EXHIBIT 10.14
[PREFCO/INVESTOR AGREEMENT]
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RECEIVABLES PURCHASE AGREEMENT
DATED AS OF JANUARY 31, 1997
AMONG
KOHL'S RECEIVABLES CORPORATION,
AS THE SELLER,
VARIOUS PURCHASERS,
AND
THE FIRST NATIONAL BANK OF CHICAGO,
AS AGENT
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TABLE OF CONTENTS
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ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES..................... 1
Section 1.1. Purchase Facility....................................... 1
Section 1.2. Making Incremental Purchases............................ 3
Section 1.3. Selection of Tranche Periods and
Discount Rates.......................................... 4
Section 1.4. Percentage Evidenced by Receivable
Interests............................................... 5
Section 1.5. Dividing or Combining Receivable
Interests............................................... 5
Section 1.6. Reinvestment Purchases and
Settlements............................................. 5
Section 1.7. Liquidation Settlement Procedures....................... 6
Section 1.8. Limited Recourse........................................ 7
Section 1.9. Discount; Payments and
Computations, Etc....................................... 8
Section 1.10. Maximum Aggregate Receivables
Interest; Grant of Security Interest.................... 9
Section 1.11. Non-Performing Investors................................ 9
Section 1.12. Characterization........................................ 9
Section 1.13. Seller's Extinguishment................................. 10
Section 1.14. Servicer Fee............................................ 10
ARTICLE II
LIQUIDITY FACILITY............................. 10
Section 2.1. Transfer to Investors................................... 10
Section 2.2. Transfer Price Reduction Discount....................... 11
Section 2.3. Payments to PREFCO...................................... 11
Section 2.4. Limitation on Commitment to
Purchase from PREFCO.................................... 11
Section 2.5. Defaulting Investors.................................... 11
Section 2.6. Representations of the Investors........................ 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES....................... 12
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Section 3.1. Seller Representations and Warranties............. 12
(a) Corporate Existence and Power.......................... 12
(b) No Conflict............................................ 13
(c) Governmental Authorization............................. 13
(d) Binding Effect......................................... 13
(e) Accuracy of Information................................ 13
(f) Use of Proceeds........................................ 13
(g) Title to Receivables; Perfection....................... 13
(h) Places of Business..................................... 14
(i) Collection Banks; etc.................................. 14
(j) Material Adverse Effect................................ 15
(k) Names.................................................. 15
(l) Actions, Suits......................................... 15
(m) Credit and Collection Policy........................... 15
(n) Payments to Originator................................. 15
(o) Ownership of the Seller................................ 15
(p) Not an Investment Company.............................. 15
(q) Purpose................................................ 15
(r) Net Receivables Balance................................ 15
Section 3.2. Investor Representations and
Warranties........................................ 16
(a) Existence and Power.................................... 16
(b) No Conflict............................................ 16
(c) Governmental Authorization............................. 16
(d) Binding Effect......................................... 16
ARTICLE IV
CONDITIONS OF PURCHASES......................... 16
Section 4.1. Conditions Precedent to Initial Purchase................ 16
Section 4.2. Conditions Precedent to Purchases and Reinvestments..... 16
ARTICLE V
COVENANTS.................................. 17
Section 5.1. Affirmative Covenants of Seller......................... 17
(a) Financial Reporting........................................ 17
(i) Annual Reporting................................... 17
(ii) Quarterly Reporting................................ 17
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(iii) Compliance Certificate............................ 18
(iv) Shareholders Statements and Reports............... 18
(v) S.E.C. Filings.................................... 18
(vi) Change in Credit and Collection Policy............ 18
(b) Notices.................................................... 18
(i) Termination Events, Servicer Defaults,
Potential
Termination Events and Potential Servicer
Defaults.......................................... 18
(ii) Judgment.......................................... 18
(c) Compliance with Laws....................................... 19
(d) Audits..................................................... 19
(e) Keeping and Marking of Records and Books................... 20
(f) Compliance with Contracts and Credit and Collection
Policy.....................................................
(g) Purchase of Receivables from the Originator................ 20
(h) Ownership Interest......................................... 20
(i) Payment to the Originator.................................. 21
(j) Performance and Enforcement of Sale Agreement and
Parent Demand Note......................................... 21
(k) Purchasers' Reliance....................................... 21
(l) Collections................................................ 23
(m) Minimum Net Worth.......................................... 23
(n) Parent Demand Note......................................... 24
Section 5.2. Negative Covenants of Seller......................... 24
(a) Name Change, Offices, Records and Books of Accounts........ 24
(b) Change in Payment Instructions to Obligors................. 24
(c) Modifications of Receivables and Contracts................. 25
(d) Sales, Liens, Etc.......................................... 25
(e) Nature of Business; Other Agreements; Other
Indebtedness............................................... 25
(f) Amendments to Sale Agreement............................... 26
(g) Amendments to Corporate Documents.......................... 26
(h) Merger..................................................... 26
(i) Restricted Junior Payments................................. 27
ARTICLE VI
ADMINISTRATION AND COLLECTION....................... 27
Section 6.1. Designation of Servicer................................ 27
Section 6.2. Duties of Servicer..................................... 27
Section 6.3. Collection Notices..................................... 29
Section 6.4. Responsibilities of the Seller......................... 29
Section 6.5. Reports................................................ 29
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ARTICLE VII
SERVICER DEFAULTS AND TERMINATION EVENTS.................. 30
Section 7.1. Servicer Defaults...................................... 30
Section 7.2. Termination Events..................................... 30
ARTICLE VIII
INDEMNIFICATION............................... 32
Section 8.1. Indemnities by the Seller.............................. 32
Section 8.2. Increased Costs and Reduced Return..................... 34
Section 8.3. Other Costs and Expenses............................... 35
ARTICLE IX
THE AGENT................................. 36
Section 9.1. Authorization and Action............................... 36
Section 9.2. Delegation of Duties................................... 37
Section 9.3. Exculpatory Provisions................................. 37
Section 9.4. Reliance by Agent...................................... 37
Section 9.5. Non-Reliance on Agent and Other
Purchasers............................................. 38
Section 9.6. Reimbursement and Indemnification...................... 38
Section 9.7. Agent in its Individual Capacity....................... 38
Section 9.8. Successor Agent........................................ 38
ARTICLE X
ASSIGNMENTS; PARTICIPATIONS........................ 39
Section 10.1. Assignments............................................ 39
Section 10.2. Participations......................................... 40
ARTICLE XI
MISCELLANEOUS............................. 40
Section 11.1. Waivers and Amendments.................................. 40
Section 11.2. Notices................................................. 41
Section 11.3. Ratable Payments........................................ 42
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Section 11.4. Protection of Ownership Interests of
the Purchasers.......................................... 42
Section 11.5. Confidentiality......................................... 43
Section 11.6. Bankruptcy Petition..................................... 44
Section 11.7. Limitation of Liability................................. 44
Section 11.8. CHOICE OF LAW........................................... 44
Section 11.9. CONSENT TO JURISDICTION................................. 44
Section 11.10. WAIVER OF JURY TRIAL.................................... 45
Section 11.11. Integration; Survival of Terms.......................... 45
Section 11.12. Counterparts; Severability.............................. 45
Section 11.13. First Chicago Roles..................................... 45
Section 11.14. Characterization........................................ 46
EXHIBIT I DEFINITIONS............................................... 49
EXHIBIT II CHIEF EXECUTIVE OFFICE OF THE SELLER;
LOCATIONS OF RECORDS; TRADE NAMES;
FEDERAL EMPLOYER IDENTIFICATION
NUMBER.................................................... 66
EXHIBIT III COLLECTION ACCOUNTS....................................... 67
EXHIBIT IV FORM OF COMPLIANCE CERTIFICATE............................ 68
EXHIBIT V FORM OF COLLECTION ACCOUNT
AGREEMENT................................................. 69
EXHIBIT VI CREDIT AND COLLECTION POLICY.............................. 73
EXHIBIT VII FORM OF CONTRACT(S)....................................... 74
EXHIBIT VIII FORM OF PERIODIC REPORT................................... 75
SCHEDULE A DOCUMENTS AND RELATED ITEMS TO BE
DELIVERED ON OR PRIOR TO THE INITIAL
PURCHASE.................................................. 76
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RECEIVABLES PURCHASE AGREEMENT
THIS RECEIVABLES PURCHASE AGREEMENT, dated as of January 31, 1997, is
entered into by and among KOHL'S RECEIVABLES CORPORATION, a Wisconsin
corporation (the "SELLER"), the INVESTORS (hereinafter defined), PREFERRED
RECEIVABLES FUNDING CORPORATION, a Delaware corporation ("PREFCO"), and THE
FIRST NATIONAL BANK OF CHICAGO, AS AGENT. Unless defined elsewhere herein,
capitalized terms used in this Agreement shall have the meanings assigned to
such terms in EXHIBIT I hereto.
PRELIMINARY STATEMENTS
The Seller desires to transfer and assign Receivable Interests to the
Purchasers from time to time.
PREFCO may, in its absolute and sole discretion, purchase Receivable
Interests from the Seller from time to time.
The Investors shall, at the request of the Seller, purchase Receivable
Interests from time to time. In addition, the Investors have agreed to
provide a liquidity facility to PREFCO.
The First National Bank of Chicago has been requested and is willing
to act as Agent on behalf of PREFCO and the Investors in accordance with
the terms hereof.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
ARTICLE I
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility.
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(a) Upon the terms and subject to the conditions hereof, the Seller
may, at its option, sell and assign Receivable Interests to the Agent for the
benefit of one or more of the Purchasers. From time to time during the period
from the date hereof to but not including the Facility Termination Date: PREFCO
may, at its option, instruct the Agent to purchase a particular Receivable
Interest on behalf of PREFCO, or if PREFCO does not purchase such Receivable
Interest, the Agent shall purchase such Receivable Interest on behalf of the
Investors. The Seller hereby
assigns, transfers and conveys to the Agent for the benefit of the relevant
Purchaser or Purchasers, and the Agent hereby acquires, all of the Seller's now
owned and existing and hereafter arising or acquired right, title and interest
in and to the Receivable Interests.
(b) The Seller may, upon at least five (5) days' notice to the Agent,
terminate in whole or reduce in part, ratably among the Investors, the unused
portion of the Purchase Limit; provided that each partial reduction of the
Purchase Limit shall be in an amount equal to $5,000,000 or an integral multiple
thereof.
(c) The Seller may, upon at least thirty (30) days' notice (or less,
if mutually agreed upon) to the Agent, request one or more increases in the
Purchase Limit in a minimum amount of $25,000,000 (or a larger integral multiple
of $1,000,000). If the Agent and all of the Investors agree to such increase,
such increase shall become effective on the Business Day on which all conditions
precedent to the amendment to this Agreement giving effect to such increase have
been satisfied. Notwithstanding anything to the contrary contained in Section
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8.3, the Seller shall not be obligated to reimburse the Agent and the Purchasers
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for more than $1,000 in expenses per amendment to this Agreement entered into to
increase the Purchase Limit in accordance with this Section 1.1(c).
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(d) The Seller may, by written notice to the Agent given not less
than 60 days nor more than 180 days prior to the Liquidity Termination Date as
in effect at the time of such notice (each such notice, an "EXTENSION REQUEST"),
request that the Liquidity Termination Date be extended for a period not to
exceed 360 days from the date of such Extension Request. The Agent shall
promptly provide copies of each Extension Request to the Purchasers. Provided
each of the Purchasers gives its written consent to an Extension Request on or
within 30 days after such Purchaser's receipt of a copy of such Extension
Request, the existing Liquidity Termination Date shall be extended to the date
specified in such written consent. The Seller acknowledges that any consent to
an Extension Request will be subject to each Purchaser's receipt of all
necessary credit approvals and must be in writing signed by all of the
Purchasers and acknowledged by the Agent. In the event that any Investor does
not give its written consent to an Extension Request:
(i) the Agent will notify the Seller and the remaining Purchasers
of such fact and will use its reasonable best efforts to find another
Investor or Eligible Person who is willing to accept an assignment of such
dissenting Investor's Commitment and Pro Rata Share of the Receivable
Interests pursuant to an Assignment Agreement,
(ii) not later than 10 Business Days prior to the existing Liquidity
Termination Date, the Agent or the Seller may nominate another Investor or
Eligible Person who is willing to accept an
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assignment of such dissenting Investor's Commitment and Pro Rata Share of
the Receivable Interests pursuant to an Assignment Agreement, and
(iii) if the Agent or the Seller is able to find another Investor or
Eligible Person who is willing to enter into an Assignment Agreement, the
dissenting Investor shall assign the same pursuant to an Assignment
Agreement effective as of the existing Liquidity Termination Date and
executed and delivered to the Agent and the Seller not later than 2
Business Days prior to the existing Liquidity Termination Date; provided
that the assigning Investor receives payment in full, pursuant to an
Assignment Agreement, of an amount equal to such assigning Investor's Pro
Rata Share of the Capital and Discount owing to the Investors and all
accrued but unpaid fees and other costs and expenses payable in respect of
its Pro Rata Share of the Receivable Interests, and
(iv) upon the Agent's receipt of an executed Assignment Agreement in
accordance with the preceding clause (iii), the Agent shall notify the
remaining Purchasers and the Seller that the Liquidity Termination Date
will be extended as per their above-described written consent, and the
Liquidity Termination Date shall be so extended.
Section 1.2. Making Incremental Purchases. The Seller shall provide
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the Agent with written notice (a "PURCHASE NOTICE") of each Incremental Purchase
not later than 9:00 a.m. (Chicago time) on the Business Day of the proposed
Incremental Purchase; provided, however, that the Seller shall endeavor to
provide each Purchase Notice at least three Business Days prior to the proposed
date of the Incremental Purchase. Each Purchase Notice shall, except as set
forth below, be irrevocable and shall specify the requested Purchase Price
(which shall not be less than $1,000,000), the date of purchase, the duration of
the initial Tranche Period and the initial Discount Rate related thereto, and
the Person and bank account to which the Purchase Price should be transferred.
Following receipt of a Purchase Notice, the Agent shall determine whether PREFCO
agrees to make the purchase. If PREFCO does not make a proposed purchase, the
Seller may cancel the Purchase Notice or the Incremental Purchase of the
Receivable Interests shall be made by the Investors. On the date of each
Incremental Purchase, upon satisfaction of the applicable conditions precedent
set forth in Article IV, PREFCO or each Investor, as applicable, shall wire
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transfer to the Person and account specified in the applicable Purchase Notice,
in immediately available funds, no later than 12:00 noon (Chicago time), an
amount equal to (i) in the case of PREFCO, the aggregate of the Purchase Prices
of each of the Receivable Interests PREFCO is purchasing, or (ii) in the case of
an Investor, such Investor's Pro Rata Share of the Purchase Prices of each of
the Receivable Interests the Investors are purchasing.
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Section 1.3. Selection of Tranche Periods and Discount Rates. (a)
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Each Receivable Interest shall at all times have an associated amount of
Capital, a Discount Rate and Tranche Period applicable to it. Not less than
$1,000,000 of Capital may be allocated to any single Receivable Interest with
respect to which a LIBO Rate applies. The Seller shall request Discount Rates
and Tranche Periods for the Receivable Interests of the Purchasers. The Seller
may select the CP Rate, with the concurrence of the Agent, or the Base Rate for
the Receivable Interests of PREFCO and the LIBO Rate or the Base Rate for the
Receivable Interests of the Investors. The Seller shall (i) by 11:00 a.m.
(Chicago time) at least three Business Days prior to the expiration of any then
existing Tranche Period with respect to which the LIBO Rate is being requested
as a new Discount Rate, (ii) by at least 9:00 a.m. (Chicago time) on the date of
expiration of any then existing Tranche Period with respect to which the CP Rate
is being requested as a new Discount Rate, and (iii) by at least 9:00 a.m.
(Chicago time) on the date of expiration of any then existing Tranche Period
with respect to which the Base Rate is being requested as a new Discount Rate,
give the Agent irrevocable notice of the new Tranche Period and Discount Rate
for the Receivable Interest associated with such expiring Tranche Period. If
the Seller fails to request timely a Discount Rate and/or a Tranche Period for
any Receivable Interest pursuant to the terms of this SECTION 1.3, the Discount
Rate shall be the Base Rate, and the applicable Tranche Period shall be a period
of one Business Day commencing on the day requested in the Purchase Notice or
the last day of the then expiring Tranche Period for such Receivable Interest,
as applicable. Until the Seller gives notice to the Agent of another Discount
Rate, the initial Discount Rate for any Receivable Interest transferred to the
Investors pursuant to Section 2.1 shall be the Base Rate.
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(b) If any Investor notifies the Agent that it has determined that
funding its Pro Rata Share of the Receivable Interests of the Investors at a
LIBO Rate would violate any applicable law, rule, regulation, or directive,
whether or not having the force of law, or that (i) deposits of a type and
maturity appropriate to match fund its Receivable Interests at such LIBO Rate
are not available, or (ii) such LIBO Rate does not accurately reflect the cost
of acquiring or maintaining a Receivable Interest at such LIBO Rate, then the
Agent shall suspend the availability of such LIBO Rate and require the Seller to
select a new Discount Rate for any Receivable Interest accruing Discount at such
LIBO Rate. In the event of any such notice by an Investor, at Seller's request,
such Investor shall assign its rights and obligations under this Agreement to
(x) another Investor (if any such Investor is willing to accept such assignment)
or (y) another Eligible Person nominated by the Seller who is willing to
participate in this Agreement through the Liquidity Termination Date; provided
that the assigning Investor receives payment in full, pursuant to an Assignment
Agreement, of an amount equal to such assigning Investor's Pro Rata Share of the
Capital and Discount owing to the Investors and all accrued but unpaid fees and
other costs and expenses payable in respect of its Pro Rata Share of the
Receivable Interests.
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Section 1.4. Percentage Evidenced by Receivable Interests. Each
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Receivable Interest shall be initially computed on its date of purchase.
Thereafter, until its Liquidation Day, each Receivable Interest shall be
automatically recomputed (or deemed to be recomputed) on each day prior to its
Liquidation Day. The variable percentage represented by any Receivable Interest
as computed (or deemed recomputed) as of the close of business on the day
immediately preceding its Liquidation Day shall remain constant at all times
after such Liquidation Day.
