
executed and delivered by the Servicer and constitutes a legal, valid and
binding obligation of the Servicer that is enforceable against the Servicer in
accordance with its terms except (i) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws which may be applied in the event of the bankruptcy or insolvency of such
Obligor, and (ii) as such enforceability may be limited by general principles of
equity (whether considered in a suit at law or in equity).
(d) Authorizations and Filings. No authorization, consent, approval,
license, exemption or other action by, and no registration, qualification,
designation, declaration or filing with, any Official Body is or will be
necessary or, in the opinion of the Servicer, advisable in connection with the
Servicer's execution and delivery of this Agreement, its consummation of the
transactions herein contemplated or its performance of or its compliance with
the terms and conditions hereof, to ensure the legality, validity or
enforceability hereof.
(e) Absence of Conflicts. Neither the Servicer's execution and delivery of
this Agreement and the Sale Agreement, nor its consummation of the transactions
herein and therein contemplated, nor its performance of or the compliance with
the terms and conditions hereof, will (i) violate any Law applicable to it or
(ii) conflict with or result in a breach of or a default under (A) the articles
or certificate of incorporation or by-laws of the Servicer or (B) any agreement
or instrument, including, without limitation, any and all indentures,
debentures, loans or other agreements to which the Servicer is a party or by
which it or any of its properties (now owned or hereafter acquired) may be
subject or bound.
50
(f) No Termination Event. No event has occurred and is continuing and no
condition exists which constitutes a Termination Event or a Potential
Termination Event.
(g) Accurate and Complete Disclosure. No information, whether written or
oral, furnished by the Servicer to the Buyer pursuant to or in connection with
this Agreement or any transaction contemplated hereby, including without
limitation information regarding the Permitted Lockboxes and Permitted Lockbox
Accounts, is false or misleading in any material respect as of the date as of
which such information was furnished (including by omission of material
information necessary to make such information not misleading).
(h) No Proceedings. There are no proceedings or investigations pending (or,
to the Servicer's knowledge, threatened) before any court, official body,
regulatory body, administrative agency, or other tribunal or governmental
instrumentality (A) asserting the invalidity of any of this Agreement (B)
seeking to prevent the consummation of any of the transactions contemplated by
any of this Agreement, or (C) seeking any determination or ruling that could
materially and adversely affect (i) the performance by the Servicer of its
obligations under this Agreement or (ii) the validity or enforceability of the
Contracts or any material amount of the Receivables.
(i) Not an Investment Company. The Servicer is not and will not become as a
result of the transactions contemplated by the Purchase Documents, an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
ARTICLE IX
COVENANTS
---------
9.01 Affirmative Covenants of the Seller. In addition to its other
covenants contained herein or made pursuant hereto, the Seller covenants to the
Buyer as follows:
51
(a) Notice of Termination Event. Promptly upon becoming aware of any
Termination Event or Potential Termination Event, the Seller shall (or direct
the Servicer to) give the Buyer notice thereof, together with a written
statement of a Responsible Officer setting forth the details thereof and any
action with respect thereto taken or contemplated to be taken by the Seller.
(b) Notice of Material Adverse Change. Promptly upon becoming aware
thereof, the Seller shall (or direct the Servicer to) give the Buyer notice of
any material adverse change in the business, operations or financial condition
of the Seller which could affect adversely the collectibility of the Purchased
Receivables or the ability to service the Purchased Receivables. In order to
verify compliance with this Section 9.01(b), the Seller shall furnish the
following to the Buyer:
(i) as soon as practicable and in any event within 60 days following
the close of each fiscal quarter, excluding the last fiscal quarter, of
each fiscal year of the Seller during the term of this Agreement, an
unaudited consolidated balance sheet of the Seller as at the end of such
quarter and unaudited consolidated statements of income and cash flows of
the Seller for such quarter and for the fiscal year through such quarter,
setting forth in comparative form the corresponding figures for the
corresponding quarter of the preceding fiscal year, all in reasonable
detail and certified by a Financial Officer of the Seller, subject to (A)
adjustments of the type which would occur as a result of a year-end audit
and (B) the absence of notes, as having been prepared in accordance with
GAAP; and
(ii) as soon as practicable and in any event within 100 days after the
close of each fiscal year of the Seller during the term of this Agreement,
an unaudited consolidated balance sheet of the Seller as at the close of
such fiscal year and unaudited consolidated statements of income and cash
flows of the Seller for such fiscal year, setting forth in comparative form
the corresponding figures for the preceding fiscal year, together with
appropriate explanatory notes thereto, all in reasonable detail and
certified (with respect to the consolidated financial statements) by a
Financial Officer of the Seller as having been prepared in accordance with
GAAP.
52
(c) Preservation of Existence. The Seller shall preserve and maintain its
corporate existence, rights, franchises and privileges in the jurisdiction of
incorporation, and qualify and remain qualified in good standing as a foreign
corporation in each jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualification could materially
adversely affect (i) the interests of the Buyer hereunder or (ii) the ability of
the Seller to perform its obligations hereunder.
(d) Compliance with Laws. The Seller shall comply in all material respects
with all Laws applicable to the Seller, its business and properties, and the
Purchased Receivables.
(e) Enforceability of Obligations. The Seller shall ensure that, with
respect to each Purchased Receivable, the obligation of any related Obligor to
pay the unpaid balance of such Purchased Receivable in accordance with the terms
of the related Contract remains legal, valid, binding and enforceable against
such Obligor, except (i) as permitted by Section 6.06 hereof, (ii) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws which may be applied in the
event of the bankruptcy or insolvency of such Obligor, and (iii) as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(f) Books and Records. The Seller shall maintain and implement
administrative and operating procedures (including, without limitation, the
ability to recreate Records evidencing the Purchased Receivables in the event of
the destruction of the originals thereof), and keep and maintain all documents,
books, Records and other information reasonably necessary or advisable for the
collection of all Purchased Receivables (including, without limitation, Records
adequate to permit the identification of all Collections and adjustments to each
existing Purchased Receivable) at its Chief Executive Office, except as provided
in Section 6.03 hereof.
(g) Fulfillment of Obligations. The Seller will duly observe and perform,
or cause to be observed or performed, all obligations and undertakings on its
part to be observed and performed under or in connection with the Purchased
Receivables, and, subject to Section 6.06, will do nothing to impair the rights,
title and interest of the Buyer in and to its Participation Interest in the
Purchased Receivables.
53
(h) Customer List. The Seller shall at all times maintain (or cause the
Servicer to maintain) a current list (which may be stored on magnetic tapes or
disks) of all Obligors under Contracts related to Purchased Receivables,
including the name, address, telephone number and account number of each such
Obligor. The Seller shall deliver or cause to be delivered a copy of such list
to the Buyer as soon as practicable following the Buyer's request.
(i) Copies of Reports, Filings, Opinions, etc.
(1) Together with each Settlement Statement required to be delivered
pursuant to Section 5.01, the Seller shall cause the Servicer to prepare
and forward to the Buyer (i) a report in substantially the form of Exhibit
E hereto, relating to the Receivables Pool, as of the close of business on
the last day of the Accounting Period most recently completed, and (ii) a
listing by Obligor of all Purchased Receivables together with an aging of
such Purchased Receivables, in such detail as the Buyer may reasonably
request, as of the last day of the most recently completed Accounting
Period.
(2) Upon the request of the Buyer not more often than annually, the
Seller shall furnish to the Buyer an opinion of counsel who shall be
satisfactory to the Buyer with respect to the perfection of the Buyer's
right, title and interest in the Receivables Pool and all Collections with
respect thereto against all Persons whomsoever.
(3) Simultaneously with the delivery of the Seller's annual financial
statements pursuant to Section 9.01(b)(ii) for each fiscal year of the
Seller, the Seller shall, at the Seller's expense, cause a firm of
nationally recognized independent certified public accountants (who may
render other services to the Servicer or the Seller) to furnish a report to
the Buyer and the Referral Agent to the effect that they have applied
certain procedures agreed upon with the Servicer and Buyer and examined
certain documents and records relating to the servicing of the Receivables
under this Agreement and that, based upon such agreed-upon procedures,
nothing has come to the attention of such accountants that caused them to
believe that the servicing (including, without limitation, the allocation
of the Collections)
54
has not been conducted in compliance with the terms and conditions of
Article V and Section 6.08 of this Agreement and such predecessor
agreement, except for such exceptions as they believe to be immaterial and
such other exceptions as shall be set forth in such statement; and in
addition, each report shall set forth the agreed upon procedures performed;
provided that such examinations and reports may be combined with the
examinations and reports required by Section 9.03(i)(3).
(j) Litigation. As soon as possible, and in any event within three (3)
Business Days of the Seller's knowledge thereof, the Seller shall (or shall
direct the Servicer to) give the Buyer notice of (i) any litigation,
investigation or proceeding to which the Seller is a party or which could have
an adverse effect on the business, operations, property or financial condition
of the Seller or impair the ability of the Seller to perform its obligations
under this Agreement and (ii) any material adverse development in previously
disclosed litigation.
(k) Total Systems Failure. The Seller shall cause the Servicer to promptly
notify the Buyer of any total systems failure and to advise the Buyer of the
estimated time required to remedy such total systems failure and of the
estimated date on which a Settlement Statement can be delivered. Until a total
systems failure is remedied, the Seller shall cause the Servicer (i) to furnish
to the Buyer such periodic status reports and other information relating to such
total systems failure as the Buyer may reasonably request and (ii) to promptly
notify the Buyer if the Servicer believes that such total systems failure cannot
be remedied by the estimated date, which notice shall include a description of
the circumstances which gave rise to such delay, the action proposed to be taken
in response thereto, and a revised estimate of the date on which a Settlement
Statement can be delivered. The Seller shall cause the Servicer to promptly
notify the Buyer when a total systems failure has been remedied.
(l) Notice of Change. The Seller shall give the Buyer sixty (60) days'
prior written notice of any change in its jurisdiction of incorporation, name,
identity or corporate structure if, as a result of such change, the applicable
provisions of the Revised UCC Article 9 of any applicable jurisdiction or other
applicable Laws would require the filing of any amendment of any previously
filed financing statement or continuation statement or of any new financing
statement. The
55
Seller will at all times maintain its Chief Executive Office within a
jurisdiction in the United States in which Revised UCC Article 9 is in effect.
(m) Further Information. The Seller will furnish or cause to be furnished
to the Buyer such other information, as promptly as practicable, and in such
form and detail, as the Buyer may reasonably request.
(n) Treatment of Purchase. For accounting purposes, the Seller shall treat
the Purchase and each Reinvestment made hereunder as a sale of an undivided
participation interest in the Purchased Receivables. The Seller shall also
maintain its records and books of account in a manner which clearly reflects the
sale of the Participation Interest to the Buyer and the Buyer's Investment
therein.
(o) Administrative and Operating Procedures. The Seller shall maintain and
implement administrative and operating procedures adequate to permit the
identification of the Receivables Pool and all collections and adjustments
attributable to such Receivables Pool.
(p) Certificates of Title.
(1) If any amount payable under or in connection with any Purchased
Receivable shall be or become evidenced by any promissory note, chattel
paper or other instrument, such note, chattel paper or instrument shall be
duly endorsed in a manner satisfactory to the Buyer and delivered to the
Buyer or its agent.
(2) The Seller shall deliver to the Buyer any certificate of title or
other evidence of ownership issued by the United States or any state or any
political subdivision thereof relating to any chattel held as security for
any amount payable under or in connection with any Purchased Receivable,
with evidence of perfection of the security interest in such property noted
thereon, if such notation is required under the laws of the jurisdiction in
which such property is located in order to perfect a security interest in
such property.
(3) If the Contract relating to any Purchased Receivable requires the
related Obligor to maintain insurance upon the chattel security relating to
such
56
Contract, the Seller shall deliver to the Buyer all documents or
certificates relating to such insurance.
(4) The Seller shall deliver to the Buyer any other document required
by the terms of the related Contracts as a condition to the enforcement
thereof.
(q) Acknowledgment of Servicer. If there is a Servicer other than the
Seller, the Company or the Buyer, the Seller shall deliver to the Buyer a copy
of the Successor Servicing Agreement together with an acknowledgment from the
Servicer affirming that the Successor Servicing Agreement is in full force and
effect.
(r) Transfer of Receivables from the Company. Any Receivable transferred by
the Company to the Seller shall be transferred in accordance with the terms and
conditions of the Sale Agreement.
(s) Separate Existence. The Seller hereby acknowledges that the Buyer is
entering into the transactions contemplated by this Agreement in reliance upon
the Seller's identity as a separate legal entity from the Company or any Company
Entity (as defined below). Therefore, from and after the date of execution and
delivery of this Agreement, the Seller shall take all reasonable steps
including, without limitation, all steps that the Buyer may from time to time
reasonably request, to maintain the Seller's identity as a separate legal entity
and to make it manifest to third parties that the Seller is an entity with
assets and liabilities distinct from those of the Company and any Affiliates
(other than the Seller) thereof (each of the Company and its Affiliates (other
than the Seller) shall be referred to herein as a "Company Entity"), and not
just a division of any Company Entity. Without limiting the generality of the
foregoing and in addition to and consistent with the covenants set forth above,
the Seller shall:
(i) require that any and all full-time employees of the Seller
identify themselves as such and not as employees of any Company Entity
(including, without limitation, by means of providing appropriate employees
with business or identification cards identifying such employees as the
Seller's employees);
(ii) to the extent any employee, consultant or agent of the Seller is
also an employee, consultant or agent of any Company Entity, allocate the
compensation of such employee, consultant or agent between the
57
Seller and such Company Entity on a basis which reflects the services
rendered to the Seller and such Company Entity;
(iii) allocate all overhead expenses (including, without limitation,
telephone and other utility charges) for items shared between the Seller
and any Company Entity on a reasonable basis consistent with GAAP;
(iv) at all times on and after the Closing Date have at least one
director on its board of directors who is not, (A) a director, member,
officer or employee of any Company Entity, (B) a person related to any
officer, member, or director of any Company Entity, (C) a holder (directly
or indirectly) of more than 5% of any voting securities of any Company
Entity, or (D) a person related to a holder (directly or indirectly) of
more than 5% of any voting securities of any Company Entity (the
"Independent Director"); (v) ensure that all of its actions are duly
authorized by vote of its board of directors (including the Independent
Director in the case of the filing of a voluntary bankruptcy petition) in
accordance with its bylaws;
(vi) maintain the Seller's books and records separate from those of
any Company Entity and in a location which is clearly identified (by
signage or otherwise) as allocated solely to the Seller;
(vii) prepare its financial statements separately from those of the
Company Entities and insure that any consolidated financial statements of
the Company that include the Seller have a footnote clearly stating that
the Seller is a separate entity and that its assets will be available first
to satisfy the claims of its creditors;
(viii) except as herein specifically otherwise provided, not commingle
funds or other assets of Seller with those of any Company Entity and not
maintain bank accounts or other depository accounts to which any Company
Entity is an account party, into which any Company Entity makes deposits or
from which any Company Entity has the power to make withdrawals;
58
(ix) be obligated to reimburse any Company Entity which pays any of
the Seller's operating expenses; and
(x) not permit the Seller to be named as an insured on the insurance
policy covering the property of any Company Entity, except and only to the
extent that such policy also covers property of the Seller, or enter into
an agreement with the holder of such policy whereby in the event of a loss
in connection with the property of any Company Entity, proceeds are paid to
the Seller.