Section 1.5. Dividing or Combining Receivable Interests. The Seller
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or the Agent may, upon notice to and consent by the other received at the time a
Tranche Period and Discount Rate is selected pursuant to Section 1.3(a), take
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any of the following actions with respect to such Receivable Interest: (i)
divide the Receivable Interest into two or more Receivable Interests having
aggregate Capital equal to the Capital of such divided Receivable Interest, (ii)
combine the Receivable Interest with another Receivable Interest with a Tranche
Period ending on the same day, creating a new Receivable Interest having Capital
equal to the Capital of the two Receivable Interests combined, or (iii) combine
the Receivable Interest with a Receivable Interest to be purchased on such day
by such Purchaser, creating a new Receivable Interest having Capital equal to
the Capital of the two Receivable Interests combined, provided that a Receivable
Interest of PREFCO may not be combined with a Receivable Interest of the
Investors.
Section 1.6. Reinvestment Purchases and Settlements. At any time
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that any Collection is received by the Servicer after the initial purchase, or
any other Incremental Purchase, of a Receivable Interest hereunder and on or
prior to the Liquidation Day of such Receivable Interest:
first, at any time the Servicer is not the Seller, the Originator or
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an Affiliate thereof, the Servicer may retain a portion of such Collection
in payment of any Servicer Fee that is then due and owing;
second, the Servicer is hereby directed to pay a portion of the
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remainder, if any, of such Collection to the Agent in payment of any
accrued and unpaid Discount that is then due and owing;
third, except to the extent the Seller wishes to reduce the
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outstanding amount of Capital of a Receivable Interest (in which case the
provisions of SECTION 1.7 shall be applicable to the portion of such
Receivable Interest represented by such reduction in Capital), the Seller
hereby requests and the Purchasers hereby agree to make, simultaneously
with such receipt, a reinvestment (each, a "REINVESTMENT") with that
portion of the remainder of such Collection that is part of such Receivable
Interest such that after giving effect to such Reinvestment, the amount of
the Capital of such Receivable Interest immediately after any such receipt
and corresponding
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Reinvestment shall be equal to the amount of the Capital immediately prior
to such receipt;
fourth, if the Servicer is the Seller, the Originator or an Affiliate
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thereof, the Servicer may retain a portion of the remainder, if any, of
such Collection in payment of any Servicer Fee that is then due and owing;
and
fifth, any remaining portion of such Collection may be applied to
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making an additional Incremental Purchase in accordance with the terms of
this Agreement or paid to the Seller, in either case, as the Seller may
direct.
Section 1.7. Liquidation Settlement Procedures. On the Liquidation
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Day of a Receivable Interest and on each day thereafter:
(a) the Servicer shall set aside and hold in trust for the holder(s)
of such Receivable Interest, the percentage evidenced by such Receivable
Interest of all Collections received on such day, including, but not
limited to, Collections deemed to have been received on or prior to such
day pursuant to Section 1.8 which have not otherwise been paid by the
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Seller; and
(b) the Servicer shall set aside and hold in trust for the Seller and
the holder(s) of such Receivable Interest, as their interests may appear,
the remaining portion of the Collections received on such day (the
"REMAINING COLLECTIONS").
On the last day of each Tranche Period of a Receivable Interest after the
occurrence of its Liquidation Day, the Servicer shall remit to the Agent's
account the amounts set aside pursuant to clause (a) above, but not to exceed
the sum of (i) the accrued Discount for such Receivable Interest, (ii) the
Capital of such Receivable Interest, (iii) the accrued Servicer Fee for such
Receivable Interest, and (iv) the aggregate of all other amounts then owed
hereunder or under the other Transaction Documents by Seller to the Purchasers.
If there shall be insufficient funds on deposit for the Servicer to distribute
funds in payment in full of the aforementioned amounts, the Servicer shall
distribute funds:
first, to reimbursement of the Agent's costs of collection and
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enforcement of this Agreement,
second, to the Servicer (if the Servicer is not the Seller, the
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Originator or an Affiliate thereof) in payment of all accrued Servicer Fee
in respect of such Receivable Interest,
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third, in payment of all accrued and unpaid Discount for such
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Receivable Interest that are then due and owing,
fourth, in reduction of the Capital of such Receivable Interest,
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fifth, in payment of all other amounts (including, without limitation,
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Deemed Collections, Early Collection Fees and Default Fees, if any), that
are then due and owing to the Purchasers, and
sixth, to the Servicer (if the Seller, the Originator or an Affiliate
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thereof is the Servicer) in payment of all accrued Servicer Fee in respect
of such Receivable Interest.
Collections allocated to the Receivable Interests of the Investors shall be
shared ratably by the Investors in accordance with their Pro Rata Shares.
Collections applied to the payment of fees, expenses, Discount and all other
amounts payable or reimbursable by the Seller to the Agent and/or the Purchasers
hereunder or under any of the other Transaction Documents shall be allocated
ratably among the Agent and the Purchasers in accordance with such amounts owing
to each of them. To the extent Collections are available for such purpose in
accordance with the foregoing, the accrued Servicer Fee in respect of each
Receivable Interest shall be remitted to the Servicer. Remaining Collections
shall be held in trust by the Servicer and invested in Permitted Investments
selected from time to time by the Seller, with all income and losses from such
Permitted Investments and transaction fees arising in connection with the making
or liquidation of such Permitted Investments being for the account of the
Seller. If any amount payable by the Seller to the Agent or the Purchasers
under this Agreement or any of the other Transaction Documents is not paid
within one (1) Business Day after the date when due (such unpaid amount,
together with any Default Fee due in respect thereof, being hereinafter referred
to as a "DEFICIENCY"), the Servicer shall promptly liquidate a portion of the
Permitted Investments in the amount of such Deficiency and shall pay such amount
to the Agent for the account of the relevant Purchaser(s). From and after the
Business Day on which all Aggregate Unpaids have been paid in full, the Servicer
shall pay to Seller all remaining Collections.
Section 1.8. Limited Recourse.
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(a) If on any day the Outstanding Balance of a Receivable is (i)
reduced as a result of any rejected or returned goods or services, any cash
discount or any adjustment by the Seller, or (ii) reduced or cancelled as a
result of a setoff in respect of any claim by any Person (whether such claim
arises out of the same or a related transaction or an unrelated transaction),
the Seller shall be deemed to have received on the following Business Day a
Collection of such Receivable in the amount of such reduction or cancellation.
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(b) If on any day on or after the Facility Termination Date the
Outstanding Balance of a Receivable is charged-off as uncollectible, the Seller
shall be deemed to have received on the following Business Day a Collection of
such Receivable; provided, however, that the aggregate amount of Collections the
Seller shall be deemed to have received under this Section 1.8(b) shall not
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exceed the Loss Recourse Percentage of the aggregate Capital outstanding on the
Facility Termination Date.
(c) If on any day any of the representations or warranties in Section
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3.1 is no longer true with respect to a Receivable, the Seller shall be deemed
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to have received on the following Business Day a Collection of such Receivable
in full.
(d) If the Seller receives any Collections or is deemed to receive
Collections pursuant to this Section 1.8 or otherwise, the Seller shall
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immediately pay such Collections or deemed Collections to the Servicer and, at
all times prior to such payment, such Collections shall be held in trust by the
Seller for the exclusive benefit of the Purchasers and the Agent.
Section 1.9. Discount; Payments and Computations, Etc.
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(a) Discount shall accrue for each Receivable Interest for each day
occurring during the Tranche Period for such Receivable Interest. On the last
day of each Tranche Period the Seller shall pay to the Agent an amount equal to
the accrued and unpaid Discount for such Tranche Period.
(b) Notwithstanding any limitation on recourse contained in this
Agreement, the Seller shall pay to the Agent, for the account of the relevant
Purchasers, such fees as set forth in the Fee Letter, all amounts payable as
Discount, all amounts payable pursuant to Article VIII, if any, all Servicer
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costs, if any, payable pursuant to SECTION 6.2, any and all issuing and paying
agent fees and commissions of commercial paper dealers and, to the extent not
duplicative of commercial paper dealer commissions, placement agents in respect
of Commercial Paper issued to fund any Receivable Interest of PREFCO hereunder
(to the extent each of the foregoing has not been included in the determination
of the CP Rate), and on demand therefor, any Early Collection Fee. If any
Person fails to pay any amount when due hereunder and such non-payment results
in either a Servicer Default under Section 7.1(a)(i) or a Termination Event
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under Section 7.2(a)(i), such Person agrees to pay, on demand, the Default Fee.
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(c) All amounts to be paid or deposited by any Person hereunder shall
be paid or deposited in accordance with the terms hereof no later than 12:00
noon (Chicago time) on the day when due in immediately available funds; if such
amounts are payable to a Purchaser they shall be paid to the Agent, for the
account of such Purchaser, at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
until otherwise notified by the Agent.
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Section 1.10. Maximum Aggregate Receivables Interest; Grant of
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Security Interest. The Seller shall ensure that the aggregate Receivable
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Interests of the Purchasers shall at no time exceed 100%. If, on any day, the
aggregate Receivable Interests of the Purchasers exceeds 100%, the Seller shall
immediately pay to the Agent an amount to be applied to reduce the Capital of
the Receivable Interests, such that after giving effect to such payment the
aggregate of the Receivable Interest equals or is less than 100%. Such amount
shall be applied to the reduction of the Capital of the Receivable Interests
ratably in accordance with the percentages of the Receivable Interests. Any
amounts received by the Investors pursuant to the preceding sentence shall be
applied ratably in accordance with their Pro Rata Shares. The Seller hereby
grants to the Agent for the ratable benefit of the Purchasers a security
interest in all of its now existing and hereafter arising or acquired right,
title and interest in and to the Receivables, the Related Security, the
Collection Accounts, the Collections and all proceeds of the foregoing to secure
payment of the Aggregate Unpaids, including its indemnity obligations under
ARTICLE VIII and all other obligations owed hereunder and under the Fee Letter
to the Agent and/or the Purchasers.
Section 1.11. Non-Performing Investors. If one or more Investors
------------------------
defaults in its obligation to pay its Pro Rata Share of the Purchase Price for a
Receivables Interest pursuant to Section 1.2(ii) (each such Investor shall be
---------------
called a "NON-PERFORMING INVESTOR" and the aggregate amount of such defaulted
obligations being herein called the "PURCHASE PRICE DEFICIT"), then upon notice
from the Agent, each other Investor (a "PERFORMING INVESTOR") shall promptly pay
to the Agent, in immediately available funds, an amount equal to the lesser of
(x) such Performing Investor's proportionate share (based upon the relative
Commitments of the Performing Investors) of the Purchaser Price Deficit and (y)
the unused portion of such Performing Investor's Commitment. A Non-Performing
Investor shall forthwith upon demand pay to the Agent for the account of the
Performing Investors all amounts paid by each Performing Investor on behalf of
such Non-Performing Investor, together with interest thereon, for each day from
the date a payment was made by a Performing Investor until the date such
Performing Investor has been paid such amounts in full, at a rate per annum
equal to the Federal Funds Effective Rate plus 2%. In addition, without
prejudice to any other rights that the Seller may have under applicable law,
each Non-Performing Investor shall pay to the Seller forthwith upon demand, the
difference between the Purchase Price Deficit and the amount paid with respect
thereto pursuant to this Section 1.11 by the Performing Investors, together with
------------
interest thereon, for each day from the date of the Agent's request for such
Non-Performing Investor's Pro Rata Share of the Purchase Price pursuant to
Section 1.2(ii) until the date the requisite amount is paid to the Seller in
---------------
full, at a rate per annum equal to the Federal Funds Effective Rate plus 2%.
Section 1.12. Characterization. If the conveyance by the Seller to
----------------
the Purchasers of interests in Receivables hereunder shall be characterized as a
secured
9
loan and not a sale, it is the intention of the parties hereto that this
Agreement shall constitute a security agreement under applicable law, and that
the Seller shall be deemed to have granted to the Agent for the ratable benefit
of the Purchasers a duly perfected Security Interest in all of the Seller's
right, title and interest in, to and under the Receivables, the Collections,
each Collection Account, all Related Security, all payments on or with respect
to such Receivables, all other rights relating to and payments made in respect
of the Receivables, and all proceeds of any thereof, prior to all other Security
Interests therein. After a Termination Event, the Agent and the Purchasers
shall have, in addition to the rights and remedies which they may have under
this Agreement, all other rights and remedies provided to a secured creditor
after default under the UCC and other applicable law, which rights and remedies
shall be cumulative.
Section 1.13. Seller's Extinguishment. The Seller shall have the
-----------------------
right, on not less than thirty (30) Business Days' written notice to the Agent,
at any time following the reduction of the Capital to a level that is less than
5.0% of the original Purchase Limit, to repurchase from the Purchasers all, but
not less than all, of the then outstanding Receivable Interests. The purchase
price in respect thereof shall be an amount equal to the Aggregate Unpaids
through the date of such repurchase, payable in immediately available funds.
Such repurchase shall be without representation, warranty or recourse of any
kind by, on the part of, or against any Purchaser or the Agent.
Section 1.14. Servicer Fee. On the 20th day of each month hereafter
------------
commencing February 20, 1997, to the extent of available Collections in
accordance with the priorities set forth in SECTIONS 1.6 and 1.7, the Servicer
shall be paid the Servicer Fee in arrears for the preceding month.
ARTICLE II
LIQUIDITY FACILITY
Section 2.1. Transfer to Investors. Each Investor hereby agrees,
---------------------
subject to Section 2.4, that immediately upon written notice from PREFCO
-----------
delivered on or prior to the Liquidity Termination Date, it shall acquire by
assignment from PREFCO, without recourse or warranty, its Pro Rata Share of one
or more of the Receivable Interests of PREFCO as specified by PREFCO. The Agent
shall promptly notify the Seller of each notice from PREFCO received under this
Section 2.1. Each Investor shall promptly pay to the Agent at an account
-----------
designated by the Agent, for the benefit of PREFCO, its Acquisition Amount.
Unless an Investor has notified the Agent that it does not intend to pay its
Acquisition Amount, the Agent may assume that such payment has been made and
may, but shall not be obligated to, make the amount of such payment available to
PREFCO in reliance upon such assumption. PREFCO hereby sells and assigns to the
Agent for the ratable benefit of the Investors, and the Agent hereby purchases
and assumes from PREFCO, effective upon the receipt by PREFCO of the PREFCO
10
Transfer Price, the Receivable Interests of PREFCO which are the subject of any
transfer pursuant to this Article II.
----------
Section 2.2. Transfer Price Reduction Discount. If the Adjusted
---------------------------------
Liquidity Price is included in the calculation of the PREFCO Transfer Price for
any Receivable Interest, each Investor agrees that the Agent shall pay to PREFCO
the Reduction Percentage of any Discount received by the Agent with respect to
such Receivable Interest.
Section 2.3. Payments to PREFCO. In consideration for the reduction
------------------
of the PREFCO Transfer Prices by the PREFCO Transfer Price Reductions, effective
only at such time as the aggregate amount of the Capital of the Receivable
Interests of the Investors equals the PREFCO Residual, each Investor hereby
agrees that the Agent shall not distribute to the Investors and shall
immediately remit to PREFCO any Discount, Collections or other payments received
by it to be applied pursuant to the terms hereof or otherwise to reduce the
Capital of the Receivable Interests of the Investors.
Section 2.4. Limitation on Commitment to Purchase from PREFCO.
------------------------------------------------
Notwithstanding anything to the contrary in this Agreement, but without limiting
the Investors' obligations to the Seller to purchase Receivable Interests under
Section 1.1, no Investor shall have any obligation to purchase any Receivable
-----------
Interest from PREFCO, pursuant to Section 2.1 or otherwise, if:
-----------
(a) PREFCO shall have voluntarily commenced any proceeding or
filed any petition under any bankruptcy, insolvency or similar law seeking
the dissolution, liquidation or reorganization of PREFCO or taken any
corporate action for the purpose of effectuating any of the foregoing; or
(b) involuntary proceedings or an involuntary petition shall
have been commenced or filed against PREFCO by any Person under any
bankruptcy, insolvency or similar law seeking the dissolution, liquidation
or reorganization of PREFCO and such proceeding or petition shall have not
been dismissed.
Section 2.5. Defaulting Investors. If one or more Investors defaults
--------------------
in its obligation to pay its Acquisition Amount pursuant to Section 2.1 (each
-----------
such Investor shall be called a "DEFAULTING INVESTOR" and the aggregate amount
of such defaulted obligations being herein called the "PREFCO TRANSFER PRICE
DEFICIT"), then upon notice from the Agent, each Investor other than the
Defaulting Investors (a "NON-DEFAULTING INVESTOR") shall promptly pay to the
Agent, in immediately available funds, an amount equal to the lesser of (x) such
Non-Defaulting Investor's proportionate share (based upon the relative
Commitments of the Non-Defaulting Investors) of the PREFCO Transfer Price
Deficit and (y) the unused portion of such Non-Defaulting Investor's Commitment.
A Defaulting Investor shall forthwith upon demand pay to the Agent for the
account of the Non-Defaulting Investors all
11
amounts paid by each Non-Defaulting Investor on behalf of such Defaulting
Investor, together with interest thereon, for each day from the date a payment
was made by a Non-Defaulting Investor until the date such Non-Defaulting
Investor has been paid such amounts in full, at a rate per annum equal to the
Federal Funds Effective Rate plus 2%. In addition, without prejudice to any
other rights that PREFCO may have under applicable law, each Defaulting Investor
shall pay to PREFCO forthwith upon demand, the difference between such
Defaulting Investor's unpaid Acquisition Amount and the amount paid with respect
thereto by the non-Defaulting Investors, together with interest thereon, for
each day from the date of the Agent's request for such Defaulting Investor's
Acquisition Amount pursuant to Section 2.1 until the date the requisite amount
-----------
is paid to PREFCO in full, at a rate per annum equal to the Federal Funds
Effective Rate plus 2%.
Section 2.6. Representations of the Investors. Each of the Investors
--------------------------------
hereby represents and warrants to the Seller, the Agent and PREFCO as follows:
(a) This Agreement has been duly executed and delivered by such
Investor,
(b) The execution, delivery and performance by such Investor of this
Agreement have been duly authorized by all necessary corporate action,
(c) Assuming the due authorization, execution and delivery of this
Agreement by each of the other parties hereto, this Agreement constitutes
the legal, valid and binding obligation of such Investor enforceable
against such Investor in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to or limiting creditors'
rights generally.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. Seller Representations and Warranties. The Seller
-------------------------------------
hereby represents and warrants to the Agent and the Purchasers that:
(a) Corporate Existence and Power. The Seller is a corporation duly
-----------------------------
organized, validly existing and in good standing under the laws of its state of
incorporation, and has all corporate power and all governmental licenses,
authorizations, consents and approvals required to carry on its business in each
jurisdiction in which its business is conducted, except for such failures which
will not, individually or in the aggregate, have a Material Adverse Effect.
12
(b) No Conflict. The execution, delivery and performance by the
-----------
Seller of this Agreement and each other document to be delivered hereunder to
which it is a party, and the Seller's use of the proceeds of purchases made
hereunder, are within its corporate powers, have been duly authorized by all
necessary corporate action, do not contravene or violate (i) its certificate or
articles of incorporation or by-laws, (ii) any law, rule or regulation
applicable to it, (iii) any restrictions under any agreement, contract or
instrument to which it is a party or by which it or any of its property is
bound, or (iv) any order, writ, judgment, award, injunction or decree binding on
or affecting it or its property, and do not result in the creation or imposition
of any Adverse Claim on assets of the Seller (except created hereunder); and no
transaction contemplated hereby requires compliance with any bulk sales act or
similar law. This Agreement and each other document to be executed and
delivered by the Seller hereunder has been duly executed and delivered by the
Seller.
(c) Governmental Authorization. Other than the filing of the
--------------------------
financing statements required hereunder, no authorization or approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
the Seller of this Agreement, any Collection Account Agreement or any other
document to be delivered hereunder.
(d) Binding Effect. This Agreement and each Collection Account
--------------
Agreement constitutes the legal, valid and binding obligation of the Seller
enforceable against the Seller in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization
or other similar laws relating to or limiting creditors' rights generally.
(e) Accuracy of Information. All relevant information heretofore
-----------------------
furnished by the Seller or any of its Affiliates to the Agent or the Purchasers
for purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all such information hereafter furnished by the
Seller to the Purchasers will be, true and accurate in every material respect,
on the date such information is stated or certified and does not and will not
contain any material misstatement of fact or omit to state a material fact or
any fact necessary to make the statements contained therein not misleading.
(f) Use of Proceeds. No proceeds of any Purchase will be used (i)
---------------
for a purpose which violates, or would be inconsistent with, Regulation G, T, U
or X promulgated by the Board of Governors of the Federal Reserve System from
time to time or (ii) to acquire any security in any transaction which is subject
to Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(g) Title to Receivables; Perfection. Each Receivable has been
--------------------------------
purchased by the Seller from the Originator in accordance with the terms of the
Sale Agreement or contributed to the Seller's capital under the Subscription
13
Agreement, and the Seller has thereby irrevocably obtained all legal and
equitable title to, and has the legal right to sell and encumber, each
Receivable, its Collections and the Related Security. Each such Receivable has
been transferred to the Seller free and clear of any Adverse Claim. Without
limiting the foregoing, there has been duly filed all financing statements or
other similar instruments or documents necessary under the UCC of all
appropriate jurisdictions (or any comparable law) to perfect the Seller's
ownership interest in such Receivable. Immediately prior to each purchase
hereunder, the Seller shall be the legal and beneficial owner of the Receivables
and Collections and Related Security with respect thereto, free and clear of any
Adverse Claim, except as created by this Agreement and the documents entered
into in connection herewith and except for such Adverse Claims as to which the
Agent has received (i) an estoppel letter stating that upon receipt of
immediately available funds in an amount not to the exceed the applicable
Purchase Price, such Adverse Claim(s) will be automatically terminated, and (ii)
irrevocable wire transfer instructions from the Seller directing the payment of
the applicable Purchase Price (or portion thereof necessary to effect such
automatic release of an Adverse Claim) directly to the holder of such Adverse
Claim. This Agreement is effective to, and shall, upon each purchase hereunder,
transfer to the relevant Purchaser or Purchasers (and such Purchaser or
Purchasers shall acquire from the Seller) a valid and perfected first priority
Security Interest in each Receivable existing or hereafter arising and in the
Related Security and Collections with respect thereto, free and clear of any
Adverse Claim, except as created by this Agreement and the documents entered
into in connection herewith.
(h) Places of Business. The principal places of business and chief
------------------
executive office of the Seller and the offices where the Seller keeps all its
Records are located at the address(es) listed on EXHIBIT II or such other
locations notified to the Agent in accordance with Section 5.2(a) in
--------------
jurisdictions where all action required by Section 5.2(a) has been taken and
--------------
completed. The Seller's Federal Employer Identification Number is correctly set
forth on EXHIBIT II.
(i) Collection Banks; etc. Except as otherwise notified to the Agent
---------------------
in accordance with Section 5.2(b), (i) the Seller has instructed, or has
--------------
required the Originator to instruct, all Obligors to pay all Collections (A)
directly to a lock-box listed on EXHIBIT III over which exclusive dominion and
control has been transferred to the Seller or (B) at one of the Seller's or one
of its Wholly-Owned Subsidiaries' stores, (ii) all proceeds from such lock-boxes
are deposited directly by a Collection Bank into one of the depository accounts
listed on EXHIBIT III, (iii) the names and addresses of all Collection Banks,
together with the account numbers of the Collection Accounts of the Seller at
each Collection Bank, are listed on EXHIBIT III. The Seller has not granted any
Person, other than the Agent as contemplated by this Agreement, dominion and
control of any Collection Account, or the right to take dominion and control of
any Collection Account at a future time or upon the occurrence of a future
event.
14
(j) Material Adverse Effect. Since April 29, 1995, except as
-----------------------
disclosed to the Agent in writing prior to the date of this Agreement, no event
has occurred which would have a Material Adverse Effect.
(k) Names. In the past five years, the Seller has not used any
-----
corporate names, trade names or assumed names other than those listed on EXHIBIT
II and names notified to the Agent after the date of this Agreement in
accordance with Section 5.2(a).
--------------
(l) Actions, Suits. There are no actions, suits or proceedings
--------------
pending, or to the best of the Seller's knowledge, threatened, against or
affecting the Seller or the Originator, or any of the respective properties of
the Seller or the Originator, in or before any court, arbitrator or other body,
which constitutes a Material Adverse Effect.
(m) Credit and Collection Policy. With respect to each Receivable,
----------------------------
each of the Originator, the Seller and the Servicer has complied in all material
respects with the Credit and Collection Policy.
(n) Payments to Originator. With respect to each Receivable sold to
----------------------
the Seller by the Originator, the Seller has given reasonably equivalent value
to the Originator in consideration for such Receivable and the Related Security
with respect thereto under the Sale Agreement and such transfer was not made for
or on account of an antecedent debt. No transfer by the Originator of any
Receivable is or may be voidable under any Section of the Bankruptcy Reform Act
of 1978 (11 U.S.C. (S)(S) 101 et seq.), as amended.
(o) Ownership of the Seller. The Originator owns, directly or
-----------------------
indirectly, 100% of the issued and outstanding capital stock of the Seller.
Such capital stock is validly issued, fully paid and nonassessable, and there
are no options, warrants or other rights to acquire securities of the Seller.
(p) Not an Investment Company. The Seller is not an "investment
-------------------------
company" within the meaning of the Investment Company Act of 1940, as amended
from time to time, or any successor statute.
(q) Purpose. The Seller has determined that, from a business
-------
viewpoint, the purchase of Receivables and related interests from the Originator
under the Sale Agreement, and the sale of Receivable Interests to the Purchasers
and the other transactions contemplated herein, are in the best interest of the
Seller.
(r) Net Receivables Balance. Both before and after giving effect to
-----------------------
each Incremental Purchase and Reinvestment, the Net Receivables Balance exceeds
the aggregate Capital then outstanding.
15
Section 3.2. Investor Representations and Warranties. Each Investor
---------------------------------------
hereby represents and warrants to the Agent and PREFCO that:
(a) Existence and Power. Such Investor is a corporation or a banking
-------------------
association duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, and has all corporate
power to perform its obligations hereunder.
(b) No Conflict. The execution, delivery and performance by such
-----------
Investor of this Agreement are within its corporate powers, have been duly
authorized by all necessary corporate action, do not contravene or violate (i)
its certificate or articles of incorporation or association or by-laws, (ii) any
law, rule or regulation applicable to it, (iii) any restrictions under any
agreement, contract or instrument to which it is a party or any of its property
is bound, or (iv) any order, writ, judgment, award, injunction or decree binding
on or affecting it or its property, and do not result in the creation or
imposition of any Adverse Claim on its assets. This Agreement has been duly
authorized, executed and delivered by such Investor.
(c) Governmental Authorization. No authorization or approval or
--------------------------
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and performance by
such Investor of this Agreement.
(d) Binding Effect. This Agreement constitutes the legal, valid and
--------------
binding obligation of such Investor enforceable against such Investor in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws relating
to or limiting creditors' rights generally.
ARTICLE IV
CONDITIONS OF PURCHASES
Section 4.1. Conditions Precedent to Initial Purchase. The initial
----------------------------------------
purchase of a Receivable Interest under this Agreement is subject to the
conditions precedent that the Agent shall have received on or before the date of
such purchase those documents listed on SCHEDULE A hereto.
Section 4.2. Conditions Precedent to Purchases and Reinvestments.
---------------------------------------------------
Each Incremental Purchase of a Receivable Interest (other than pursuant to
Section 2.1) and each Reinvestment shall be subject to the further conditions
-----------
precedent that:
16
(a) in the case of each such Incremental Purchase, the Servicer shall
have delivered to the Agent on or prior to the date of such purchase, in form
and substance satisfactory to the Agent, all Periodic Reports due under Section
-------
6.5;
---
(b) on the date of each such Incremental Purchase and each
Reinvestment, the following statements shall be true both before and after
giving effect to such Incremental Purchase or Reinvestment (and acceptance of
the proceeds of such Incremental Purchase or Reinvestment shall be deemed a
representation and warranty by the Seller that such statements are then true):
(i) the representations and warranties set forth in SECTION 3.1
are correct on and as of the date of such purchase or Reinvestment as
though made on and as of such date;
(ii) no event has occurred, or would result from such purchase or
Reinvestment, that will constitute a Termination Event, and, in the case of
an Incremental Purchase, no event has occurred and is continuing, or would
result from such Incremental Purchase that would constitute a Potential
Termination Event; and
(iii) the Liquidity Termination Date shall not have occurred and
the aggregate Receivable Interests shall not exceed 100% and the aggregate
outstanding Capital does not exceed the Purchase Limit.
ARTICLE V
COVENANTS
Section 5.1. Affirmative Covenants of Seller. Until the date on
-------------------------------
which the Aggregate Unpaids have been indefeasibly paid in full, the Seller
hereby covenants that:
(a) Financial Reporting. The Seller will maintain a system of
-------------------
accounting established and administered in accordance with generally accepted
accounting principles, and furnish to the Agent:
(i) Annual Reporting. Within 90 days after the close of each of
----------------
its fiscal years, consolidated financial statements of ▇▇▇▇'▇ Corporation
for such fiscal year certified in a manner acceptable to the Agent by
independent public accountants acceptable to the Agent.
(ii) Quarterly Reporting. Within 45 days after the close of the
-------------------
first three quarterly periods of each of its fiscal years, consolidated
balance sheets of ▇▇▇▇'▇ Corporation as at the close of each such period
and related consolidated statements of income and retained earnings and a
consolidated
17
statement of cash flows for the period from the beginning of such fiscal
year to the end of such quarter, all certified by its chief financial
officer.
(iii) Compliance Certificate. Together with the financial
----------------------
statements required hereunder, a compliance certificate in substantially
the form of EXHIBIT IV signed by the Seller's corporate comptroller or
chief financial officer and dated the date of such annual financial
statement or such quarterly financial statement, as the case may be.
(iv) Shareholders Statements and Reports. Promptly upon the
-----------------------------------
furnishing thereof to the shareholders of ▇▇▇▇'▇ Corporation, copies of all
financial statements, reports and proxy statements so furnished.
(v) S.E.C. Filings. Promptly upon the filing thereof, copies
--------------
of all registration statements and annual, quarterly, monthly or other
regular reports which the Seller or ▇▇▇▇'▇ Corporation files with the
Securities and Exchange Commission.
(vi) Change in Credit and Collection Policy. At least 30 days
--------------------------------------
prior to the effectiveness of any material change in or amendment to the
Credit and Collection Policy, a copy of the Credit and Collection Policy
then in effect and a notice indicating such change or amendment.
(vii) Notices under Transaction Documents. Forthwith upon its
-----------------------------------
receipt of any notice, request for consent, financial statements,
certification, report or other communication under or in connection with
any Transaction Document from any Person other than the Agent or PREFCO,
copies of the same.
(b) Notices. The Seller will notify the Agent in writing of any of
-------
the following immediately upon learning of the occurrence thereof, describing
the same and, if applicable, the steps being taken with respect thereto:
(i) Termination Events, Servicer Defaults, Potential Termination
------------------------------------------------------------
Events and Potential Servicer Defaults. The occurrence of each Termination
--------------------------------------
Event, (for so long as the Seller is the Servicer) Servicer Default or each
Potential Termination Event or (for so long as the Seller is the Servicer)
Potential Servicer Default, by a statement of the corporate comptroller or
senior financial officer of the Seller.
(ii) Judgment. The entry of any judgment or decree against the
--------
Seller if the aggregate amount of all judgments and decrees then
outstanding against the Seller exceeds $10,000,000 after deducting (a) the
amount with respect to which the Seller is insured and with respect to
which the insurer has assumed responsibility in writing, and (b) the amount
for which the
18
Seller is otherwise indemnified if the terms of, and creditworthiness of
the provider of, such indemnification are reasonably satisfactory to the
Agent.
(iii) Litigation. The institution of any litigation,
----------
arbitration proceeding or governmental proceeding against the Seller or to
which the Seller becomes party in excess of $10,000 (other than litigation
as to which the Originator has fully-indemnified the Seller in writing).
(iv) Termination Date under Sale Agreement. The occurrence of
-------------------------------------
the "TERMINATION DATE" under the Sale Agreement.
(v) Downgrade. Any downgrade in the rating of any
---------
Indebtedness of the Seller or any downgrade below investment grade in the
rating of any Indebtedness of ▇▇▇▇'▇ Corporation by Standard & Poor's
Ratings Group or by ▇▇▇▇▇'▇ Investors Service, Inc., setting forth the
Indebtedness affected and the nature of such change.
(c) Compliance with Laws. The Seller will comply in all respects
--------------------
with all applicable laws, rules, regulations, orders writs, judgments,
injunctions, decrees or awards to which it may be subject, the failure to comply
with which, individually or in the aggregate, will or could reasonably be
expected to have a Material Adverse Effect.
(d) Audits. The Seller will furnish to the Agent from time to time
------
such information with respect to it and the Receivables as the Agent may
reasonably request. The Seller shall, from time to time during regular business
hours as requested by the Agent upon reasonable notice, permit the Agent, or its
agents or representatives (and shall require the Originator to permit the Agent
or its agents or representatives) at their expense except as hereinafter
provided: (i) to examine and make copies of and abstracts from all Records in
the possession or under the control of the Seller or the Originator relating to
Receivables and the Related Security, including, without limitation, the related
Contracts, and (ii) to visit the offices and properties of the Seller or the
Originator for the purpose of examining such materials described in clause (i)
above, and to discuss matters relating to the Seller's or the Originator's
financial condition or the Receivables and the Related Security or the Seller's
or the Originator's performance under any of the Transaction Documents or the
Seller's or the Originator's performance under the Contracts with any of the
officers or employees of the Seller or the Originator having knowledge of such
matters. Notwithstanding the foregoing, the Seller shall reimburse the Agent
for up to $5,000 of the reasonable costs of each audit conducted by the Agent
not more than once every two years. From and after the occurrence of a Servicer
Default, the timing and expense limitations contained in the foregoing sentence
shall no longer apply.
19
(e) Keeping and Marking of Records and Books.
----------------------------------------
(i) The Seller will, and will require the Originator to,
maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing Receivables
in the event of the destruction of the originals thereof), and keep and
maintain all documents, books, records and other information reasonably
necessary or advisable for the collection of all Receivables (including,
without limitation, records adequate to permit the immediate identification
of each new Receivable and all Collections of and adjustments to each
existing Receivable). The Seller will, and will require the Originator to,
give the Agent notice of any material change in the administrative and
operating procedures referred to in the previous sentence.
(ii) The Seller will, and will require the Originator to, (A) on
or prior to the date hereof, ▇▇▇▇ its master data processing records and
other books and records relating to the Receivable Interests with a legend
stating that the Receivables are subject to a Security Interest in favor of
the Agent for the benefit of the Purchasers and (B) upon the request of the
Agent following a Servicer Default: (1) ▇▇▇▇ each Contract (other than
sales receipts) with a legend describing the Security Interest of the Agent
and (2) deliver to the Agent all Contracts (including, without limitation,
all multiple originals in the Seller's possession of any such Contract
which constitutes an instrument, a letter of credit or chattel paper)
relating to the Receivables.
(f) Compliance with Contracts and Credit and Collection Policy. The
----------------------------------------------------------
Seller will, and will require the Originator to, timely and fully (i) perform
and comply with all provisions, covenants and other promises required to be
observed by it under the Contracts related to the Receivables, and (ii) comply
in all material respects with the Credit and Collection Policy in regard to each
Receivable and the related Contract. The Seller will, and will require the
Originator to, pay when due any sales, use, excise, stamp or other transactional
taxes payable in connection with the Receivables or the sale of goods or
services giving rise thereto.
(g) Purchase of Receivables from the Originator. With respect to
-------------------------------------------
each Receivable purchased under the Sale Agreement, the Seller shall (or shall
require the Originator to) take all actions necessary to vest legal and
equitable title to such Receivable and the Related Security irrevocably in the
Seller, including, without limitation, the filing of all financing statements or
other similar instruments or documents necessary under the UCC of all
appropriate jurisdictions (or any comparable law) to perfect the Seller's
interest in such Receivable and such other action to perfect, protect or more
fully evidence the interest of the Seller as the Agent may reasonably request.