(t) Enforcement of Sale Agreement. The Seller shall enforce the obligations
of the Company under the Sale Agreement for the benefit of the Buyer.
(u) Compliance with ERISA. (1) The Seller shall comply in all material
respects with the applicable provisions of ERISA and (2) furnish to the Buyer
(i) as soon as possible after, and in any event within thirty (30) days after
any Responsible Officer of the Seller or any ERISA Affiliate either knows or has
reason to know that, any Reportable Event has occurred that alone or together
with any other Reportable Event could reasonably be expected to result in
liability of the Seller to the PBGC in an aggregate amount exceeding $10,000, or
of all ERISA Affiliates of the Seller to the PBGC in an aggregate amount
exceeding $200,000,000, (A) a copy of the notice of such event required to be
given to the PBGC or, if notice is not so required, a statement of an officer of
the Seller having responsibility over its employee benefits (a "Benefits
Officer") setting forth in reasonable detail the nature of such event and the
action proposed to be taken with respect thereto and (B) in the event that a
notice is required to be given to the PBGC, as soon as practicable after the
reasonable request of the Buyer following receipt a copy of such notice, a
statement of a Benefits Officer of the type described in (A) above, (ii)
promptly after receipt thereof, a copy of any notice the Seller or any ERISA
Affiliate may receive from the PBGC relating to the intention of the PBGC to
terminate any Plan or Plans (other than a Plan maintained by an ERISA Affiliate
that is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Code) or to appoint a trustee to administer any Plan or
Plans, (iii) within ten (10) days after the due date for filing with the PBGC
pursuant to Section 412(n) of the Code of a notice of failure to make a required
installment or other payment with respect to a Plan, a copy of such notice, and,
as soon as practicable after the reasonable request of the Buyer, a statement of
a Benefits Officer setting
59
forth in reasonable detail the nature of such failure and the action proposed to
be taken with respect thereto and (iv) promptly and in any event within thirty
(30) days after receipt thereof by the Seller or any ERISA Affiliate from the
sponsor of a Multiemployer Plan, a copy of each notice received by the Seller or
any ERISA Affiliate concerning (A) the imposition of Withdrawal Liability or (B)
a determination that a Multiemployer Plan is, or is expected to be, terminated
or in reorganization, in each case within the meaning of Title IV of ERISA.
(v) Collections. The Seller shall cause all Collections received directly
by the Seller from Obligors to be deposited in the Permitted Lockboxes within
two (2) Business Days from the date of receipt of such Collections by the
Seller.
9.02 Negative Covenants of the Seller. The Seller covenants that it
will not, without the prior written consent of the Buyer:
(a) Statementing for and Treatment of the Sales. Prepare any financial
statements for financial accounting or reporting purposes which shall account
for the transactions contemplated hereby in any manner other than as a sale of
the Participation Interest in the Purchased Receivables to the Buyer.
(b) No Rescissions or Modifications. Rescind or cancel any Purchased
Receivable or related Contract or modify any terms or provisions thereof, except
in accordance with the Credit and Collection Policy or otherwise with the prior
written consent of the Buyer.
(c) No Liens. Cause any of the Purchased Receivables to be sold, pledged,
assigned or transferred or to be subject to a Lien, other than the sale and
assignment of the Participation Interest therein to the Buyer and the Liens
created in connection with the transactions contemplated by this Agreement and
the Program Support Agreements and other Permitted Liens.
(d) Mergers, Acquisitions. Be a party to any merger or consolidation, or
purchase or otherwise acquire all or substantially all of the assets or any
stock of any class of, or any partnership or joint venture interest in, any
other Person.
(e) No Changes. Change its name, identity or corporate structure in any
manner which would, could or might make any financing statement or continuation
statement filed in
60
connection with this Agreement or the transactions contemplated hereby seriously
misleading within the meaning of Revised UCC Article 9 or other applicable Laws
unless it shall have given the Buyer at least sixty (60) days' prior written
notice thereof, or amend its articles or certificate of incorporation or its
by-laws without the prior written consent of the Buyer.
(f) Payment Instructions. Add any bank as a Permitted Lockbox Bank,
terminate any bank listed on Exhibit G hereto as a Permitted Lockbox Bank,
change any Lockbox Account listed on Exhibit G hereto, or make any change in its
instructions to Obligors regarding payments to be made to the Seller or payments
to be made to any Permitted Lockbox Bank, unless the Buyer shall have received
ten (10) Business Days' prior notice of such addition, termination or change
and, with respect to the addition of any Permitted Lockbox Bank, a Lockbox
Servicing Agreement executed by such Permitted Lockbox Bank shall have been
delivered to the Buyer.
(g) Sales, etc. Sell, transfer, convey, assign or lease all or any
substantial part of its assets, or sell or assign with or without recourse any
Receivables (other than pursuant hereto), or permit any subsidiary to do any of
the foregoing.
(h) Permitted Debt. Incur any debt or other liability except for (a) debt
of the Seller in favor of the Company which is evidenced by the promissory note
of the Seller delivered pursuant to the Sale Agreement containing the following
terms: (i) a fixed date for the payment of principal and interest which date
shall be no earlier than one year and one day after the last day on which the
Net Investment is greater than zero; (ii) the obligations under such promissory
note shall be subordinated to all obligations of the Seller to the Buyer and no
payments shall be permitted to be made under such promissory note until the
Buyer has no remaining enforceable claims against the Seller (other than
inchoate indemnity obligations and, if the Net Investment is not zero, claims to
the Buyer's Allocation of Collections in the event that any written-off
Receivables ultimately are collected), provided that payments (including
prepayments) of principal and interest may be made if, after giving effect to
such payment, no Termination Event or Potential Termination Event would occur or
be continuing; and (iii) the obligations of the Seller under such promissory
note shall not constitute a claim against the Seller in the event the Seller has
insufficient funds to satisfy the obligation unless all obligations of the
Seller to the Buyer have been paid in full and any period during which a trustee
or
61
receiver of the Seller or the Seller's assets could recover any payments made to
the Buyer hereunder has expired, (b) obligations in connection with operating
expenses arising in the ordinary course of its business as well as statutorily
imposed joint and several liability, including, but not limited to such
statutorily imposed joint and several liability relating to income taxes and
ERISA obligations and (c) any liability arising under this Agreement or any of
the agreements permitted under clause (i) below.
(i) Other Agreements. Not enter into or be a party to any agreement or
instrument other than agreements with the Company covering the lease of its
offices, the allocation of its overhead and the provision for management
expenses, agreements covering insurance, this Agreement, the Sale Agreement, or
any other agreement referred to herein or contemplated hereby, amend, modify or
waive any provision in any thereof (except as permitted by this Agreement), or
give any approval or consent or permission provided for in any thereof without
the prior written consent of the Buyer (which consent will not be unreasonably
withheld); provided, however, that each such agreement shall contain an
undertaking from each Person who enters into any such agreement with the Seller
that such Person will not institute, or join with any other Person in
instituting, against the Seller any proceeding of the type referred to in
Section 11.19.
(j) Other Business. Without the prior written consent of the Buyer, not
engage in any business or enterprise or enter into any transaction other than as
contemplated by this Agreement and the Sale Agreement.