(h) Ownership Interest. The Seller shall take all necessary action
------------------
to establish and maintain a valid and perfected first priority undivided
percentage
20
ownership interest in the Receivables and the Related Security and Collections
with respect thereto, to the full extent contemplated herein, in favor of the
Agent and the Purchasers, including, without limitation, taking such action to
perfect, protect or more fully evidence the interest of the Agent and the
Purchasers hereunder as the Agent may reasonably request.
(i) Payment to the Originator. With respect to any Receivable
-------------------------
purchased by the Seller from the Originator, such sale shall be effected under,
and in strict compliance with the terms of, the Sale Agreement, including,
without limitation, the terms relating to the amount and timing of payments to
be made to the Originator in respect of the purchase price for such Receivable.
(j) Performance and Enforcement of Sale Agreement and Parent Demand
---------------------------------------------------------------
Note. The Seller shall timely perform the obligations required to be performed
----
by the Seller, and shall vigorously enforce the rights and remedies accorded to
the Seller, under the Sale Agreement. The Seller shall take all actions to
perfect and enforce its rights and interests (and the rights and interests of
the Purchasers and the Agents, as assignees of the Seller) under the Sale
Agreement, as the Agent may from time to time reasonably request, including,
without limitation, making claims to which it may be entitled under any
indemnity, reimbursement or similar provision contained in the Sale Agreement.
The Seller shall diligently enforce its rights and interests under the Parent
Demand Note including, but not limited to, making demand for payment thereunder
when required by the terms of this Agreement.
(k) Purchasers' Reliance. The Seller acknowledges that the
--------------------
Purchasers are entering into the transactions contemplated by this Agreement in
reliance upon the Seller's identity as a legal entity that is separate from the
Originator. 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 Agent or any Purchaser 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 Originator and any Affiliates
thereof and not just a division of the Originator. Without limiting the
generality of the foregoing and in addition to the other covenants set forth
herein, the Seller shall:
(i) conduct its own business in its own name and require that all
full-time employees of the Seller, if any, identify themselves as such and
not as employees of the Originator (including, without limitation, by means
of providing such employees with business or identification cards
identifying such employees as the Seller's employees);
(ii) compensate all employees, consultants and agents directly, from
the Seller's bank accounts, for services provided to the Seller by such
employees, consultants and agents and, to the extent any employee,
21
consultant or agent of the Seller is also an employee, consultant or agent
of the Originator, allocate the compensation of such employee, consultant
or agent between the Seller and the Originator on a basis which reflects
the services rendered to the Seller and the Originator;
(iii) clearly identify its offices (by signage or otherwise) as its
offices and, if such office is located in the offices of the Originator,
the Seller shall lease such office at a fair market rent;
(iv) have separate stationery, invoices and checks in its own name;
(v) conduct all transactions with the Originator (including,
without limitation, any delegation of its obligations hereunder as
Servicer) on terms that are consistent with those that would be obtained by
an unaffiliated entity on an arm's-length basis, allocate all overhead
expenses (including, without limitation, telephone and other utility
charges) for items shared between the Seller and the Originator on the
basis of actual use to the extent practicable and, to the extent such
allocation is not practicable, on a basis reasonably related to actual use;
(vi) at all times have at least one member of its Board of Directors
(an "INDEPENDENT DIRECTOR") who is "INDEPENDENT" as provided in the
Seller's Articles of Incorporation as in effect on the date hereof;
(vii) observe all corporate formalities as a distinct entity, and
ensure that all corporate actions relating to (A) the selection,
maintenance or replacement of the Independent Director, (B) the dissolution
or liquidation of the Seller or (C) the initiation of participation in,
acquiescence in or consent to any bankruptcy, insolvency, reorganization or
similar proceeding involving the Seller, are duly authorized by unanimous
vote of its Board of Directors (including the Independent Director);
(viii) maintain the Seller's books and records separate from those of
the Originator and otherwise readily identifiable as its own assets rather
than assets of the Originator;
(ix) prepare financial statements separate from those of the
Originator and insure that any consolidated financial statements of the
Originator or any Affiliate thereof that include the Seller have detailed
notes clearly stating that the Seller is a separate corporate entity and
that its assets will be available first and foremost to satisfy the claims
of the creditors of the Seller;
(x) except as herein specifically otherwise provided, not commingle
funds or other assets of the Seller with those of the Originator and not
maintain bank accounts or other depository accounts to which the Originator
22
is an account party, into which the Originator makes deposits or from which
the Originator has the power to make withdrawals except in its capacity as
Sub-Servicer; and
(xi) not permit the Originator to pay any of the Seller's operating
expenses (except pursuant to allocation arrangements that comply with the
requirements of this SECTION 5.1(K)).
(l) Collections. The Seller shall instruct, or require the
-----------
Originator to instruct, all Obligors to pay all Collections directly to (i) a
segregated lock-box or other Collection Account listed on EXHIBIT III, each of
which is subject to a Collection Account Agreement, or (ii) at one of the
Originator's or one of its Wholly-Owned Subsidiaries' stores. In the case of
payments remitted to any such lock-box or store, the Originator may credit those
payments against the Subordinated Loan and/or retain such payments except to the
extent that the Seller is obligated to pay such amounts to the Agent for the
benefit of the Purchasers hereunder (in which case, such payments shall be paid
to a depositary account of the Seller listed on EXHIBIT III hereto). The Seller
shall maintain exclusive dominion and control (subject to the terms of this
Agreement) to each Collection Account. In the case of any Collections received
by the Seller or the Originator or at one of its or its Wholly-Owned
Subsidiary's stores following the occurrence of a Servicer Default, the Seller
shall remit, or shall require the Originator to remit, such Collections to a
Collection Account of the Seller not later than the Business Day immediately
following the date of receipt of such Collections, and, at all times prior to
such remittance, the Seller or the Originator, as the case may be, shall itself
hold such Collections in trust, for the exclusive benefit of the Agent and the
Purchasers. In the case of any remittances received by the Seller in any such
Collection Account that shall have been identified, to the satisfaction of the
Servicer, to not constitute Collections or other proceeds of the Receivables or
the Related Security, the Seller shall promptly remit such items to the Person
identified to it as being the owner of such remittances. From and after the date
the Agent delivers to any of the Collection Banks a Collection Notice pursuant
to SECTION 6.3, the Agent may request that the Seller, and the Seller thereupon
promptly shall and shall direct the Originator to, direct all Obligors on
Receivables to remit all payments thereon to a new depositary account (the "NEW
CONCENTRATION ACCOUNT") specified by the Agent and, at all times thereafter the
Seller shall not deposit or otherwise credit, and shall not permit the
Originator or any other Person to deposit or otherwise credit to the New
Concentration Account any cash or payment item other than Collections.
Alternatively, the Agent may request that the Seller, and the Seller thereupon
promptly shall, direct all Persons then making remittances to any Collection
Account listed on EXHIBIT III which remittances are not payments on Receivables
to deliver such remittances to a location other than an account listed on
EXHIBIT III.
(m) Minimum Net Worth. The Seller shall at all times maintain Net
-----------------
Worth of not less than the Required Capital Amount.
23
(n) Parent Demand Note.
------------------
(i) In the event that ▇▇▇▇'▇ Corporation shall fail to have a senior
long-term unsecured debt rating of at least BBB- from Standard & Poor's
Corporation, or ▇▇▇▇'▇ Corporation shall fail to have a long-term senior
unsecured debt rating of at least Baa3 from ▇▇▇▇▇'▇ Investors Service, Inc.
or a Trigger Event occurs, the Seller shall demand immediate repayment in
full of all principal outstanding under the Parent Demand Note.
(ii) In addition to the foregoing, in the event that Collections in
any month following the Facility Termination Date and other funds available
to the Seller are insufficient to pay the full amount of Discount, fees due
under the Fee Letter and servicing fees and expenses due to the Sub-
Servicer under the Sale Agreement, the Seller shall demand payment of a
portion of the outstanding principal under the Parent Demand Note, if any,
in an amount equal to the lesser of the unpaid principal thereunder or the
aggregate amount of Discount, fees due under the Fee Letter and servicing
fees and expenses due to the Sub-Servicer under the Sale Agreement which
were not paid from such Collections or other funds.
(iii) Lastly, if on any Business Day following the Facility
Termination Date, the Seller is unable to pay any deemed Collection due and
owing the Agent and the Purchasers under SECTION 1.8 on such day, the
Seller shall demand payment of a portion of the outstanding principal under
the Parent Demand Note, if any, in an amount equal to the lesser of the
unpaid principal thereunder or the aggregate amount of such deemed
Collections which the Seller was unable to pay.
Section 5.2. Negative Covenants of Seller. Until the date on which
----------------------------
the Aggregate Unpaids have been indefeasibly paid in full, the Seller hereby
covenants that:
(a) Name Change, Offices, Records and Books of Accounts. The Seller
---------------------------------------------------
will not change its name, identity or corporate structure (within the meaning of
Section 9-402(7) of any applicable enactment of the UCC), use any new trade name
or assumed business name to identify itself, or relocate its chief executive
office or any office where Records are kept unless it shall have: (i) given the
Agent at least 45 days prior notice thereof and (ii) delivered to the Agent all
financing statements, instruments and other documents requested by the Agent in
connection with such change or relocation.
(b) Change in Payment Instructions to Obligors. The Seller will not
------------------------------------------
add or terminate any bank as a Collection Bank from those listed in EXHIBIT III,
or make
24
any change in its instructions to Obligors regarding payments to be made to the
Seller or payments to be made to any Collection Account or Collection Bank,
unless the Agent shall have received, at least 10 days before the proposed
effective date therefor, (i) written notice of such addition, termination or
change and (ii) with respect to the addition of a Collection Bank or a
Collection Account, an executed account agreement from, and executed copies of a
Collection Account Agreement to, the Collection Bank; provided, however, that
the Seller may make changes in instructions to Obligors regarding payments if
such new instructions require such Obligor to make payments to another existing
Collection Account.
(c) Modifications of Receivables and Contracts. Except as provided
------------------------------------------
in Section 6.2(c), the Seller, acting as Servicer or otherwise, will not extend,
--------------
amend or otherwise modify the economic terms of any Receivable or of any
Contract related thereto other than in accordance with the Credit and Collection
Policy, or amend any Contract to convert it into "chattel paper", except that
the Seller may amend the economic terms of any Contract (and, to the extent
applicable, the Credit and Collection Policy) to: (x) comply with applicable
laws and regulations from time to time in effect in any state in which the
Seller now or hereafter extends consumer credit, (y) increase the interest rate,
fees or minimum monthly installments payable thereunder, and/or (z) shorten the
maturity of amounts outstanding thereunder (all of the foregoing, "PERMITTED
AMENDMENTS") PROVIDED the Seller promptly provides copies of each Permitted
Amendment to the Agent for distribution to the Purchasers.
(d) Sales, Liens, Etc. The Seller shall not, and shall not authorize
------------------
the Originator to, sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, or create or suffer to exist
any Adverse Claim upon (including, without limitation, the filing of any
financing statement) or with respect to, any Receivable or Related Security or
Collections in respect thereof, or upon or with respect to any Contract under
which any Receivable arises, or any lock-box or Collection Account or assign any
right to receive income in respect thereof (other than, in each case, the
creation of the interests therein in favor of the Agent and the Purchasers
provided for herein), and the Seller shall defend the right, title and interest
of the Agent and the Purchasers in, to and under any of the foregoing property,
against all claims of third parties claiming through or under the Seller or the
Originator.
(e) Nature of Business; Other Agreements; Other Indebtedness. The
--------------------------------------------------------
Seller shall not engage in any business or activity of any kind or enter into
any transaction or indenture, mortgage, instrument, agreement, contract, lease
or other undertaking, in each case other than the transactions contemplated and
authorized by this Agreement and the Sale Agreement. Without limiting the
generality of the foregoing, the Seller shall not create, incur, guarantee,
assume or suffer to exist any indebtedness or other liabilities, whether direct
or contingent, other than:
25
(i) as a result of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business,
(ii) the incurrence of obligations under this Agreement,
(iii) the incurrence of obligations, as expressly contemplated in the
Sale Agreement, to make payment to the Originator thereunder for the
purchase of Receivables from the Originator under the Sale Agreement, and
(iv) the incurrence of operating expenses in the ordinary course of
business of the type otherwise contemplated in SECTION 5.1(K) of this
Agreement.
In the event the Seller shall at any time borrow a "SUBORDINATED LOAN" under the
Sale Agreement, the obligations of the Seller in connection therewith shall be
subordinated to the obligations of the Seller to the Purchasers and the Agent
under this Agreement, on the terms provided for in the Subordinated Note and the
Sale Agreement.
(f) Amendments to Sale Agreement. The Seller shall not, without
----------------------------
the prior written consent of the Agent (which consent shall not be unreasonably
withheld or delayed):
(i) cancel or terminate the Sale Agreement,
(ii) give any consent, waiver, directive or approval under the Sale
Agreement,
(iii) waive any default, action, omission or breach under the Sale
Agreement, or otherwise grant any indulgence thereunder, or
(iv) amend, supplement or otherwise modify any of the terms of the
Sale Agreement.
(g) Amendments to Corporate Documents. The Seller shall not
---------------------------------
amend its Articles of Incorporation or By-Laws in any respect that would impair
its ability to comply with the terms or provisions of any of the Transaction
Documents, including, without limitation, SECTION 5.1(K) of this Agreement.
(h) Merger. The Seller shall not merge or consolidate with or
------
into, or convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions, and except as otherwise contemplated
herein) all or substantially all of its assets (whether now owned or hereafter
acquired) to, or acquire all or substantially all of the assets of, any Person.
26
(i) Restricted Junior Payments. The Seller shall not make any
--------------------------
Restricted Junior Payment:
(i) if any Trigger Event exists or would result therefrom; or
(ii) if (A) the product of the Loss Recourse Percentage times
outstanding Capital is greater than (B) the sum of the outstanding
principal balance of the Parent Demand Note plus Net Worth;
PROVIDED, HOWEVER, that the Seller may make payments on the Subordinated Note
(as defined in the Sale Agreement) to the extent permitted by the terms thereof
following a Termination Event under SECTION 7.2(C).
ARTICLE VI
ADMINISTRATION AND COLLECTION
Section 6.1. Designation of Servicer. (a) The servicing,
-----------------------
administration and collection of the Receivables shall be conducted by such
Person (the "SERVICER") so designated from time to time in accordance with this
Section 6.1. The Seller is hereby designated as, and hereby agrees to perform
-----------
the duties and obligations of, the Servicer pursuant to the terms of this
Agreement. The Agent may at any time following a Servicer Default designate as
Servicer any Person to succeed the Seller or any successor Servicer.
(b) The Seller is permitted to delegate, and the Seller hereby
advises the Purchasers and the Agent that it has delegated, to the Originator,
as subservicer of the Servicer, certain of its duties and responsibilities as
Servicer hereunder in respect of the Receivables transferred by the Originator
to the Seller. Notwithstanding the foregoing, (i) the Seller shall be and remain
primarily liable to the Agent and the Purchasers for the full and prompt
performance of all duties and responsibilities of the Servicer hereunder and
(ii) the Agent and the Purchasers shall be entitled to deal exclusively with the
Seller in matters relating to the discharge by the Servicer of its duties and
responsibilities hereunder, and the Agent and the Purchasers shall not be
required to give notice, demand or other communication to any Person other than
the Seller in order for communication to the Servicer and its subservicer or
other delegate in respect thereof to be accomplished. The Seller, at all times
that it is the Servicer, shall be responsible for providing its subservicer or
other delegate with any notice given under this Agreement.
(c) Without the prior written consent of the Required Investors,
(i) the Seller shall not be permitted to delegate any of its duties or
responsibilities as Servicer to any Person other than the Originator, and then
such delegation shall be limited to the activities of Servicer hereunder as the
same may relate to the Receivables originated by the Originator, and (ii) the
Originator shall not be permitted to further delegate to any other Person any of
the duties or
27
responsibilities of the Servicer delegated to it by the Seller. If at any time
the Agent shall designate as Servicer any Person other than the Seller, all
duties and responsibilities theretofore delegated by the Seller to the
Originator may, at the discretion of the Agent, be terminated forthwith on
notice given by the Agent to the Seller.
Section 6.2. Duties of Servicer. (a) The Servicer shall take or
------------------
cause to be taken all such actions as may be necessary or reasonably advisable
to collect each Receivable from time to time, all in accordance with applicable
laws, rules and regulations, with reasonable care and diligence, and in
accordance with the Credit and Collection Policy.
(b) The Servicer shall administer the Collections in accordance with
the procedures described herein and in Article I. The Servicer shall set aside
---------
and hold in trust for the account of the Seller and the Purchasers their
respective shares of the Collections of Receivables in accordance with Section
-------
1.7. The Servicer shall upon the request of the Agent after the occurrence of a
---
Termination Event, segregate, in a manner acceptable to the Agent, all cash,
checks and other instruments received by it from time to time constituting
Collections from the general funds of the Servicer or the Seller prior to the
remittance thereof in accordance with Section 1.7. If the Servicer shall be
-----------
required to segregate Collections pursuant to the preceding sentence, the
Servicer shall segregate and deposit with a bank designated by the Agent such
allocable share of Collections of Receivables set aside for the Purchasers on
the first Business Day following receipt by the Servicer of such Collections,
duly endorsed or with duly executed instruments of transfer. From and after a
Servicer Default, all Collection Accounts shall be required to be concentrated
on a daily basis into a concentration account at the Agent or at another bank
but under the Agent's exclusive dominion and control for the benefit of the
Seller and the applicable Purchasers, as their interests may appear, to be
distributed in accordance with Section 1.7.
-----------
(c) The Servicer, may, in accordance with the Credit and Collection
Policy, extend the maturity of any Receivable or adjust the Outstanding Balance
of any Receivable as the Servicer may determine to be appropriate to maximize
Collections thereof; provided, however, that such extension or adjustment shall
not alter the status of such Receivable as a Delinquent Receivable or Defaulted
Receivable or limit the rights of the Seller, the Agent or the Purchasers under
this Agreement. Notwithstanding anything to the contrary contained herein,
following the occurrence of a Servicer Default, the Agent shall have the
absolute and unlimited right to direct the Servicer to commence or settle any
legal action with respect to any Receivable or to foreclose upon or repossess
any Related Security.
(d) The Servicer shall hold in trust for the Seller and the
Purchasers, in accordance with their respective Receivable Interests, all
Records that evidence or relate to the Receivables, the related Contracts and
Related Security and/or the Collections or that are otherwise necessary or
desirable to collect the Receivables
28
and shall, as soon as practicable upon demand of the Agent following a Servicer
Default, deliver or make available to the Agent all such Records, at a place
selected by the Agent. The Servicer shall, as soon as practicable following
receipt thereof, turn over to the Seller (i) that portion of Collections of
Receivables representing the Seller's undivided fractional ownership interest
therein, less, in the event the Seller is not the Servicer, all reasonable out-
of-pocket costs and expenses of the Servicer of servicing, administering and
collecting the Receivables, and (ii) any cash collections or other cash proceeds
received with respect to Indebtedness not constituting Receivables. The
Servicer shall, from time to time at the request of any Purchaser, furnish to
the Purchasers (promptly after any such request) a calculation of the amounts
set aside for the Purchasers pursuant to Section 1.7.
-----------
(e) Any payment by an Obligor in respect of any indebtedness owed by
it to the Seller shall, except as otherwise specified by such Obligor or
otherwise required by contract or law and unless otherwise instructed by the
Agent, be applied as a Collection of any Receivable of such Obligor (starting
with the oldest such Receivable) to the extent of any amounts then due and
payable thereunder before being applied to any other receivable or other
obligation of such Obligor.
Section 6.3. Collection Notices. The Agent is authorized at any time
------------------
after a Servicer Default to date and to deliver to the Collection Banks, the
Collection Notices. The Seller hereby transfers to the Agent for the benefit of
the Purchasers, effective when the Agent delivers such notice, the exclusive
ownership and control of the Collection Accounts. In case any authorized
signatory of the Seller whose signature appears on a Collection Account
Agreement shall cease to have such authority before the delivery of such
Collection Notice, such Collection Notice shall nevertheless be valid as if such
authority had remained in force. The Seller hereby authorizes the Agent, and
agrees that at any time and from time to time following a Servicer Default, the
Agent shall be entitled to: (i) endorse the Seller's name on checks and other
instruments representing Collections, (ii) enforce the Receivables, the related
Contracts and the Related Security, and (iii) take such action as shall be
necessary or desirable to cause all cash, checks and other instruments
constituting Collections of Receivables to come into the possession of the Agent
rather than the Seller.
Section 6.4. Responsibilities of the Seller. Anything herein to the
------------------------------
contrary notwithstanding, the exercise by the Agent and the Purchasers of their
rights hereunder shall not release the Servicer or the Seller from any of their
duties or obligations with respect to any Receivables or under the related
Contracts. The Purchasers shall have no obligation or liability with respect to
any Receivables or related Contracts, nor shall any of them be obligated to
perform the obligations of the Seller.
Section 6.5. Reports. On the 20th day after each of the Seller's
-------
(approximately monthly) fiscal accounting periods and at such other times as the
29
Agent shall reasonably request, the Servicer shall prepare and forward to the
Agent a Periodic Report.
ARTICLE VII
SERVICER DEFAULTS AND TERMINATION EVENTS
Section 7.1. Servicer Defaults. The occurrence of any one or more of
-----------------
the following events shall constitute a Servicer Default:
(a) The Servicer shall fail to make any payment or deposit required
hereunder on or within one Business Day after the date when required to be made.
(b) The Servicer shall fail to perform or observe any term,
covenant or agreement under Article VI or Section 11.6, which failure remains
---------- ------------
unremedied for five Business Days after notice from the Agent, and such failure
shall have a Material Adverse Effect.
(c)(i) The Seller or the Servicer shall generally not pay its debts as
such debts become due or shall admit in writing its inability to pay its debts
generally or shall make a general assignment for the benefit of creditors; (ii)
any proceeding shall be instituted by the Seller or the Servicer seeking to
adjudicate it bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for it or any
substantial part of its property (each of the foregoing proceedings being
hereinafter referred to as an "INSOLVENCY PROCEEDING"); (iii) any Insolvency
Proceeding shall be instituted against the Seller and either (A) shall result in
the entry of an order for relief against the Seller, or (B) shall continue
undischarged, undismissed or unstayed for a period of 60 consecutive days; or
(iv) the Seller or the Servicer shall take any corporate action to authorize any
of the actions set forth in clauses (i)-(iii) above in this subsection (c).
Section 7.2. Termination Events. The occurrence of any one or more
------------------
of the following events shall constitute a Termination Event:
(a) The Seller shall fail (i) to make any payment or deposit
required under this Agreement or any of the other Transaction Documents on or
within one Business Day after the date when required to be made, or (ii) to
perform or observe any term, covenant or agreement hereunder and such failure
shall remain unremedied for five Business Days after notice from the Agent.
(b) Any representation, warranty, certification or statement made
by the Seller, the Servicer or the Originator in this Agreement, any other
Transaction Document or in any other document delivered pursuant hereto or
30
thereto shall prove to have been incorrect in any material respect when made or
deemed made and shall have a Material Adverse Effect.
(c) (i) Failure of the Originator to pay any Indebtedness in excess
of $10,000,000 when due; or the default by the Originator in the performance of
any term, provision or condition contained in any agreement under which any
Indebtedness in excess of $10,000,000 was created or is governed, the effect of
which is to cause, or to permit the holder or holders of such Indebtedness to
cause, such Indebtedness to become due prior to its stated maturity; or any
Indebtedness in excess of $10,000,000 of the Originator shall be declared to be
due and payable or required to be prepaid (other than by a regularly scheduled
payment) prior to the date of maturity thereof; or (ii) except as provided in
clause (a)(i) above: failure of the Seller to pay any Indebtedness when due; or
the default by the Seller in the performance of any term, provision or condition
contained in any agreement under which any Indebtedness was created or is
governed, the effect of which is to cause, or to permit the holder or holders of
such Indebtedness to cause, such Indebtedness to become due prior to its stated
maturity; or any Indebtedness of the Seller shall be declared to be due and
payable or required to be prepaid (other than by a regularly scheduled payment)
prior to the date of maturity thereof.
(d) A Servicer Default shall occur.
(e) The average of the Delinquency Ratios for the most recent three
(3) consecutive calendar months shall exceed 4.5%.
(f) The Charge-Off Ratio for the most recent twelve (12) consecutive
calendar months shall exceed 8.5%.
(g) A Change of Control shall occur.
(h) (i) The Originator shall fail to perform or observe any term,
covenant or agreement contained in any other Transaction Document and such
failure shall continue unremedied beyond any applicable grace or cure period
provided therein, or (ii) the Originator shall for any reason cease to transfer,
or cease to have the legal capacity or otherwise be incapable of transferring,
Receivables to the Seller, as purchaser under the Sale Agreement, or (iii) any
"EVENT OF DEFAULT" shall occur under the Sale Agreement.
(i) The aggregate Receivable Interests hereunder shall at any time
exceed 100%.
31
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Indemnities by the Seller. Without limiting any other
-------------------------
rights which the Agent or any Purchaser may have hereunder or under applicable
law, the Seller hereby agrees to indemnify the Agent and each Purchaser and
their respective officers, directors, agents and employees (each, an
"INDEMNIFIED PARTY") from and against any and all damages, losses, claims,
taxes, liabilities, costs, expenses and for all other amounts payable, including
reasonable attorneys' fees (which attorneys may be employees of the Agent or
such Purchaser) and disbursements (all of the foregoing being collectively
referred to as "INDEMNIFIED AMOUNTS") awarded against or actually incurred by
any of them arising out of or as a result of this Agreement or the acquisition,
either directly or indirectly, by a Purchaser of an interest in the Receivables,
excluding, however:
(i) Indemnified Amounts to the extent final judgment of a court
of competent jurisdiction holds that (A) such Indemnified Amounts resulted
primarily from gross negligence or willful misconduct on the part of the
Indemnified Party seeking indemnification, or (B) such Indemnified Amounts
resulted primarily from, arose primarily out of, or would not have occurred
but for: (x) any representation or warranty of such Indemnified Party
being materially incorrect, (y) the failure by such Indemnified Party to
perform or observe any covenant in this Agreement required to be performed
or observed by it, and (z) any breach by the Agent or any Investor of its
duties and obligations hereunder;
(ii) Indemnified Amounts to the extent the same includes losses
in respect of Eligible Receivables which are uncollectible on account of
the insolvency, bankruptcy or lack of creditworthiness of the related
Obligor and the aggregate amount of such uncollectible Eligible Receivables
exceeds the Loss Recourse Percentage of the Capital outstanding on the
Facility Termination Date;
(iii) taxes imposed by the country and state or province in which
such Indemnified Party's principal executive office is located, on or
measured by the overall net income, capital or assets of such Indemnified
Party to the extent that the computation of such taxes is consistent with
the Intended Characterization;
(iv) attorneys' fees and other expenses incurred in connection
with the making of any assignment, or the sale of any participation,
pursuant to Article X;
---------
(v) Indemnified Amounts arising with respect to events occurring
after payment in full of the Aggregate Unpaids and termination of this
Agreement; and
32
(vi) Indemnified Amounts to the extent the same (1) duplicate
other Aggregate Unpaids which have been paid pursuant to another provision
of this Agreement, or (2) represent expenses of the types addressed in
Section 8.3 of this Agreement to the extent such expenses (A) exceed the
-----------
applicable limitations set forth therein or (B) are excluded from the
Seller's reimbursement obligations thereunder;
provided, however, that nothing contained in this sentence shall limit the
liability of the Seller or the Servicer or limit the recourse of the Purchasers
to the Seller or Servicer for amounts otherwise specifically provided to be paid
by the Seller or (for so long as the Seller shall be the Servicer) the Servicer
under the terms of this Agreement. Without limiting the generality of the
foregoing indemnification, the Seller shall indemnify the Agent and the
Purchasers for Indemnified Amounts (including, without limitation, losses in
respect of uncollectible receivables, regardless of whether reimbursement
therefor would constitute recourse to the Seller or the Servicer) relating to or
resulting from:
(a) any representation or warranty made by the Seller, the Originator
or (for so long as the Seller shall be the Servicer) the Servicer (or any
officers of the Seller or (for so long as the Seller shall be the Servicer)
the Servicer) under or in connection with this Agreement, any other
Transaction Document, any Periodic Report or any other information or
report delivered by the Seller, the Originator or (for so long as the
Seller shall be the Servicer) the Servicer pursuant hereto or thereto,
which shall have been false or incorrect when made or deemed made;
(b) the failure by the Seller, the Originator or (for so long as the
Seller shall be the Servicer) the Servicer to comply with any applicable
law, rule or regulation with respect to any Receivable or Contract related
thereto, or the nonconformity of any Receivable or Contract included
therein with any such applicable law, rule or regulation;
(c) any failure of the Seller, the Originator or (for so long as the
Seller shall be the Servicer) the Servicer to perform its duties or
obligations in accordance with the provisions of this Agreement or any of
the other Transaction Documents;
(d) any products liability or similar claim arising out of or in
connection with merchandise, insurance or services which are the subject of
any Contract;
(e) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any Receivable
(including, without limitation, a defense based on
33
such Receivable or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in accordance
with its terms), or any other claim resulting from the sale of the
merchandise or service related to such Receivable or the furnishing or
failure to furnish such merchandise or services;
(f) the commingling of Collections of Receivables at any time with
other funds;
(g) any investigation, litigation or proceeding related to or arising
from this Agreement, any of the other Transaction Documents, the
transactions contemplated hereby or thereby, the use of the proceeds of a
purchase, the ownership of the Receivable Interests or any other
investigation, litigation or proceeding relating to the Seller or the
Originator in which any Indemnified Party becomes involved as a result of
any of the transactions contemplated hereby;
(h) any inability to litigate any claim against any Obligor in
respect of any Receivable as a result of such Obligor being immune from
civil and commercial law and suit on the grounds of sovereignty or
otherwise from any legal action, suit or proceeding;
(i) any Servicer Default described in Section 7.1(c);
--------------
(j) the failure to vest and maintain vested in the Agent and the
Purchasers, or to transfer to the Agent and the Purchasers, legal and
equitable title to, and ownership of, a first priority perfected undivided
percentage ownership (to the extent of the Receivable Interests
contemplated hereunder) in the Receivables, the Related Security and the
Collections, free and clear of any Adverse Claim; or
(k) any failure of the Seller to give reasonably equivalent value to
the Originator under the Sale Agreement in consideration of the transfer by
the Originator of any Receivable, or any attempt by any Person to void any
such transfer under statutory provisions or common law or equitable action,
including, without limitation, any provision of the Bankruptcy Code.
Section 8.2. Increased Costs and Reduced Return.
----------------------------------
(a) If after the date hereof, any Funding Source shall be charged any
fee, expense or increased cost on account of the adoption of any applicable law,
rule or regulation (including any applicable law, rule or regulation regarding
capital adequacy) or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
34
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency (a "REGULATORY CHANGE"): (i)
which subjects any Funding Source to any charge or withholding on or with
respect to any Funding Agreement or a Funding Source's obligations under a
Funding Agreement, or on or with respect to the Receivables, or changes the
basis of taxation of payments to any Funding Source of any amounts payable under
any Funding Agreement (except for changes in the rate of tax on the overall net
income of a Funding Source) or (ii) which imposes, modifies or deems applicable
any reserve, assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the account of a Funding
Source, or credit extended by a Funding Source pursuant to a Funding Agreement
or (iii) which imposes any other condition the result of which is to increase
the cost to a Funding Source of performing its obligations under a Funding
Agreement, or to reduce the rate of return on a Funding Source's capital as a
consequence of its obligations under a Funding Agreement, or to reduce the
amount of any sum received or receivable by a Funding Source under a Funding
Agreement or to require any payment calculated by reference to the amount of
interests or loans held or interest received by it, then, upon demand by the
Agent, the Seller shall pay to the Agent, for the benefit of the relevant
Funding Source, such amounts charged to such Funding Source or compensate such
Funding Source for such reduction; PROVIDED, HOWEVER, that the Seller shall not
be obligated to reimburse any Funding Source other than an Investor for any of
the increased costs described in the foregoing clauses (i), (ii) or (iii) unless
such Funding Source is entitled to seek and, in fact demands, reimbursement
therefor from a Purchaser or its assets.
(b) Each Investor agrees that it shall use its reasonable best
efforts to attempt to avoid the incurrence of the increased costs described in
Section 8.2(a); PROVIDED THAT such Investor shall not be obligated to take any
--------------
action that would, in the reasonable opinion of such Investor, be
disadvantageous to such Investor. In the event that any Funding Source claims
any increased costs pursuant to Section 8.2(a), the applicable Purchaser will
--------------
furnish to the Agent a certificate setting forth the basis and amount of each
request for reimbursement by such Funding Source. Determinations by a Purchaser
of increased costs referred to in Section 8.2(a) shall be conclusive, absent
--------------
manifest error.
Section 8.3. Other Costs and Expenses. The Seller shall pay to the
------------------------
Agent and PREFCO on demand all costs and out-of-pocket expenses in connection
with the preparation, execution, delivery, amendment, waiver and administration
of this Agreement, the transactions contemplated hereby and the other documents
to be delivered hereunder, including without limitation, the cost of PREFCO's
auditors auditing the books, records and procedures of the Seller, reasonable
fees and out-of-pocket expenses of legal counsel for PREFCO and the Agent (which
such counsel may be employees of PREFCO or the Agent) with respect thereto and
with respect to advising PREFCO and the Agent as to their respective rights and
remedies under this Agreement; PROVIDED, HOWEVER, that (a) the Seller's
obligation to reimburse the Agent and PREFCO for legal fees in connection with
any
35
amendment to increase the Purchase Limit in accordance with Section 1.1(c) shall
--------------
not exceed $1,000 per amendment, (b) the Seller's obligation to reimburse the
Agent for audit fees shall not exceed $5,000 for each biennial audit, (c) the
Seller shall not be obligated to reimburse the Agent or any Purchaser for any
legal fees or out-of-pocket expenses incurred in connection with any extension
of the Facility Termination Date and Liquidity Termination Date pursuant to
Section 1.1(d), the making of any assignment or the sale of any participation
--------------
pursuant to Article X of this Agreement, or any dispute arising amongst any of
---------
the Purchasers and/or between any Purchaser(s) and the Agent, and (d) the Seller
shall not be obligated to reimburse the Agent or any Purchaser for any fees or
expenses which are expressly excluded from the indemnifications set forth in
Sections 8.2 and 8.3. From and after the occurrence of a Servicer Default, the
--------------------
timing and expense limitations on future audits contained in the foregoing
clause (c) shall no longer apply. The Seller shall pay to the Agent on demand
any and all costs and expenses of the Agent and the Purchasers, if any,
including reasonable counsel fees and expenses in connection with the
enforcement of this Agreement and the other documents delivered hereunder and in
connection with any restructuring or workout of this Agreement or such
documents, or the administration of this Agreement following a Servicer Default.
ARTICLE IX
THE AGENT
Section 9.1. Authorization and Action. Each Purchaser hereby
------------------------
designates and appoints First Chicago to act as its agent hereunder and under
each other Transaction Document, and authorizes the Agent to take such actions
as agent on its behalf and to exercise such powers as are delegated to the Agent
by the terms of this Agreement and the other Transaction Documents together with
such powers as are reasonably incidental thereto. The Agent shall not have any
duties or responsibilities, except those expressly set forth herein or in any
other Transaction Document, or any fiduciary relationship with any Purchaser,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities on the part of the Agent shall be read into this Agreement or any
other Transaction Document or otherwise exist for the Agent. In performing its
functions and duties hereunder and under the other Transaction Documents, the
Agent shall act solely as agent for the Purchasers and does not assume nor shall
be deemed to have assumed any obligation or relationship of trust or agency with
or for the Seller or any of its successors or assigns. The Agent shall not be
required to take any action which exposes the Agent to personal liability or
which is contrary to this Agreement, any other Transaction Document or
applicable law. The appointment and authority of the Agent hereunder shall
terminate upon the indefeasible payment in full of all Aggregate Unpaids. Each
Purchaser hereby authorizes the Agent to execute each of the Uniform Commercial
Code financing statements and the Collections Notices on behalf of such
Purchaser (the terms of which shall be binding on such Purchaser).