9.03 Affirmative Covenants of the Servicer. In addition to its other
covenants contained herein or made pursuant hereto, the Servicer covenants to
the Buyer as follows:
(a) Notice of Termination Event. Promptly upon becoming aware of any
Termination Event or Potential Termination Event, the Servicer shall give the
Buyer notice thereof, together with a written statement of a Responsible Officer
setting forth the details thereof and any action with respect thereto taken or
contemplated to be taken by the Servicer.
(b) Notice of Material Adverse Change. Promptly upon becoming aware
thereof, the Servicer shall give the Buyer notice of any material adverse change
in the business, operations or financial condition of the Servicer which could
affect adversely the collectibility of the Purchased Receivables or the ability
to service the Purchased Receivables. In order to verify
62
compliance with this Section 9.03(b), the Servicer shall furnish the following
to the Buyer:
(i) as soon as practicable and in any event within 60 days following
the close of each fiscal quarter, excluding the last fiscal quarter, of
each fiscal year of the Servicer during the term of this Agreement, an
unaudited consolidated balance sheet of the Servicer as at the end of such
quarter and unaudited consolidated statements of income and cash flows of
the Servicer for such quarter and for the fiscal year through such quarter,
setting forth in comparative form the corresponding figures for the
corresponding quarter of the preceding fiscal year, all in reasonable
detail and certified by a Financial Officer of the Servicer, subject to (A)
adjustments of the type which would occur as a result of a year-end audit
and (B) the absence of notes, as having been prepared in accordance with
GAAP; and
(ii) as soon as practicable and in any event within 100 days after the
close of each fiscal year of the Servicer during the term of this
Agreement, a consolidated balance sheet of the Servicer as at the close of
such fiscal year and consolidated statements of income and cash flows of
the Servicer for such fiscal year, setting forth in comparative form the
corresponding figures for the preceding fiscal year, all in reasonable
detail and certified (with respect to the consolidated financial
statements) by independent certified public accountants of recognized
standing selected by the Servicer and satisfactory to the Buyer, whose
certificate or opinion accompanying such financial statements shall not
contain any qualification, exception or scope limitation not satisfactory
to the Buyer.
63
(c) Preservation of Corporate Existence. The Servicer shall preserve and
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified in good
standing as a foreign corporation in each jurisdiction where the failure to
preserve and maintain such existence, rights, franchises, privileges and
qualification could materially adversely affect (i) the interests of the Buyer
hereunder or (ii) the ability of the Servicer to perform its obligations
hereunder.
(d) Compliance with Laws. The Servicer shall comply in all material
respects with all Laws applicable to the Servicer, its business and properties,
and the Purchased Receivables.
(e) Enforceability of Obligations. The Servicer shall ensure that, with
respect to each Purchased Receivable, the obligation of any related Obligor to
pay the unpaid balance of such Purchased Receivable in accordance with the terms
of the related Contract remains legal, valid, binding and enforceable against
such Obligor, except (i) as otherwise permitted by Section 6.06 hereof, (ii) as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws which may be applied in the
event of the bankruptcy or insolvency of such Obligor, and (iii) as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(f) Books and Records. The Servicer shall maintain and implement
administrative and operating procedures (including, without limitation, the
ability to recreate Records evidencing the Purchased Receivables in the event of
the destruction of the originals thereof), and keep and maintain all documents,
books, Records and other information reasonably necessary or advisable for the
collection of all Purchased Receivables (including, without limitation, Records
adequate to permit the identification of all Collections and adjustments to each
existing Purchased Receivable) at its Chief Executive Office, except as provided
in Section 6.03 hereof.
(g) Fulfillment of Obligations. The Servicer will duly observe and perform,
or cause to be observed or performed, all obligations and undertakings on its
part to be observed and performed under or in connection with the Purchased
Receivables, and, subject to Section 6.06, will do nothing to impair the rights,
title and interest of the Buyer in and to its Participation Interest in the
Purchased Receivables.
64
(h) Customer List. The Servicer shall at all times maintain a current list
(which may be stored on magnetic tapes or disks) of all Obligors under Contracts
related to Purchased Receivables, including the name, address, telephone number
and account number of each such Obligor. The Servicer shall deliver or cause to
be delivered a copy of such list to the Buyer as soon as practicable following
the Buyer's request.
(i) Copies of Reports, Filings, Opinions, etc.
(1) Together with each Settlement Statement required to be delivered
pursuant to Section 5.01, the Servicer shall prepare and forward to the
Buyer (i) a report in substantially the form of Exhibit E hereto, relating
to the Receivables Pool, as of the close of business on the last day of the
Accounting Period most recently completed, and (ii) a listing by Obligor of
all Purchased Receivables together with an aging of such Purchased
Receivables, in such detail as the Buyer may reasonably request, as of the
last day of the most recently completed Accounting Period.
(2) Upon the request of the Buyer not more often than annually, the
Servicer shall furnish to the Buyer an opinion of counsel who shall be
satisfactory to the Buyer with respect to the perfection of the Buyer's
right, title and interest in the Receivables Pool and all Collections with
respect thereto against all Persons whomsoever.
(3) Simultaneously with the delivery of the Servicer's annual
financial statements pursuant to Section 9.03(b)(ii) for each fiscal year
of the Servicer, the Servicer shall, at the Servicer's expense, cause a
firm of nationally recognized independent certified public accountants (who
may render other services to the Servicer or the Seller) to furnish a
report to the Buyer and the Referral Agent to the effect that they have
applied certain procedures agreed upon with the Servicer and Buyer and
examined certain documents and records relating to the servicing of the
Receivables under this Agreement and that, based upon such agreed-upon
procedures, nothing has come to the attention of such accountants that
caused them to believe that the servicing (including, without limitation,
the allocation of the Collections) has not been conducted in compliance
with the terms and conditions of Article V and Section 6.08 of this
65
Agreement and such predecessor agreement, except for such exceptions as
they believe to be immaterial and such other exceptions as shall be set
forth in such statement; and in addition, each report shall set forth the
agreed upon procedures performed; provided that such examinations and
reports may be combined with the examinations and reports required by
Section 9.01(i)(3).
(j) Litigation. As soon as possible, and in any event within three (3)
Business Days of the Servicer's knowledge thereof, the Servicer shall give the
Buyer notice of (i) any litigation, investigation or proceeding to which the
Servicer is a party or which could have a material adverse effect on the
business, operations, property or financial condition of the Servicer or impair
the ability of the Servicer to perform its obligations under this Agreement and
(ii) any material adverse development in previously disclosed litigation.
(k) Total Systems Failure. The Servicer shall promptly notify the Buyer of
any total systems failure and to advise the Buyer of the estimated time required
to remedy such total systems failure and of the estimated date on which a
Settlement Statement can be delivered. Until a total systems failure is
remedied, the Servicer shall (i) furnish to the Buyer such periodic status
reports and other information relating to such total systems failure as the
Buyer may reasonably request and (ii) promptly notify the Buyer if the Servicer
believes that such total systems failure cannot be remedied by the estimated
date, which notice shall include a description of the circumstances which gave
rise to such delay, the action proposed to be taken in response thereto, and a
revised estimate of the date on which a Settlement Statement can be delivered.
The Servicer will promptly notify the Buyer when a total systems failure has
been remedied.
(l) Notice of Change. The Servicer shall give the Buyer sixty (60) days'
prior written notice of any change in its jurisdiction of incorporation, name,
identity or corporate structure if, as a result of such change, the applicable
provisions of the Revised UCC Article 9 of any applicable jurisdiction or other
applicable Laws would require the filing of any amendment of any previously
filed financing statement or continuation statement or of any new financing
statement. The Servicer will at all times maintain its Chief Executive Office
within a jurisdiction in the United States in which Revised UCC Article 9 is in
effect.
66
(m) Further Information. The Servicer will furnish or cause to be furnished
to the Buyer such other information, as promptly as practicable, and in such
form and detail, as the Buyer may reasonably request.