36
Section 9.2. Delegation of Duties. The Agent may execute any of its
--------------------
duties under this Agreement and each other Transaction Document by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
responsible to any Purchaser for the negligence or misconduct of any agents or
attorneys-in-fact selected by the Agent with reasonable care.
Section 9.3. Exculpatory Provisions. Neither the Agent nor any of
----------------------
its directors, officers, agents or employees shall be (i) liable for any action
lawfully taken or omitted to be taken by it or them under or in connection with
this Agreement or any other Transaction Document (except for its, their or such
Person's own gross negligence or willful misconduct), or (ii) responsible in any
manner to any of the Purchasers for any recitals, statements, representations or
warranties made by the Seller contained in this Agreement, any other Transaction
Document or any certificate, report, statement or other document referred to or
provided for in, or received under or in connection with, this Agreement, or any
other Transaction Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement, or any other
Transaction Document or any other document furnished in connection herewith or
therewith, or for any failure of the Seller to perform its obligations hereunder
or thereunder, or for the satisfaction of any condition specified in Article IV,
----------
or for the perfection, priority, condition, value or sufficiency or any
collateral pledged in connection herewith. The Agent shall not be under any
obligation to any Purchaser to ascertain or to inquire as to the observance or
performance of any of the agreements or covenants contained in, or conditions
of, this Agreement or any other Transaction Document, or to inspect the
properties, books or records of the Seller. The Agent shall not be deemed to
have knowledge of any Servicer Default, Potential Servicer Default, Termination
Event or Potential Termination Event unless the Agent has received notice from
the Seller or a Purchaser.
Section 9.4. Reliance by Agent. The Agent shall in all cases be
-----------------
entitled to rely, and shall be fully protected in relying, upon any document or
conversation believed by it to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons and upon advice and statements of
legal counsel (including, without limitation, counsel to the Seller),
independent accountants and other experts selected by the Agent. Each of the
Purchasers hereby agrees that: (a) the Agent shall in all cases be fully
justified in failing or refusing to take any action under this Agreement or any
other Transaction Document unless it shall first receive such advice or
concurrence of PREFCO or the Required Investors or all of the Purchasers, as
applicable, as it deems appropriate and it shall first be indemnified to its
satisfaction by the Purchasers, provided that unless and until the Agent shall
have received such advice, the Agent may take or refrain from taking any action,
as the Agent shall deem advisable and in the best interests of the Purchasers,
and (b) the Agent shall in all cases be fully protected from any claims brought
by or behalf of any Purchaser(s) in acting, or in refraining from acting, in
accordance with a request of PREFCO or the Required Investors or
37
all of the Purchasers, as applicable, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Purchasers.
Section 9.5. Non-Reliance on Agent and Other Purchasers. Each
------------------------------------------
Purchaser expressly acknowledges that neither the Agent, nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates has made
any representations or warranties to it and that no act by the Agent hereafter
taken, including, without limitation, any review of the affairs of the Seller,
shall be deemed to constitute any representation or warranty by the Agent. Each
Purchaser represents and warrants to the Agent that it has and will,
independently and without reliance upon the Agent or any other Purchaser and
based on such documents and information as it has deemed appropriate, made its
own appraisal of and investigation into the business, operations, property,
prospects, financial and other conditions and creditworthiness of the Seller and
made its own decision to enter into this Agreement, the other Transaction
Documents and all other documents related hereto or thereto.
Section 9.6. Reimbursement and Indemnification. The Investors agree
---------------------------------
to reimburse and indemnify the Agent and its officers, directors, employees,
representatives and agents ratably according to their Pro Rata Shares, to the
extent not paid or reimbursed by the Seller (i) for any amounts for which the
Agent, acting in its capacity as Agent, is entitled to reimbursement by the
Seller hereunder and (ii) for any other expenses incurred by the Agent, in its
capacity as Agent and acting on behalf of the Purchasers, in connection with the
administration and enforcement of this Agreement and the other Transaction
Documents.
Section 9.7. Agent in its Individual Capacity. The Agent and its
--------------------------------
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Seller or any Affiliate of the Seller as though the
Agent were not the Agent hereunder. With respect to the acquisition of
Receivable Interests pursuant to this Agreement, the Agent shall have the same
rights and powers under this Agreement as any Purchaser and may exercise the
same as though it were not the Agent, and the terms "Investor," "Purchaser,"
"Investors" and "Purchasers" shall include the Agent in its individual capacity.
Section 9.8. Successor Agent. The Agent may, upon five days' notice
---------------
to the Seller and the Purchasers, and the Agent will, upon the direction of all
of the Purchasers (other than the Agent, in its individual capacity) resign as
Agent. If the Agent shall resign, then the Required Investors during such five-
day period shall appoint from among the Purchasers a successor agent. If for
any reason no successor Agent is appointed by the Required Investors during such
five-day period, then, effective upon the termination of such five day period,
the Purchasers shall perform all of the duties of the Agent hereunder and under
the other Transaction Documents and the Seller shall make all payments in
respect of the Aggregate Unpaids directly to the applicable Purchasers and for
all purposes shall deal directly with the Purchasers. After the effectiveness
of any retiring Agent's
38
resignation hereunder as Agent,the retiring Agent shall be discharged from its
duties and obligations to the Purchasers hereunder and under the other
Transaction Documents, and the provisions of this Article IX and Article VIII
---------- ------------
shall continue in effect for its benefit with respect to any actions taken or
omitted to be taken by it while it was Agent under this Agreement and under the
other Transaction Documents.
ARTICLE X
ASSIGNMENTS; PARTICIPATIONS
Section 10.1. Assignments. (a) The Seller and each Investor hereby
-----------
agree and consent to the complete or partial assignment by PREFCO of all of its
rights under, interest in, title to and obligations under this Agreement to the
Investors pursuant to Section 2.1, and upon such assignment, PREFCO shall be
-----------
released from its obligations so assigned. Each Investor hereby further agrees
and consents to the complete or partial assignment by PREFCO of all of its
rights under, interest in, title to and obligations under this Agreement to any
other Eligible Person, and upon such assignment, PREFCO shall be released from
its obligations so assigned. Further, the Seller and each Investor hereby agree
that any assignee of PREFCO of this Agreement or all or any of the Receivable
Interests of PREFCO shall have all of the rights and benefits under this
Agreement as if the term "PREFCO" explicitly referred to such party, and no such
assignment shall in any way impair the rights and benefits of PREFCO hereunder.
The Seller shall not have the right to assign its rights or obligations under
this Agreement.
(b) With the consent of the Seller (which consent shall not be
unreasonably withheld) and of PREFCO, any Investor may at any time and from time
to time assign to one or more Eligible Persons ("PURCHASING INVESTORS") all or
any part of its rights and obligations under this Agreement pursuant to an
assignment agreement, in a form satisfactory to the Agent (each, an "ASSIGNMENT
AGREEMENT") executed by such Purchasing Investor and such selling Investor.
Each Purchasing Investor must be an Eligible Person and must deliver to the
Agent and the Seller an enforceability opinion in form and substance
satisfactory to the Agent prior to the effectiveness of any Assignment
Agreement. Upon delivery of the executed Assignment Agreement to the Agent
(with a copy to the Seller), such selling Investor shall be released from its
obligations hereunder to the extent of such assignment. Thereafter, the
Purchasing Investor shall for all purposes be an Investor party to this
Agreement and shall have all the rights and obligations of an Investor under
this Agreement to the same extent as if it were an original party hereto and no
further consent or action by the Seller, the Purchasers or the Agent shall be
required.
(c) Each of the Investors agrees that in the event that it shall
cease to be an Eligible Person (an "AFFECTED INVESTOR"), such Affected Investor
shall be obliged, at the request of PREFCO, the Seller or the Agent, to assign
all of its rights
39
and obligations hereunder to (x) another Investor or (y) another Eligible Person
nominated by the Agent or the Seller and willing to participate in this
Agreement through the Liquidity Termination Date in the place of such Affected
Investor; provided that the Affected Investor receives payment in full, pursuant
to an Assignment Agreement, of an amount equal to such Investor's Pro Rata Share
of the Capital and Discount owing to the Investors and all accruing but unpaid
fees and other costs and expenses payable in respect of its Pro Rata Share of
the Receivable Interests.
Section 10.2. Participations. Any Investor may, in the ordinary
--------------
course of its business at any time sell to one or more Eligible Persons (each, a
"PARTICIPANT") participating interests in its Pro Rata Share of the Receivable
Interests of the Investors, its obligation to pay PREFCO its Acquisition Amounts
or any other interest of such Investor hereunder. Notwithstanding any such sale
by an Investor of a participating interest to a Participant, such Investor's
rights and obligations under this Agreement shall remain unchanged, such
Investor shall remain solely responsible for the performance of its obligations
hereunder, and the Seller, PREFCO and the Agent shall continue to deal solely
and directly with such Investor in connection with such Investor's rights and
obligations under this Agreement. Each Investor agrees that any agreement
between such Investor and any such Participant in respect of such participating
interest shall not restrict such Investor's right to agree to any amendment,
supplement, waiver or modification to this Agreement, except for any amendment,
supplement, waiver or modification described in clause (i) of Section 11.1(b).
---------------
ARTICLE XI
MISCELLANEOUS
Section 11.1. Waivers and Amendments. (a) No failure or delay on the
----------------------
part of any party hereto in exercising any power, right or remedy under this
Agreement shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or remedy preclude any other further exercise
thereof or the exercise of any other power, right or remedy. The rights and
remedies herein provided shall be cumulative and nonexclusive of any rights or
remedies provided by law. Any waiver of this Agreement shall be effective only
in the specific instance and for the specific purpose for which given.
(b) No provision of this Agreement may be amended, supplemented,
modified or waived except in writing in accordance with the provisions of this
Section 11.1(b). PREFCO, the Seller and the Agent, at the direction of the
---------------
Required Investors, may enter into written modifications or waivers of any
provisions of this Agreement, provided, however, that no such modification or
waiver shall:
40
(i) without the consent of each affected Purchaser, (A) extend
the Liquidity Termination Date or the date of any payment or deposit of
Collections by the Seller or the Servicer, (B) reduce the rate or extend
the time of payment of Discount (or any component thereof), (C) reduce any
fee payable to the Agent for the benefit of the Purchasers, (D) except
pursuant to Article X hereof, change the amount of the Capital of any
---------
Purchaser, an Investor's Pro Rata Share or an Investor's Commitment, (E)
amend, modify or waive any provision of the definition of Required
Investors or this Section 11.1(b) or release all or any substantial portion
---------------
of the Receivable Interests, (F) consent to or permit the assignment or
transfer by the Seller of any of its rights and obligations under this
Agreement, (G) change the definition of "Eligible Receivable" or "Loss
Recourse Percentage," or (H) amend or modify any defined term (or any
defined term used directly or indirectly in such defined term) used in
clauses (A) through (G) above in a manner which would circumvent the
intention of the restrictions set forth in such clauses; or
(ii) without the written consent of the then Agent, amend, modify
or waive any provision of this Agreement if the effect thereof is to affect
the rights or duties of such Agent.
Notwithstanding the foregoing, (i) without the consent of the Investors, the
Agent may, with the consent of the Seller, amend this Agreement solely to add
additional Persons as Investors hereunder and (ii) without the consent of the
Seller, the Agent, the Required Investors and PREFCO may enter into amendments
to modify any of the terms or provisions of Article II, Article IX, Article X or
---------- ---------- ---------
Section 11.13, provided that such amendment has no negative impact upon the
-------------
Seller and the Seller promptly receives a copy of each such amendment. Any
modification or waiver made in accordance with this Section 11.1 shall apply to
------------
each of the Purchasers equally and shall be binding upon the Seller, the
Purchasers and the Agent.
Section 11.2. Notices. Except as provided below, all communications
-------
and notices provided for hereunder shall be in writing (including bank wire,
telecopy or electronic facsimile transmission or similar writing) and shall be
given to the other parties hereto at their respective addresses or telecopy
numbers set forth on the signature pages hereof. The Seller hereby authorizes
the Agent to effect purchases and Tranche Period and Discount Rate selections
based on telephonic notices made by any Person who identifies himself or herself
as an individual who has been identified in writing as an authorized
representative of the Seller by its chairman, president or senior vice president
and chief financial officer and whom the Agent in good faith believes to be such
authorized representative. The Seller agrees to deliver promptly to the Agent a
written confirmation of each telephonic notice signed by an authorized
representative of the Seller. However, the absence of such confirmation shall
not affect the validity of such notice. If the written
41
confirmation differs from the action taken by the Agent, the records of the
Agent shall govern absent manifest error.
Section 11.3. Ratable Payments. If any Purchaser, whether by setoff
----------------
or otherwise, has payment made to it with respect to any portion of the
Aggregate Unpaids owing to such Purchaser (other than payments received pursuant
to Section 8.2 or 8.3) in a greater proportion than that received by any other
----------- ---
Purchaser entitled to receive a ratable share of such Aggregate Unpaids, such
Purchaser agrees, promptly upon demand, to purchase for cash without recourse or
warranty a portion of the Aggregate Unpaids held by the other Purchasers so that
after such purchase each Purchaser will hold its ratable proportion of the
Aggregate Unpaids; provided that if all or any portion of such excess amount is
thereafter recovered from such Purchaser, such purchase shall be rescinded and
the purchase price restored to the extent of such recovery, but without
interest.
Section 11.4. Protection of Ownership Interests of the Purchasers.
---------------------------------------------------
(a) The Seller agrees that from time to time, at its expense, it will promptly
execute and deliver all instruments and documents, and take all actions, that
may be necessary or reasonably desirable, to perfect, protect or more fully
evidence the Receivable Interests, or to enable the Agent or the Purchasers to
exercise and enforce their rights and remedies hereunder. The Agent may, or the
Agent may direct the Seller to, notify the Obligors of Receivables, at any time
following the occurrence of a Servicer Default and at the Seller's expense, of
the ownership interests of the Purchasers under this Agreement and, following a
Servicer Default, may also direct that payments of all amounts due or that
become due under any or all Receivables be made directly to the Agent or its
designee. The Seller shall, at any Purchaser's request, withhold the identity
of such Purchaser in any such notification.
(b) If the Seller or the Servicer fails to perform any of its
obligations hereunder, the Agent or any Purchaser may (but shall not be required
to) perform, or cause performance of, such obligation; and the Agent's or such
Purchaser's costs and expenses incurred in connection therewith shall be payable
by the Seller (if the Servicer that fails to so perform is the Seller or an
Affiliate thereof) as provided in Section 8.3, as applicable. The Seller and
-----------
the Servicer each irrevocably authorizes the Agent in the sole discretion of the
Agent, and appoints the Agent as its attorney-in-fact, to act on behalf of the
Seller and the Servicer at any time or times before the payment in full of the
Aggregate Unpaids: (i) to execute on behalf of the Seller as debtor and to file
financing statements necessary or desirable in the Agent's sole discretion to
perfect and to maintain the perfection and priority of the interest of the
Purchasers in the Receivables and (ii) to file a carbon, photographic or other
reproduction of this Agreement or any financing statement with respect to the
Receivables as a financing statement in such offices as the Agent in its sole
discretion deems necessary or desirable to perfect and to maintain the
perfection and priority of the interests of the Purchasers in the Receivables.
This appointment is coupled with an interest and is irrevocable.
42
Section 11.5. Confidentiality. (a) The Seller shall maintain and
---------------
shall cause each of its employees and officers to maintain the confidentiality
of this Agreement and the other confidential proprietary information with
respect to the Agent and PREFCO and their respective businesses obtained by it
or them in connection with the structuring, negotiating and execution of the
transactions contemplated herein, except that the Seller and its officers and
employees may disclose such information to the Seller's external accountants and
attorneys, to other Persons conducting due diligence with respect to the Seller,
to the Seller's and such other Person's officers, directors, employees, outside
consultants and attorneys so long as such information is kept confidential by
them, and as required by any applicable law or order of any judicial or
administrative proceeding; PROVIDED, HOWEVER, that "confidential proprietary
information" shall not include information which (i) is or becomes generally
available to the public other than as a result of a disclosure by the Seller;
(ii) was available to the Seller on a non-confidential basis prior to its
disclosure to the Seller by a Purchaser or the Agent; or (iii) becomes available
to the Seller on a non-confidential basis from a Person other than the Agent or
PREFCO who, to the best knowledge of the Seller, is not otherwise bound by a
confidentiality agreement with the Agent or any Purchaser or is not otherwise
prohibited from transmitting the information to the Seller.
(b) Each of the Agent and the Purchasers shall maintain and shall
cause each of its employees and officers to maintain the confidentiality of all
nonpublic information concerning the Seller and its business obtained in
connection with this Agreement and the transactions contemplated herein;
PROVIDED, HOWEVER, that "nonpublic information" shall not include information
which (i) is or becomes generally available to the public other than as a result
of a disclosure by the Agent or such Purchaser; (ii) was available to the Agent
or such Purchaser on a non-confidential basis prior to its disclosure to the
Agent or such Purchaser by the Seller; or (iii) becomes available to the Agent
or a Purchaser on a non-confidential basis from a Person other than the Seller
who, to the best knowledge of the Agent or such Purchaser, is not otherwise
bound by a confidentiality agreement with the Seller or is not otherwise
prohibited from transmitting the information to the Agent or such Purchaser.
Anything herein to the contrary notwithstanding, the Seller hereby consents to
the disclosure of any nonpublic information with respect to it (i) to the Agent,
the Investors or PREFCO by each other, (ii) by the Agent or the Purchasers to
any prospective or actual assignee or participant of any of them who signs a
written confidentiality agreement containing terms and conditions consistent
with the terms of this Section 11.5(b), or (iii) by the Agent to any rating
---------------
agency, Commercial Paper dealer or provider of a surety, guaranty or credit or
liquidity enhancement to PREFCO or to any other financing or securitization
conduit for which First Chicago provides managerial services or acts as the
administrative agent and to any officers, directors, employees, outside
accountants and attorneys of any of the foregoing; PROVIDED such information is
kept confidential by such Persons and used solely for evaluating matters
pertaining to this Agreement and the transaction contemplated herein. In
addition, the Purchasers and the Agent may disclose any such nonpublic
information pursuant to any law, rule, regulation,
43
direction, request or order of any judicial, administrative or regulatory
authority or proceedings (whether or not having the force or effect of law).
Section 11.6. Bankruptcy Petition. The Seller, the Servicer, the
-------------------
Agent and each Investor hereby covenants and agrees that, prior to the date
which is one year and one day after the payment in full of all outstanding
senior Indebtedness of PREFCO, it will not institute against, or join any other
Person in instituting against, PREFCO any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States.
Section 11.7. Limitation of Liability. Except with respect to any
-----------------------
claim arising out of the willful misconduct or gross negligence of PREFCO, the
Agent or any Investor, no claim may be made by the Seller, the Servicer or any
other Person against PREFCO, the Agent or any Investor or their respective
Affiliates, directors, officers, employees, attorneys or agents for any special,
indirect, consequential or punitive damages in respect of any claim for breach
of contract or any other theory of liability arising out of or related to the
transactions contemplated by this Agreement, or any act, omission or event
occurring in connection therewith; and the Seller hereby waives, releases, and
agrees not to ▇▇▇ upon any claim for any such damages, whether or not accrued
and whether or not known or suspected to exist in its favor.
SECTION 11.8. CHOICE OF LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
-------------
ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS.
SECTION 11.9. CONSENT TO JURISDICTION. THE SELLER HEREBY IRREVOCABLY
-----------------------
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY THE SELLER PURSUANT
TO THIS AGREEMENT AND THE SELLER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF
THE AGENT OR ANY PURCHASER TO BRING PROCEEDINGS AGAINST THE SELLER IN THE COURTS
OF ANY OTHER JURISDICTION WHEREIN ANY ASSETS OF THE SELLER OR THE ORIGINATOR MAY
BE LOCATED. ANY JUDICIAL PROCEEDING BY THE SELLER AGAINST THE AGENT OR ANY
PURCHASER OR ANY AFFILIATE OF THE AGENT OR A PURCHASER INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
THIS AGREEMENT OR ANY DOCUMENT
44
EXECUTED BY THE SELLER PURSUANT TO THIS AGREEMENT SHALL BE BROUGHT ONLY IN A
COURT IN CHICAGO, ILLINOIS.
SECTION 11.10. WAIVER OF JURY TRIAL. THE AGENT, THE SELLER AND EACH
--------------------
PURCHASER HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
AGREEMENT, ANY DOCUMENT EXECUTED BY THE SELLER PURSUANT TO THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
Section 11.11. Integration; Survival of Terms.
------------------------------
(a) This Agreement, the Collection Account Agreements and the Fee
Letter contain the final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to the
subject matter hereof superseding all prior oral or written understandings.
(b) The provisions of Article VIII and Section 11.6 shall survive any
------------ ------------
termination of this Agreement.
Section 11.12. Counterparts; Severability. This Agreement may be
--------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
Section 11.13. First Chicago Roles. Each of the Investors
-------------------
acknowledges that First Chicago acts, or may in the future act, (i) as
administrative agent for PREFCO, (ii) as issuing and paying agent for the
Commercial Paper, (iii) to provide credit or liquidity enhancement for the
timely payment for the Commercial Paper and (iv) to provide other services from
time to time for PREFCO (collectively, the "FIRST CHICAGO ROLES"). Without
limiting the generality of this Section 11.13, each Investor hereby acknowledges
-------------
and consents to any and all First Chicago Roles and agrees that in connection
with any First Chicago Role, First Chicago may take, or refrain from taking, any
action which it, in its discretion, deems appropriate, including, without
limitation, in its role as administrative agent for PREFCO, the giving of notice
to the Agent of a mandatory purchase pursuant to Section 2.1.
-----------
45
Section 11.14. Characterization.
----------------
(a) It is the intention of the parties hereto that each purchase
hereunder shall constitute an absolute and irrevocable sale, which purchase
shall provide the applicable Purchaser with the full benefits of ownership of
the applicable Receivable Interest. Except as specifically provided in this
Agreement, each sale of a Receivable Interest hereunder is made without recourse
to the Seller; PROVIDED, HOWEVER, that (i) the Seller shall be liable to each
Purchaser and the Agent for all representations, warranties and covenants made
by the Seller pursuant to the terms of this Agreement, and (ii) such sale does
not constitute and is not intended to result in an assumption by any Purchaser
or the Agent or any assignee thereof of any obligation of the Seller or the
Originator or any other person arising in connection with the Receivables, the
Related Security, or the related Contracts, or any other obligations of the
Seller or the Originator.
(b) If the conveyance by the Seller to the Purchasers of interests in
Receivables hereunder shall be characterized as a secured loan and not a sale,
it is the intention of the parties hereto that this Agreement shall constitute a
security agreement under applicable law, and that the Seller shall be deemed to
have granted to the Agent for the ratable benefit of the Purchasers a duly
perfected security interest in all of the Seller's right, title and interest in,
to and under the Receivables, the Collections, each Collection Account, all
Related Security, all payments on or with respect to such Receivables, all other
rights relating to and payments made in respect of the Receivables, and all
proceeds of any thereof prior to all other liens on and security interests
therein. After a Servicer Default, the Agent and the Purchasers shall have, in
addition to the rights and remedies which they may have under this Agreement,
all other rights and remedies provided to a secured creditor after default under
the UCC and other applicable law, which rights and remedies shall be cumulative.
46
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their duly authorized officers or representatives
as of the date hereof.
KOHL'S RECEIVABLES CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇
Senior Vice President and
Chief Financial Officer
Address:
-------
Kohl's Receivables Corporation
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇
Senior Vice President and Chief
Financial Officer
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
47
PREFERRED RECEIVABLES FUNDING CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------------------
Authorized Signatory
Address:
-------
Preferred Receivables Funding Corporation
c/o The First National Bank of Chicago
One First National Plaza
Asset-Backed Markets, 21st Floor
Chicago, Illinois 60670-0596
Attn: ▇▇▇▇ ▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
INVESTORS:
Commitment
----------
$200,000,000.00 THE FIRST NATIONAL BANK OF CHICAGO, as an Investor
and as Agent
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇
Authorized Agent
Address:
-------
The First National Bank of Chicago
One First National Plaza
Asset-Backed Markets, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Phone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
48
EXHIBIT I
DEFINITIONS
AS USED IN THIS AGREEMENT, THE FOLLOWING TERMS SHALL HAVE THE
FOLLOWING MEANINGS (SUCH MEANINGS TO BE EQUALLY APPLICABLE TO BOTH THE SINGULAR
AND PLURAL FORMS OF THE TERMS DEFINED):
"ACCOUNT" means a retail credit or charge card account originated by
the Originator.
"ACQUISITION AMOUNT" means, on the date of any purchase from PREFCO of
Receivable Interests pursuant to Section 2.1, (i) with respect to each Investor
-----------
other than First Chicago, the lesser of (a) such Investor's Pro Rata Share of
the PREFCO Transfer Price and (b) such Investor's unused Commitment and (ii)
with respect to First Chicago, the difference between (a) the PREFCO Transfer
Price and (b) the aggregate amount payable by all other Investors on such date
pursuant to clause (i) above.
"ADJUSTED LIQUIDITY PRICE" means, in determining the PREFCO Transfer
Price for any Receivable Interest, an amount equal to:
RI x [(i) DC + (ii) NDR + USR]
where:
RI = the undivided percentage interest evidenced by such
Receivable Interest.
DC = the Deemed Collections.
NDR = the Outstanding Balance of all non-Defaulted
Receivables.
USR = the unused amount of any Seller recourse, i.e., the
excess of (a) the Loss Recourse Percentage of the
aggregate Capital outstanding on the Facility
Termination Date over (b) the amount of Collections
deemed to have been received by the Seller pursuant
to Section 1.8(b).
--------------
Each of the foregoing shall be determined from the most recent Periodic Report
received from the Servicer.
49
"ADVERSE CLAIM" means a lien, Security Interest, charge or
encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person.
"AFFILIATE" means any Person directly or indirectly controlling,
controlled by, or under direct or indirect common control with, another Person
or any Subsidiary of such other Person. A Person shall be deemed to control
another Person if the controlling Person owns 10% or more of any class of voting
securities of the controlled Person or possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of the
controlled Person, whether through ownership of stock, by contract or otherwise.
"AGENT" means First Chicago in its capacity as agent for the
Purchasers pursuant to Article IX, and not in its individual capacity as an
----------
Investor, and any successor Agent appointed pursuant to Article IX.
----------
"AGGREGATE UNPAIDS" means, at any time, an amount equal to the sum of
all accrued and unpaid Discount, Capital and all other amounts owed (whether due
or accrued) hereunder or under the Fee Letter to the Agent and the Purchasers at
such time.
"AGREEMENT" means this Receivables Purchase Agreement, as it may be
amended or modified and in effect from time to time.
"AVERAGE COLLECTION PERIOD" means, at any time, that period of days
equal to the average maturity of the Receivables as of the last day of the prior
month.
"BASE RATE" means a rate per annum equal to the corporate base rate of
interest announced by First Chicago from time to time, changing when and as such
rate of interest changes (computed for actual days elapsed on the basis of a
year consisting of 365, or when appropriate, 366 days).
"BUSINESS DAY" means any day on which banks are not authorized or
required to close in New York, New York or Chicago, Illinois and The Depository
Trust Company of New York is open for business, and, if the applicable Business
Day relates to any computation or payment to be made with respect to the LIBO
Rate, any day on which dealings in dollar deposits are carried on in the London
interbank market.
"CAPITAL" of any Receivable Interest means, at any time, the Purchase
Price of such Receivable Interest, MINUS the sum of the aggregate amount of
Collections and other payments received by the Agent which in each case are
applied to reduce such Capital; provided that such Capital shall be restored in
the amount of any Collections or payments so received and applied if at any time
the
50
distribution of such Collections or payments are rescinded or must otherwise be
returned for any reason.
"CHANGE OF CONTROL" means the earlier to occur of (a) the date of a
public announcement that a Person or group of affiliated or associated Persons
(an "ACQUIRING PERSON") has acquired, or has obtained the right to acquire,
legal or beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934) of
50% or more of the outstanding shares of voting stock of the Seller; or (b) the
date an Acquiring Person acquires all or substantially all of the assets of the
Seller. For purposes hereof, the term "ACQUIRING PERSON" shall not include (i)
▇▇▇▇'▇ Corporation or any of its subsidiaries, or (ii) any other Person 60% of
the combined voting stock of which is beneficially owned, directly or
indirectly, by the Persons who were the holders of the Seller's and Kohl's
Corporation's (as the case may be) voting stock immediately prior to such
acquisition.
"CHARGED-OFF RECEIVABLE" means a Receivable: (i) as to which the
Obligor thereof has taken any action, or suffered any event to occur, of the
type described in Section 7.1(c) (as if references to the Seller therein refer
--------------
to such Obligor), (ii) which, consistent with the Credit and Collection Policy,
would be written off the Seller's books as uncollectible, (iii) which has been
identified by the Seller as uncollectible, or (iv) which is a Defaulted
Receivable.
"CHARGE-OFF RATIO" means, as at the last day of any period of 12
consecutive calendar months, a percentage equal to (i) the aggregate amount of
Receivables that became Defaulted Receivables during such period less any cash
recoveries received during such period with respect to any Defaulted Receivable,
divided by (ii) the average Outstanding Balance of Receivables during such
period.
"COLLECTION ACCOUNT" means each New Concentration Account, depository
account, lock-box account or similar account of the Seller in which any
Collections are collected or deposited.
"COLLECTION ACCOUNT AGREEMENT" means, in the case of any actual or
proposed Collection Account, an agreement in substantially the form of EXHIBIT V
hereto.
"COLLECTION BANK" means, at any time, any of the banks or other
financial institutions holding one or more Collection Accounts.
"COLLECTION NOTICE" means a notice, in substantially the form attached
to the Collection Account Agreement, from the Agent to a Collection Bank.
"COLLECTIONS" means, (a) with respect to any Receivable, all cash
collections and other cash proceeds in respect of such Receivable, including,
without limitation, all cash proceeds of Related Security with respect to such
51
Receivable including, without limitation, all Permitted Investments made
therewith and all amounts payable to the Purchasers by the Seller pursuant to
Section 1.8, and (b) all payments of principal and interest made under the
-----------
Parent Demand Note.
"COMMERCIAL PAPER" means promissory notes of PREFCO issued by PREFCO
in the commercial paper market.
"COMMITMENT" means, for each Investor, the commitment of such Investor
to purchase its Pro Rata Share of Receivable Interests from (i) the Seller and
(ii) PREFCO, such Pro Rata Share not to exceed, in the aggregate, the amount set
forth opposite such Investor's name on the signature pages of this Agreement, as
such amount may be modified in accordance with the terms hereof.
"CONTINGENT OBLIGATION" of a Person means any agreement, undertaking
or arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or other financial condition
of any other Person, or otherwise assures any creditor of such other Person
against loss, including, without limitation, any comfort letter, operating
agreement, take-or-pay contract or application for a letter of credit.
"CONTRACT" means, with respect to any Receivable, any and all account
agreements and other agreements, instruments, charge slips, invoices or other
writings pursuant to which such Receivable arises or which evidences such
Receivable.
"CP RATE" means, the rate, requested by the Seller and agreed to by
PREFCO, equivalent to the rate (or if more than one rate, the weighted average
of the rates) at which Commercial Paper having a term equal to the relevant
Tranche Period may be sold by any placement agent or commercial paper dealer
reasonably selected by PREFCO, as agreed between each such dealer or agent and
PREFCO; provided, however, that if the rate (or rates) as agreed between any
such agent or dealer and PREFCO is a discount rate (or rates), the "CP RATE" for
such Tranche Period shall be the rate (or if more than one rate, the weighted
average of the rates) resulting from PREFCO's converting such discount rate (or
rates) to an interest-bearing equivalent rate per annum. The CP Rate shall be
computed for actual days elapsed on the basis of a year consisting of 360 days.
"CREDIT AND COLLECTION POLICY" means the Seller's credit and
collection policies and practices relating to Contracts and Receivables existing
on the date hereof and summarized in EXHIBIT VI hereto, as modified from time to
time in accordance with this Agreement. It is understood that the Credit and
Collection Policy of the Seller in respect of any Receivable shall be the credit
and collection policies of the Originator thereof. To the extent the Originator
shall not have comprehensively reduced to writing its credit and collection
policies, the Credit and
52
Collection Policy in respect of Receivables originated by the Originator shall
be those credit and collection policies of the Originator in effect on the date
hereof and disclosed to the Agent on or prior to the date hereof.
"DEEMED COLLECTIONS" means, in connection with the transfer by PREFCO
of one or more Receivable Interests to the Investors pursuant to Section 2.1,
-----------
the aggregate of all amounts owing to PREFCO pursuant to Sections 1.8 and 8.1
------------ ---
relating to the Receivable Interests which are the subject of such transfer.
"DEFAULT FEE" means with respect to any amount due and payable by the
Seller hereunder or under the Fee Letter which is not paid when due, an amount
equal to interest on any such amount at a rate per annum equal to 2% above the
Base Rate, provided, however, that such interest rate will not at any time
exceed the maximum rate permitted by applicable law. The Default Fee will
computed for actual days elapsed on the basis of a year consisting of 360 days
(unless such Default Fee arises with respect to nonpayment of Discount at the
Base Rate, in which case the Default Fee will be computed for actual days
elapsed on the basis of a year consisting of 365 or, when appropriate, 366
days).
"DEFAULTED RECEIVABLE" means a Receivable as to which any payment, or
part thereof, remains unpaid for 180 days or more from the original due date for
such payment.
"DELINQUENCY RATIO" means, for any month of determination, a
percentage equal to (i) the aggregate Outstanding Balance of all Receivables
that were Delinquent Receivables on the last day of such month divided by (ii)
the average aggregate Outstanding Balance of all Receivables during such month.
"DELINQUENT RECEIVABLE" means a Receivable as to which any payment, or
part thereof, remains unpaid for 90-179 days from the original due date for such
payment.
"DISCOUNT" means, for each Receivable Interest for any Tranche Period:
DR x C x AD
--
P
where:
DR = the Discount Rate for such Receivable Interest for
such Tranche Period;
53
C = the Capital of such Receivable Interest during such
Tranche Period; and
AD = the actual number of days elapsed during such
Tranche Period;
P = 360 for Tranche Periods for which the Discount Rate
is a LIBO Rate or CP Rate and 365 (or, as
appropriate, 366) for Tranche Periods for which the
Discount Rate is the Base Rate
provided that no provision of this Agreement shall require the payment or permit
the collection of Discount in excess of the maximum permitted by applicable law;
and provided, further, that Discount for any Tranche Period shall not be
considered paid by any distribution to the extent that at any time all or a
portion of such distribution is rescinded or must otherwise be returned for any
reason.
"DISCOUNT RATE" means the LIBO Rate, the CP Rate or the Base Rate, as
applicable.
"EARLY COLLECTION FEE" means, for any Receivable Interest which has
its Capital reduced, or its Tranche Period terminated prior to the date on which
it was originally scheduled to end, THE EXCESS, IF ANY, OF (i) the Discount that
would have accrued during the remainder of the Tranche Period subsequent to the
date of such reduction or termination on the Capital of such Receivable Interest
if such reduction or termination had not occurred, OVER (ii) the sum of (a) to
the extent all or a portion of such Capital is allocated to another Receivable
Interest, the Discount actually accrued during such period on such Capital for
the new Receivable Interest, and (b) to the extent such Capital is not allocated
to another Receivable Interest, the income, if any, actually received during
such period by the holder of such Receivable Interest from investing the portion
of such Capital not so allocated. In the event that the amount referred to in
clause (ii) exceeds the amount referred to in clause (i), the relevant Purchaser
or Purchasers agree to pay to the Seller the amount of such excess.