(n) Administrative and Operating Procedures. The Servicer shall maintain
and implement administrative and operating procedures adequate to permit the
identification of the Receivables Pool and all collections and adjustments
attributable to such Receivables Pool.
(o) Certificates of Title.
(1) If any amount payable under or in connection with any Purchased
Receivable shall be or become evidenced by any promissory note, chattel
paper or other instrument, such note, chattel paper or instrument shall be
duly endorsed in a manner satisfactory to the Buyer and delivered to the
Buyer or its agent.
(2) The Servicer shall deliver to the Buyer any certificate of title
or other evidence of ownership issued by the United States or any state or
any political subdivision thereof relating to any chattel held as security
for any amount payable under or in connection with any Purchased
Receivable, with evidence of perfection of the security interest in such
property noted thereon, if such notation is required under the laws of the
jurisdiction in which such property is located in order to perfect a
security interest in such property.
(3) If the Contract relating to any Purchased Receivable requires the
related Obligor to maintain insurance upon the chattel security relating to
such Contract, the Servicer shall deliver to the Buyer all documents or
certificates relating to such insurance.
(4) The Servicer shall deliver to the Buyer any other document
required by the terms of the related Contracts as a condition to the
enforcement thereof.
67
(p) Compliance with Sale Agreement. The Company shall comply with its
obligations under the Sale Agreement for the benefit of the Buyer.
(q) Paying Agent. The Servicer shall cause all Collections receivedby a
Paying Agent from Obligors to be deposited in the Permitted Lockboxes within two
(2) Business Days from the date of receipt of such Collections by the Paying
Agent unless it is impossible to allocate the monies received by the Paying
Agent between Collections and other amounts within such period, in which case
the Servicer shall cause such Collections to be deposited in the Permitted
Lockboxes as promptly as possible.
9.04 Negative Covenants of the Servicer. The Servicer covenants that
it will not, without the prior written consent of the Buyer:
(a) No Rescissions or Modifications. Rescind or cancel any Purchased
Receivable or related Contract or modify any terms or provisions thereof, except
in accordance with the Credit and Collection Policy or otherwise with the prior
written consent of the Buyer.
(b) No Liens. Cause any of the Purchased Receivables to be sold, pledged,
assigned or transferred or to be subject to a Lien, other than the sale and
assignment of the Participation Interest therein to the Buyer and the Liens
created in connection with the transactions contemplated by this Agreement and
the Program Support Agreements and other Permitted Liens, nor will it permit any
of the accounts into which any Paying Agent may deposit Collections to be
subject to any Lien, other than Permitted Liens.
(c) No Changes. Change its name, identity or corporate structure in any
manner which would, could or might make any financing statement or continuation
statement filed in connection with this Agreement or the Sale Agreement or the
transactions contemplated hereby or thereby seriously misleading within the
meaning of Revised UCC Article 9 or other applicable Laws unless it shall have
given the Buyer at least sixty (60) days' prior written notice thereof.
68
ARTICLE X
TERMINATION
-----------
10.01 Termination Events. A "Termination Event" shall mean the
occurrence and continuance of one or more of the following events or conditions:
(a) either the Seller or Servicer, as the case may be, shall fail to remit
or fail to cause to be remitted to the Buyer on any Settlement Date any
Collections or other amounts required to be remitted to the Buyer, on such
Settlement Date; or
(b) the Seller or the Company shall fail to deposit or pay, or fail to
cause to be deposited or paid, when due any other amount due hereunder or under
the Sale Agreement; or
(c) any representation, warranty, certification or statement made by the
Seller or the Company under this Agreement or in any agreement, certificate,
report, appendix, schedule or document furnished by or on behalf of the Seller
or the Company to the Buyer pursuant to or in connection with this Agreement
(including, without limitation, the Sale Agreement) shall prove to have been
false or misleading in any respect material to this Agreement or the
transactions contemplated hereby as of the time made or deemed made (including
by omission of material information necessary to make such representation,
warranty, certification or statement not misleading); provided, however, that
the events described in this Section 10.01(c) shall not constitute a Termination
Event if cured within 20 days of discovery of the false or misleading nature,
but only if (i) the event described in this Section 10.01(c) is capable of being
cured and (ii) the cure period will not have any material adverse effect on the
Buyer; or
(d) the Seller, the Company or the Servicer shall fail to obtain the prior
consent of the Buyer to any action or provision as to which such consent is
required by the terms of this Agreement or the Sale Agreement; or
69
(e) the Seller, the Company or the Servicer shall default or fail in the
performance or observance of any other covenant, agreement or duty applicable to
it contained herein or in the Sale Agreement and such default or failure shall
continue for twenty (20) days after either (i) any Responsible Officer of the
Seller or the Company becomes aware thereof or (ii) written notice thereof to
the Seller by the Buyer; or
(f) a default shall have occurred and be continuing under any instrument or
agreement evidencing, securing or providing for the issuance of indebtedness for
borrowed money of, or guaranteed by, the Seller, the Company or any Affiliate
thereof, and in an amount equal to or in excess of $5,000,000 in the case of the
Company or any Affiliate thereof other than the Seller, which default permits
acceleration of the maturity of such indebtedness; or
(g) a Permitted Lockbox Bank shall default or fail in the performance or
observance of any agreement or duty applicable to it under the Lockbox Servicing
Agreement executed by it and such default or failure shall continue for two (2)
Business Days after notice thereof to such Permitted Lockbox Bank and within
such period another Permitted Lockbox with another Permitted Lockbox Bank is not
established by the Seller, if so requested by the Buyer; or
(h) litigation (including, without limitation, derivative actions),
arbitration, governmental proceedings or actions pursuant to or brought to
enforce any Law is pending against the Seller, the Company or any Affiliate
thereof which in the reasonable opinion of the Buyer is likely to (i) adversely
affect the financial position or business of the Seller or impair the ability of
the Seller to perform its obligations under this Agreement or the Sale
Agreement, or (ii) materially adversely affect the financial position or
business of the Company or impair the ability of the Company to perform its
obligations under this Agreement or the Sale Agreement; or
70
(i) there shall have occurred any event which materially adversely affects
the collectibility of a material amount of the Purchased Receivables or there
shall have occurred any other event which materially adversely affects the
ability of the Servicer to collect the Purchased Receivables or the ability of
the Servicer to perform hereunder; or
(j) an Event of Bankruptcy shall occur with respect to (i) the Seller or
the Company, or (ii) one or more Affiliates of the Seller or the Company which
could have a material adverse effect on the business, financial condition or
operations of the Seller or the Company; provided that, in the case of an
involuntary proceeding against any Company Entity, the same shall remain
undismissed for sixty (60) days thereafter; or
(k) the Buyer or the Receivables Pool shall be deemed to have become an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended; or
(l) the average Rate of Collections for any three consecutive Accounting
Periods shall be less than 40%; or
(m) the Sale Agreement ceases to be in full force and effect, or ceases to
evidence the transfer by the Company to the Seller of all Purchased Receivables;
or
(n) the ability of the Seller to transfer undivided interests in the
Purchased Receivables hereunder or the ability of the Company to transfer
Purchased Receivables under the Sale Agreement shall have been adversely
affected by any action of a regulatory authority having jurisdiction over the
Seller or the Company, as the case may be; or
(o) this Agreement or the Certificate of Participation, or a combination
thereof, shall for any reason neither (1) evidence the transfer to the Buyer (or
its assignees or transferees) of legal and equitable right, title and interest
to, and ownership of, an undivided percentage
71
ownership interest in the Purchased Receivables and Collections with respect
thereto to the extent of the Participation Interest, nor (2) create a valid and
perfected first priority security interest (as defined in Revised UCC Article 9)
in favor of the Buyer in the Purchased Receivables and Collections with respect
thereto; or
(p) (i) any Person or two or more Persons acting in concert, other than the
▇▇▇▇ Family, shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 30% or more of the outstanding shares of the voting
capital stock of the Company having the power (without the occurrence of a
contingency) to elect the Board of Directors of the Company ("Volt Voting
Stock"), unless the ▇▇▇▇ Family also beneficially owns, in the aggregate, 30% or
more of the outstanding shares of Volt Voting Stock; or (ii) as of any date, a
majority of the Board of Directors of the Company consists of individuals who
were not either (A) directors of the Company as of the corresponding date of the
previous year, (B) selected or nominated to become directors by the Board of
Directors of the Company of which a majority consisted of individuals described
in clause (A), or (C) selected or nominated to become directors by the Board of
Directors of the Company of which a majority consisted of individuals described
in clause (A) and individuals described in clause (B); or
(q) the average Default Ratio for any three consecutive Accounting Periods
is greater than 4%; or
(r) the Company fails to maintain a long-term debt rating of at least "B"
from Fitch or at least the equivalent thereof from another nationally recognized
statistical rating organization.
10.02 Consequences of a Termination Event.
72
(a) If a Termination Event specified in Section 10.01 hereof shall occur
and be continuing, the Buyer may, by notice to the Seller, terminate its
obligation to purchase the Participation Interest or make Reinvestments
hereunder; provided, that in the case of a Termination Event under clause (i) of
Section 10.01(j), such obligation of the Buyer hereunder shall be automatically
terminated without any action on the part of the Buyer. Any such termination
shall reduce the Maximum Net Investment in effect from time to time thereafter
to the amount of the aggregate Net Investment at such time.
(b) Upon any termination of the Buyer's obligation to purchase the
Participation Interest and to make Reinvestments pursuant to this Section 10.02,
the Buyer shall have, in addition to all rights and remedies under this
Agreement or otherwise, all other rights and remedies provided under the Uniform
Commercial Code of the applicable jurisdiction and under other applicable Laws,
which rights shall be cumulative.
(c) The parties hereto acknowledge that this Agreement is, and is intended
to be, a contract to extend financial accommodations to the Seller within the
meaning of Section 365(e)(2)(B) of the Federal Bankruptcy Code (11 U.S.C.
ss.365(e)(2)(B)) (or any amended or successor provision thereof or any amended
or successor code).
ARTICLE XI
MISCELLANEOUS
-------------
11.01 Expenses. The Seller agrees, upon receipt of a written invoice,
to pay or cause to be paid, and to save the Buyer and the Referral Agent
harmless against liability for the payment of, all reasonable out-of-pocket
expenses (including, without limitation, attorneys', accountant's and other
third parties' fees and expenses, any filing fees, stamp taxes, expenses of
litigation or preparation therefor, audit expenses and expenses incurred by
officers or employees of the Buyer, in each case to the extent reasonable, but
excluding salaries and similar overhead costs of the Buyer and the Referral
Agent which are incurred notwithstanding the execution and performance of this
Agreement) incurred by or on behalf of the Buyer and the Referral Agent from
time to time (a) arising in connection with the development, audit, delivery,
collection, preparation, printing, execution, performance, administration and
interpretation of the Purchase Documents, or transactions undertaken, pursuant
to or in connection herewith or therewith (including, without limitation, the
perfection or protection of
73
the Buyer's Participation Interest in the Purchased Receivables), (b) relating
to any amendments, waivers or consents to the Purchase Documents requested by
the Seller or the Company, (c) arising in connection with the Buyer's or its
agent's enforcement or preservation of rights under the Purchase Documents, or
(d) arising in connection with any litigation or preparation for litigation
involving the Purchase Documents, which, including all amounts payable under
Section 11.03, shall be referred to in this Agreement as "Transaction Costs".
11.02 Payments. All payments to be made to the Buyer hereunder shall
be payable at 11:00 a.m., Pittsburgh time, on the day when due, at the Buyer's
Office in Dollars in immediately available funds. To the extent permitted by
Law, any amounts due from the Seller hereunder which are not paid when due shall
bear interest for each day from the day due until paid, payable on demand, at a
rate per annum equal to two percent (2.00%) above the Reference Rate.
11.03 Indemnity for Taxes, Reserves and Expenses. If after the date
hereof, the adoption of any Law or guideline or any amendment or change in the
administration, interpretation or application of any existing or future Law or
guideline by any Official Body charged with the administration, interpretation
or application thereof, or the compliance with any request or directive of any
Official Body (whether or not having the force of Law):
(a) subjects an Affected Party to any tax or changes the basis of taxation
with respect to the Purchase Documents, the Participation Interest, the
Purchased Receivables or payments of amounts due hereunder or under the
Purchased Receivables (including, without limitation, any sales, gross receipts,
general corporate, personal property, privilege or license taxes (unless such
tax results solely from the failure to file or keep current any certification or
documentation required to qualify for any exemption from or reduction of any
such tax to which such Affected Party would otherwise be entitled), and
including claims, losses and liabilities arising from any failure to pay or
delay in paying any such tax (unless such failure or delay results solely from
such Affected Party's gross negligence or willful misconduct), but excluding
Income Taxes incurred by such Affected Party arising out of or as a result of
this Agreement or the ownership of the Participation Interest or in respect of
any Receivable), or
74
(b) imposes, modifies or deems applicable any reserve (including, without
limitation, any reserve imposed by the Board of Governors of the Federal Reserve
System), special deposit or similar requirement against assets held by, credit
extended by, deposits with or for the account of, or other acquisition of funds
by, an Affected Party, or
(c) shall change the amount of capital maintained or requested or directed
to be maintained by an Affected Party, or
(d) imposes upon an Affected Party any other condition or expense
(including, without limitation, (i) loss of margin and (ii) attorneys' fees and
expenses, expenses incurred by officers or employees of the Referral Agent's
credit recovery group (or any successor thereto) and expenses of litigation or
preparation therefor in contesting any of the foregoing), in each case only to
the extent such expenses are reasonable, with respect to the Purchase Documents,
the Participation Interest, the Purchased Receivables or the purchase,
maintenance or funding of the purchase of the Participation Interest in any
Receivables by an Affected Party,
and the result of any of the foregoing is to increase the cost to, reduce the
income receivable by, reduce the rate of return on capital, or impose any
expense (including loss of margin) upon, an Affected Party with respect to this
Agreement, the obligations hereunder or the funding of purchases hereunder, the
Buyer may notify the Seller of the amount of such increase, reduction, or
imposition, and the Seller shall pay to the Buyer the amount so notified to the
Seller by the Buyer (which determination shall be conclusive) necessary to
compensate the Buyer for such increase, reduction or imposition; provided, that
the Seller and any other persons who from time to time sell receivables or
interests therein to the Buyer ("Other Sellers") each shall be liable for such
amount ratably in accordance with the usage under their respective facilities;
provided, further, that (i) if any portion of such amount is attributable to the
Seller and not attributable to any Other Seller, the Seller shall be solely
liable for such portion, and (ii) if any portion of such amount is attributable
to any Other Seller and not attributable to the Seller in any way, the Seller
shall not be liable for any of such portion. The Buyer's determination with
respect to the allocation of such amounts among the Seller and Other Sellers
shall be binding on the Seller. Such amounts shall be due and payable by the
Seller to such Affected Party ten (10) Business Days after such notice is given.
75
11.04 Indemnity.
(a) The Seller agrees to indemnify, defend and save harmless the Buyer, the
Referral Agent, their respective directors, officers, shareholders, employees,
agents and each legal entity, if any, who controls the Buyer or the Referral
Agent (each, an "Indemnified Party"), forthwith on demand, from and against any
and all losses, claims, damages, liabilities, costs and expenses (including,
without limitation, all attorneys' fees and expenses, expenses incurred by their
respective credit recovery groups (or any successors thereto) and expenses of
settlement, litigation or preparation therefor) which the Buyer may incur or
which may be asserted against the Buyer by any Person (including, without
limitation, the Company or any Obligor or any other Person whether on its own
behalf or derivatively on behalf of the Seller) (all of the foregoing being
collectively referred to as "Losses"), excluding, however, (a) Losses to the
extent resulting from the gross negligence or willful misconduct on the part of
such Indemnified Party, (b) recourse (except as otherwise provided in this
Agreement) for Defaulted Receivables, (c) any Losses with respect to any tax,
reserve, capital charge or expense related thereto (indemnification with respect
to such Losses being provided as and to the extent provided in Section 11.03),
or (d) Losses to the extent that such Losses resulted from an act or omission of
the Servicer, if the Servicer is not the Company or an Affiliate of the Company
arising from or incurred in connection with (i) any breach of a representation,
warranty or covenant by the Seller or the Company made or deemed made hereunder
or in connection herewith or the transactions contemplated herewith, or (ii) any
suit, action, claim, proceeding or governmental investigation, pending or
threatened, whether based on statute, regulation or order, on tort, on contract
or otherwise, before any local, state or federal court, arbitrator or
administrative, governmental or regulatory body, which arises out of or relates
to the Purchase Documents, the Participation Interest in the Purchased
Receivables or related Contracts, or the use of the proceeds of the sale of the
Participation Interest in the Receivables pursuant hereto or the transactions
contemplated hereby (all Losses, after giving effect to the limitations set
forth in clauses (a) through (d) above, being hereinafter referred to as
"Indemnified Amounts") .
(b) Without limitation of the generality of Section 11.04(a), the Seller
shall pay on demand to each Indemnified Party any and all amounts necessary to
indemnify such
76
Indemnified Party from and against any and all Indemnified Amounts relating to
or resulting from any of the following:
(i) the creation of the Participation Interest in any Purchased
Receivable which is not at the date of the creation of such Participation
Interest an Eligible Receivable;
(ii) reliance on any representation or warranty made or deemed made by
the Seller or the Company (or any of its respective Responsible Officers)
or any statement made by any Responsible Officer of the Seller or the
Company under or in connection with this Agreement which shall have been
incorrect in any material respect when made;
(iii) the failure by the Seller or the Company to comply with any
applicable law, rule or regulation;
(iv) the failure to vest in the Buyer, in accordance with the terms of
this Agreement, an undivided percentage interest, to the extent of the
Participation Interest, in the Purchased Receivables and Collections in
respect thereof free and clear of any Lien except as provided in this
Agreement;
(v) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under Revised UCC
Article 9 of any applicable jurisdiction or under any other applicable law
with respect to the assignment of the Participation Interest;
(vi) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any Purchased
Receivable (including, without limitation, a defense based on such
Purchased Receivable or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in accordance
with its terms), or any other claim resulting from the sale of the
merchandise or service related to such Purchased Receivable or the
furnishing or failure to furnish such merchandise or services;
(vii) any failure of the Seller or the Company to perform its duties
or obligations in accordance with the provisions of this Agreement; or
77
(viii) any products liability claim arising out of or in connection
with merchandise, insurance or services which are the subject of any
Contract.
(c) Promptly upon receipt by any Indemnified Party hereunder of notice of
the commencement of any suit, action, claim, proceeding or governmental
investigation (an "Action"), such Indemnified Party shall, if a claim in respect
thereof is to be made against the Seller hereunder, notify the Seller in writing
of the commencement thereof. The Seller may participate in the defense of any
such Action at its expense, and no settlement thereof shall be made without the
approval of the Seller and the Indemnified Party. The approval of the Seller
will not be unreasonably withheld or delayed. In case any Action shall be
brought against any Indemnified Party, the Seller shall be entitled to
participate in and, to the extent that it shall wish, to assume the defense
thereof, with counsel satisfactory to the Indemnified Party, and after notice
from the Seller to such Indemnified Party of its election so to assume the
defense thereof, the Seller shall not be liable to such Indemnified Party for
any legal or other expenses subsequently incurred by such Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation. In any such Action, any Indemnified Party shall have the right to
retain its own counsel, but the fees and expenses of such counsel shall be at
the expense of such Indemnified Party unless (i) the Seller and such Indemnified
Party shall have mutually agreed in writing to the retention of such counsel or
(ii) the named parties to any such Action (including any impleaded parties)
include both the Seller and such Indemnified Party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the Seller shall not, in
conjunction with any Action or related Actions in the same jurisdiction, be
liable for the fees and reasonable expenses of more than one separate firm in
addition to any local counsel for all such Indemnified Parties, unless (i) the
Seller and such Indemnified Parties shall have mutually agreed in writing to the
retention of separate counsel or (ii) the named parties to any such Action
(including any impleaded parties) include such Indemnified Parties and
representation of such Indemnified Parties by the same counsel would be
inappropriate due to actual or potential differing interests between them, and
that all such fees and reasonable expenses shall be reimbursed as they are
incurred.
78
(d) The indemnity contained in this Section 11.04 shall survive the
termination of this Agreement.
11.05 Holidays. Except as may be provided in this Agreement to the
contrary, if any payment due hereunder shall be due on a day which is not a
Business Day, such payment shall instead be due the next following Business Day.
11.06 Records. All amounts calculated or due hereunder shall be
determined from the records of the Buyer, which determinations shall be
conclusive absent manifest error.
11.07 Amendments and Waivers. The Buyer, the Company and the Seller
may from time to time enter into agreements amending, modifying or supplementing
this Agreement, and the Buyer, in its sole discretion, may from time to time
grant waivers of the provisions of this Agreement or consents to a departure
from the due performance of the obligations of the Seller or the Company under
this Agreement. Any such agreement, waiver or consent must be in writing and
shall be effective only to the extent specifically set forth in such writing.
Any waiver of any provision hereof, and any consent to a departure by the Seller
from any of the terms of this Agreement, shall be effective only in the specific
instance and for the specific purpose for which given and if such amendment,
waiver or departure would have a material adverse effect on the rights or
obligations the Referral Agent or any Affected Party, such amendment, departure
or waiver shall not be effective until consented to by the affected party.
11.08 No Implied Waiver; Cumulative Remedies. No course of dealing and
no delay or failure of the Buyer in exercising any right, power or privilege
under the Purchase Documents shall affect any other or future exercise thereof
or the exercise of any other right, power or privilege; nor shall any single or
partial exercise of any such right, power or privilege or any abandonment or
discontinuance of steps to enforce such a right, power or privilege preclude any
further exercise thereof or of any other right, power or privilege. The rights
and remedies of the Buyer under the Purchase Documents are cumulative and not
exclusive of any rights or remedies which the Buyer would otherwise have.
11.09 No Discharge. The obligations of the Seller and the Company
under the Purchase Documents shall be absolute and unconditional and shall
remain in full force and effect without regard to, and shall not be released,
discharged or in any way affected by (a) any exercise or nonexercise of any
79
right, remedy, power or privilege under or in respect of the Purchase Documents
or applicable Law, including, without limitation, any failure to set-off or
release in whole or in part by the Buyer of any balance of any deposit account
or credit on its books in favor of the Seller or the Company or any waiver,
consent, extension, indulgence or other action or inaction in respect of any
thereof, or (b) any other act or thing or omission or delay to do any other act
or thing which would operate as a discharge of the Seller or the Company as a
matter of Law.
11.10 Notices. All notices under Section 10.02 hereof shall be given
to the Seller: (i) by telephone (confirmed by first-class mail) or facsimile
(and which shall be effective when given by telephone or sent by facsimile, if
given or sent on a Business Day; otherwise, on the next Business Day); or (ii)
by first-class mail (which shall be effective three Business Days after being
deposited in the mail, if deposited on a Business Day; otherwise, four Business
Days thereafter); or (iii) by overnight express mail or overnight courier (which
shall be effective one Business Day after being delivered to the courier, if
delivered on a Business Day; otherwise, two Business Days); and in all cases
with charges prepaid. All other notices, requests, demands, directions and other
communications (collectively "notices") under the provisions of this Agreement
shall be in writing (including telexed or facsimile communication) unless
otherwise expressly permitted hereunder and shall be sent by first-class mail,
express mail, or by facsimile, in all cases with charges prepaid, and any such
properly given notice shall be effective when received. All notices shall be
sent to the applicable party at the address stated on the signature page hereof
or in accordance with the last unrevoked written direction from such party to
the other parties hereto.
11.11 Severability. The provisions of this Agreement are intended to
be severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction, such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
of such provision in any other jurisdiction or the remaining provisions hereof
in any jurisdiction.
11.12 Governing Law. THIS AGREEMENT AND THE CERTIFICATES OF
PARTICIPATION SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO ITS CONFLICTS OF LAWS RULES (OTHER THAN
SECTION 5-1401
80
OF NEW YORK'S GENERAL OBLIGATIONS LAW). The Seller hereby consents to the
jurisdiction of the courts of the State of New York and the courts of the United
States located in the State of New York for the purpose of adjudicating any
claim or controversy arising in connection with this Agreement, and for such
purpose, to the extent it may lawfully do so, waives any objection to such
jurisdiction or to venue therein.
11.13 Prior Understandings. This Agreement sets forth the entire
understanding of the parties relating to the subject matter hereof, and
supersedes all prior understandings and agreements, whether written or oral,
except as specifically referred to herein.
11.14 Survival. All representations and warranties of the Seller and
the Company contained herein or made in connection herewith or in connection
with the Certificate of Participation shall survive the making thereof, and
shall not be waived by the execution and delivery of this Agreement or the
Certificate of Participation, any investigation by the Buyer, the purchase,
repurchase or payment of the Participation Interest in any Purchased Receivable,
or any other event or condition whatsoever (other than a written waiver
complying with Section 11.07 hereof). All obligations of the Seller to make
payments to, or to indemnify, the Buyer or to repurchase the Participation
Interest in the Purchased Receivables from the Buyer shall survive the payment
of all Purchased Receivables, the termination of the Purchase Obligation and the
termination of all other obligations of the Seller hereunder and shall not be
affected by reason of an invalidity, illegality or irregularity of any Purchased
Receivable. The covenants and agreements contained in or given pursuant to this
Agreement (including, without limitation, those contained in Article IX) shall
continue in full force and effect until the termination of the Purchase
Obligation, liquidation of the Participation Interest in the Purchased
Receivables and discharge of all other obligations of the Seller and the Company
hereunder.
11.15 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts each
of which, when so executed, shall be deemed an original, but all such
counterparts shall constitute but one and the same instrument.
11.16 Set-Off. In case a Termination Event shall occur and be
continuing, the Buyer and, to the fullest extent permitted by Law, the holder of
any assignment of the Buyer's
81
rights hereunder (including without limitation each Affected Party), shall each
have the right, in addition to all other rights and remedies available to it,
without notice to the Seller, to set-off against and to appropriate and apply to
any amount owing by the Seller hereunder which has become due and payable, any
debt owing to, and any other funds held in any manner for the account of, the
Seller by the Buyer or by any holder of any assignment, including, without
limitation, all funds in all deposit accounts (whether time or demand, general
or special, provisionally credited or finally credited, or otherwise) now or
hereafter maintained by the Seller with the Buyer or any holder of any
assignment. Such right shall exist whether or not such debt owing to, or funds
held for the account of, the Seller is or are matured other than by operation of
this Section 11.16 and regardless of the existence or adequacy of any
collateral, guaranty or any other security, right or remedy available to the
Buyer or any holder. Nothing in this Agreement shall be deemed a waiver or
prohibition or restriction of the Buyer's or any holder's rights of set-off or
other rights under applicable Law.
11.17 Time of Essence. Time is of the essence in this Agreement.
11.18 Payments Set Aside. To the extent that the Seller, the Company
or any Obligor makes a payment to the Buyer or the Buyer exercises its rights of
set-off and such payment or set-off or any part thereof is subsequently
invalidated, declared to be fraudulent or preferential, set aside, recovered
from, disgorged by, or is required to be refunded, rescinded, returned, repaid
or otherwise restored to the Seller, the Company, such Obligor, a trustee, a
receiver or any other Person under any Law, including, without limitation, any
bankruptcy law, any state or federal law, common law or equitable cause, the
obligation or part thereof originally intended to be satisfied shall, to the
extent of any such restoration, be reinstated, revived and continued in full
force and effect as if such payment had not been made or such set-off had not
occurred. The provisions of this Section 11.18 shall survive the termination of
this Agreement.
11.19 No Petition. Each of the Seller and the Company agrees that it
will not institute against, or join any other Person in instituting against, the
Buyer any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding or other similar proceeding under the laws of the United States or
any state of the United States. The provisions
82
of this Section 11.19 shall survive the termination of this Agreement.
11.20 No Recourse. The obligations of the Buyer under this Agreement
are solely the corporate obligations of the Buyer. No recourse shall be had for
the payment of any amount owing in respect to this Agreement or for the payment
of any fee hereunder or for any other obligation or claim arising out of or
based upon this Agreement against GSS, against any stockholder, employee,
officer, director or incorporator of the Buyer or against the Referral Agent or
any stockholder, employee, officer, director, incorporator or affiliate thereof.
For purposes of this paragraph, the term "GSS" shall mean and include Global
Securitization Services, LLC and all Affiliates thereof and any employee,
officer, director, incorporator, shareholder or beneficial owner of any of them;
provided, however, that the Buyer shall not be considered to be an affiliate of
GSS or the Referral Agent.
11.21 Tax Treatment. It is the intention of the parties hereto that
for the purposes of all taxes, the transactions contemplated hereby shall be
treated as a loan by the Buyer to the Seller secured by the Receivables (the
"Intended Characterization"). Each party hereby agrees that it will report such
transactions for the purposes of all taxes, and otherwise will act for the
purposes of all taxes, in a manner consistent with the Intended
Characterization.
11.22 Assignment. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns.
No party may assign any of its rights or delegate any of its duties hereunder
without the prior written consent of the other parties hereto; provided that the
Buyer shall not be prohibited from making any assignment contemplated in or
permitted by a Liquidity Agreement or a Program Support Agreement.
IN WITNESS WHEREOF, the parties hereto, by their duly authorized
signatories, have executed and delivered this Agreement as of the date first
above written.
THREE RIVERS FUNDING CORPORATION
By:
-------------------------------------
Title:
----------------------------------
83
Address:
c/o Global Securitization Services, LLC
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy of all notices to:
Mellon Bank, N.A., as Referral Agent
One Mellon Bank Center - Room 0410
Pittsburgh, Pennsylvania 15258-0001
Attention: ▇▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
VOLT FUNDING CORP.
By:
-------------------------------------
Title:
----------------------------------
Address:
Volt Funding Corp.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
84
VOLT INFORMATION SCIENCES, INC.
By:
-------------------------------------
Title:
----------------------------------
Address:
Volt Information Sciences, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
85