"ELIGIBLE ACCOUNT" means, at any time, an Account that:
(a) has been (i) originated by the Seller in the ordinary course
of its business, (ii) originated by Citicorp Retail Services on behalf of
the Seller and acquired by the Seller, or (iii) acquired by the Seller from
another originator acceptable to the Agent,
(b) has not been classified by the Seller as canceled,
counterfeit or fraudulent and any credit card issued in connection
therewith has not been lost or stolen,
54
(c) is held by (i) a natural person who is a resident of the United
States or Canada, and is not deceased; (ii) a corporation or other business
organization organized under the laws of the United States or any political
subdivision thereof that has its chief executive office in the United
States; and (iii) a Person who is not a government or a governmental
subdivision or agency, and
(d) which is denominated and payable only in United States
dollars in the United States.
"ELIGIBLE PERSON" means a financial institution with a short-term debt
rating of A-1 or better by Standard & Poor's Corporation and P-1 by ▇▇▇▇▇'▇
Investors Service, Inc. which: (i) is reasonably acceptable to PREFCO, (ii) is
approved by the Seller (such approval not to be unreasonably withheld or
delayed), (iii) does not have an Affiliate in the retailing business, and (iv)
is incorporated or otherwise formed under the laws of the United States or has
executed and delivered to the Agent and the Seller United States Internal
Revenue Service Form 1001 or 4224, or any successor form(s) thereto.
"ELIGIBLE RECEIVABLE" means, at any time, a Receivable:
(a) which arises under an Eligible Account,
(b) which is an "eligible asset" as defined in Rule 3a-7(b)(1)
promulgated by the Securities and Exchange Commission under the Investment
Company Act of 1940, as amended,
(c) a purchase of which with the proceeds of notes would
constitute a "current transaction" within the meaning of Section 3(a)(3) of
the Securities Act of 1933, as amended,
(d) which is an "account" within the meaning of Section 9-106 of
the UCC of all applicable jurisdictions,
(e) which arises under a Contract in substantially the form of
one of the form contracts set forth on EXHIBIT VII hereto (subject to any
Permitted Amendments that may be made thereto) or otherwise approved by the
Agent in writing, which, together with such Receivable, is in full force
and effect and constitutes the legal, valid and binding obligation of the
related Obligor enforceable against such Obligor in accordance with its
terms subject to no offset or offset arrangement, counterclaim or other
defense,
(f) which arises under a Contract which (i) does not require the
Obligor under such Contract to consent to the transfer, sale or assignment
of the rights and duties of the Seller under such Contract and (ii) does
not contain a confidentiality provision that purports to restrict the
55
ability of any Purchaser to exercise its rights under this Agreement,
including, without limitation, its right to review the Contract,
(g) which was generated in the ordinary course of the
Originator's business and relates to the retail sale of goods or services
by one of the Originator's or one of its Wholly-Owned Subsidiaries' stores,
(h) which satisfies all applicable requirements of the Credit and
Collection Policy,
(i) which is not a Defaulted Receivable,
(j) which, together with the Contract related thereto, does not
contravene any law, rule or regulation applicable thereto (including,
without limitation, any law, rule and regulation relating to truth in
lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) and with respect
to which no part of the Contract related thereto is in violation of any
such law, rule or regulation, and
(k) the Outstanding Balance of which, if it arises under an
Eligible Account held by a resident of Canada, does not, when aggregated
with the Outstanding Balance of all other such Receivables, exceed 1% of
the Net Receivables Balance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"FACILITY TERMINATION DATE" means the earliest to occur of (a) the
Liquidity Termination Date, (b) a Termination Event, or (c) the 30th day
following written notice by the Seller to the Agent that the Seller wishes to
terminate this Agreement.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period equal to (a) the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the preceding
Business Day) by the Federal Reserve Bank of New York in the Composite Closing
Quotations for U.S. Government Securities; or (b) if such rate is not so
published for any day which is a Business Day, the average of the quotations at
approximately 10:30 a.m. (Chicago time) for such day on such transactions
received by the Reference Bank from three federal funds brokers of recognized
standing selected by it.
56
"FEE LETTER" means that certain letter agreement dated as of the date
hereof between the Seller and the Agent, as it may be amended or modified and in
effect from time to time.
"FINANCE CHARGES" means, with respect to a Contract, any finance,
interest, late payment charges or similar charges owing by an Obligor pursuant
to such Contract.
"FIRST CHICAGO" means The First National Bank of Chicago in its
individual capacity and its successors.
"FUNDING AGREEMENT" means this Agreement and any agreement or
instrument executed by any Funding Source with or for the benefit of PREFCO.
"FUNDING SOURCE" means (i) any Investor or (ii) any insurance company,
bank or other financial institution providing liquidity, credit enhancement or
back-up purchase support or facilities to PREFCO.
"INCREMENTAL PURCHASE" means a purchase of one or more Receivable
Interests which increases the total outstanding Capital hereunder.
"INDEBTEDNESS" of a Person means such Person's (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase price of
property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (iii)
obligations, whether or not assumed, secured by liens or payable out of the
proceeds or production from property now or hereafter owned or acquired by such
Person, (iv) obligations which are evidenced by notes, acceptances, or other
instruments, (v) capitalized lease obligations, (vi) net liabilities under
interest rate swap, exchange or cap agreements, (vii) Contingent Obligations and
(viii) liabilities in respect of unfunded vested benefits under plans covered by
Title IV of ERISA.
"INTENDED CHARACTERIZATION" means, for income tax purposes, the
characterization of the acquisition by the Purchasers of Receivable Interests as
a loan or loans by the Purchasers to the Seller secured by the Receivables, the
Related Security and the Collections.
"INVESTORS" means the financial institutions listed on the signature
pages of this Agreement under the heading "Investors" and their respective
successors and assigns.
"LIBO RATE" means the rate per annum equal to the sum of (i) (a) the
rate at which deposits in U.S. Dollars are offered by the Reference Bank to
first-class banks in the London interbank market at approximately 11:00 a.m.
(London time) two Business Days prior to the first day of the relevant Tranche
Period, such deposits being in the approximate amount of the Capital of the
57
Receivable Interest to be funded or maintained, divided by (b) one minus the
Reserve Requirement (expressed as a decimal) applicable to such Tranche Period
plus (ii) 0.375% per annum. The LIBO Rate shall be rounded, if necessary, to
the next higher 1/16 of 1% and shall be computed for actual days elapsed on the
basis of a year consisting of 360 days.
"LIQUIDATION DAY" means, for any Receivable Interest, the earliest to
occur of (i) the fifth consecutive Business Day on which the conditions
precedent set forth in Section 4.2 remain unsatisfied, (ii) any Business Day so
-----------
designated by the Seller or PREFCO after the occurrence of the Termination Date,
and (iii) the Business Day immediately prior to the occurrence of a Servicer
Default set forth in Section 7.1(c).
--------------
"LIQUIDITY TERMINATION DATE" means January 29, 1998 or such later date
to which the Agent and the Purchasers may agree in accordance with Section
-------
1.1(d).
------
"LOSS RECOURSE PERCENTAGE" means, at any time, the greater of (i) 2.5
times the Charge-off Ratio for the twelve-month period then most recently ended
or (ii) 10%.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
financial condition or operations of the Seller or the Originator, (ii) the
ability of the Seller or the Originator to perform its obligations under any
Transaction Document to which it is a party, (iii) the legality, validity or
enforceability of this Agreement, any other Transaction Document or any
Collection Account Agreement or Collection Notice relating to a Collection
Account into which a material portion of Collections are deposited, (iv) the
Seller's or any Purchaser's interest in the Receivables generally or in any
significant portion of the Receivables, the Related Security or the Collections
with respect thereto, or (v) the collectibility of the Receivables generally or
of any material portion of the Receivables.
"NET RECEIVABLES BALANCE" means, at any time, the Outstanding Balance
of all Eligible Receivables at such time.
"NET WORTH" means, as of the last Business Day of the Fiscal
Accounting Period preceding any date of determination, the excess, if any, of
(a) THE SUM OF (i) the aggregate Outstanding Balance of the "ELIGIBLE
RECEIVABLES" at such time, PLUS (ii) up to 97% of the aggregate Outstanding
Balance of Receivables which are not "ELIGIBLE RECEIVABLES" at such time, PLUS
(iii) 100% of the Seller's cash on hand and in the bank, OVER (b) THE SUM OF (i)
the aggregate Capital outstanding at such time, PLUS (ii) the aggregate
outstanding principal balance of the Subordinated Loans (including any
Subordinated Loan proposed to be made on the date of determination).
58
"OBLIGOR" means a Person obligated to make payments pursuant to a
Contract.
"ORIGINATOR" means Kohl's Department Stores, Inc., a Delaware
corporation, and its successors and assigns.
"OUTSTANDING BALANCE" of any Receivable at any time means the then
outstanding balance thereof.
"PARENT DEMAND NOTE" means a demand promissory note made by the
Originator in favor of the Seller.
"PERIODIC REPORT" means a report, in substantially the form of EXHIBIT
VIII hereto (appropriately completed), furnished by the Servicer to the Agent
pursuant to Section 6.5.
-----------
"PERMITTED INVESTMENTS" means (i) short-term obligations of, or fully
guaranteed by, the United States of America, (ii) commercial paper rated A-1 or
better by Standard and Poor's Corporation or P-1 or better by ▇▇▇▇▇'▇ Investors
Service, Inc., (iii) certificates of deposit issued by and time deposits with
commercial banks (whether domestic or foreign) having capital and surplus in
excess of $500,000,000 and short-term certificate of deposit ratings of A-1 or
better from Standard and Poor's Corporation and P-1 or better from ▇▇▇▇▇'▇
Investors Service, Inc., (iv) money market funds investing only in investments
of the types described in the foregoing clauses (i)-(iii), and (v) federal
funds.
"PERSON" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture or other entity, or a government or any political subdivision or agency
thereof.
"POTENTIAL SERVICER DEFAULT" means an event which, with the passage of
time or the giving of notice, or both, would constitute a Servicer Default.
"POTENTIAL TERMINATION EVENT" means an event which, with the passage
of time or the giving of notice, or both, would constitute a Termination Event.
"PREFCO RESIDUAL" means the sum of the PREFCO Transfer Price
Reductions.
"PREFCO TRANSFER PRICE" means, with respect to the assignment by
PREFCO of one or more Receivable Interests to the Agent for the benefit of the
Investors pursuant to Section 2.1, the sum of (i) the lesser of (a) the Capital
-----------
of each Receivable Interest and (b) the Adjusted Liquidity Price of each
Receivable Interest and (ii) all accrued and unpaid Discount for such Receivable
Interests.
59
"PREFCO TRANSFER PRICE REDUCTION" means in connection with the
assignment of a Receivable Interest by PREFCO to the Agent for the benefit of
the Investors, the positive difference between (i) the Capital of such
Receivable Interest and (ii) the Adjusted Liquidity Price for such Receivable
Interest.
"PRO RATA SHARE" means, for each Investor, the Commitment of such
Investor divided by the Purchase Limit, adjusted as necessary to give affect to
the application of the terms of Sections 1.11 and 2.5.
---------------------
"PURCHASE LIMIT" means the aggregate of the Commitments of the
Investors hereunder.
"PURCHASE PRICE" means, with respect to any Purchase, the least of:
(a) the amount of Capital requested by the Seller, and
(b) the remaining unused portion of the Purchase Limit on the date of
such Purchase.
"PURCHASER" means PREFCO or an Investor, as applicable.
"RECEIVABLE" means the indebtedness and other obligations owed (at the
time it arises, and before giving effect to any transfer or conveyance
contemplated under the Sale Agreement or hereunder) to the Originator under an
Account, whether constituting an account, chattel paper, instrument or general
intangible, arising in connection with the sale of goods or the rendering of
services by the Originator or by a Wholly-Owned Subsidiaries and includes,
without limitation, the obligation to pay any Finance Charges with respect
thereto. Indebtedness and other rights and obligations arising from any one
transaction, including, without limitation, indebtedness and other rights and
obligations represented by an individual invoice or Charge-slip, shall
constitute a Receivable separate from a Receivable consisting of the
indebtedness and other rights and obligations arising from any other
transaction.
"RECEIVABLE INTEREST" means, at any time, an undivided percentage
ownership interest associated with a designated amount of Capital, Discount Rate
and Tranche Period selected pursuant to Section 1.3 in (i) all Receivables
-----------
arising thereunder prior to the time of the most recent computation or
recomputation of such undivided interest pursuant to Section 1.4, (ii) all
-----------
Related Security with respect to such Receivables, and (iii) all Collections
with respect to, and other proceeds of, such Receivables. Such undivided
percentage interest shall equal:
60
C
-----
NRB
where:
C = the Capital of such Receivable Interest.
NRB = the Net Receivables Balance.
"RECORDS" means, with respect to any Receivable, all Contracts and
other documents, books, records and other information (including, without
limitation, computer programs, tapes, disks, punch cards, data processing
software and related property and rights) relating to such Receivable, any
Related Security therefor and the related Obligor.
"REDUCTION PERCENTAGE" means, for any Receivable Interest acquired by
the Investors from PREFCO for less than the Capital of such Receivable Interest,
a percentage equal to (i) one, minus (ii) a fraction the numerator of which is
the PREFCO Transfer Price Reduction for such Receivable Interest and the
denominator of which is the Capital of such Receivable Interest.
"REFERENCE BANK" means First Chicago or such other bank as the Agent
shall designate with the consent of the Seller.
"RELATED SECURITY" means, with respect to any Receivable:
(a) all Security Interests or liens and property subject thereto
from time to time, if any, purporting to secure payment of the Contract
related thereto, whether pursuant to such Contract or otherwise, together
with all financing statements and security agreements describing any
collateral securing such Contract,
(b) all guaranties, insurance and other agreements or
arrangements of whatever character from time to time supporting or securing
payment of such Receivable whether pursuant to the Contract related to such
Receivable or otherwise,
(c) all service contracts and other contracts and agreements
associated with such Receivables,
(d) all Records related to such Receivables,
(e) all of the Seller's right, title and interest in, to and
under the Sale Agreement; and
61
(f) all proceeds of any of the foregoing.
"REQUIRED CAPITAL AMOUNT" means, on any date of determination, the
greater of (a) $6,000,000 or (b) three percent (3.00%) of the aggregate Capital
outstanding at such time.
"REQUIRED INVESTORS" means, at any time, Investors with Commitments in
excess of 66-2/3% of the Purchase Limit.
"RESERVE REQUIREMENT" means the maximum aggregate reserve requirement
(including all basic, supplemental, marginal and other reserves) which is
imposed against the Reference Bank in respect of Eurocurrency liabilities, as
defined in Regulation D of the Board of Governors of the Federal Reserve System
as in effect from time to time.
"RESTRICTED JUNIOR PAYMENT" means (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
capital stock of the Seller now or hereafter outstanding, except a dividend
payable solely in shares of that class of stock or in any junior class of stock
to the Originator, (ii) any redemption, retirement, sinking fund or similar
payment, purchase or other acquisition for value, direct or indirect, of any
shares of any class of capital stock of the Seller now or hereafter outstanding,
(iii) any payment or prepayment of principal of, premium, if any, or interest,
fees or other charges on or with respect to, and any redemption, purchase,
retirement, defeasance, sinking fund or similar payment and any claim for
rescission with respect to the Indebtedness evidenced by the Subordinated Note
(as defined in the Sale Agreement), (iv) any payment made to redeem, purchase,
repurchase or retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire shares of any class of capital stock of the
Seller now or hereafter outstanding, and (v) any payment of management fees by
the Seller to the Originator or an Affiliate.
"SALE AGREEMENT" means that certain Receivables Sale Agreement of even
date herewith between the Seller, as purchaser, and the Originator, as seller,
as the same may be amended, restated, supplemented or otherwise modified from
time to time.
"SECTION" means a numbered section of this Agreement, unless another
document is specifically referenced.
"SECURITY INTEREST" has the meaning specified in (S) 1-201(37) of the
UCC as in effect in the State of Illinois on the date of this Agreement and
includes, without limitation, the interest of a buyer of accounts and chattel
paper.
"SERVICER" means at any time the Person (which may be the Agent) then
authorized pursuant to Article VI to service, administer and collect
----------
Receivables.
62
"SERVICER DEFAULT" has the meaning specified in Section 7.1.
-----------
"SERVICER FEE" means, for any Fiscal Accounting Period, a servicing
and collection fee computed pursuant to the following formula:
SFP x C
where:
SFP = the Servicer Fee Percentage; and
C = at all times while the Originator is the Sub-Servicer, the
aggregate credit sales during the applicable Fiscal
Accounting Period, and at all other times, the average
Outstanding Balance of all Receivables during such Fiscal
Accounting Period.
"SERVICER FEE PERCENTAGE" means (i) at all times while the Originator
is acting as the Sub-Servicer, up to 3.0% as agreed between the Originator and
the Seller, and (ii) at all times while the Originator is not acting as the Sub-
Servicer, 2.0% per annum.
"SUBORDINATED LOAN" means a subordinated revolving loan made by the
Originator to the Seller pursuant to the Sale Agreement.
"SUBSIDIARY" of a Person means (i) any corporation more than 50% of
the outstanding securities having ordinary voting power of which shall at the
time be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its Subsidiaries,
or (ii) any partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "SUBSIDIARY" shall mean a
Subsidiary of the Seller.
"TERMINATION DATE" means, for any Receivable Interest, the Facility
Termination Date, and, solely with respect to a Receivable Interest of PREFCO,
that Business Day so designated by the Seller or PREFCO by notice to the other.
"TERMINATION EVENT" has the meaning specified in Section 7.2.
-----------
"TRANCHE PERIOD" means, with respect to any Receivable Interest:
(a) if Discount for such Receivable Interest is calculated with
respect to the CP Rate, a period of days not to exceed 270 days commencing
on a Business Day requested by the Seller and agreed to by PREFCO;
63
(b) if Discount for such Receivable Interest is calculated on the
basis of the LIBO Rate, a period of one, two or three months, or such other
period as may be mutually agreeable to the Agent and the Seller, commencing
on a Business Day selected by the Seller or the Agent pursuant to this
Agreement. Such Tranche Period shall end on the day in the succeeding
calendar month which corresponds numerically to the beginning day of such
Tranche Period, provided, however, that if there is no such numerically
corresponding day in such succeeding month, such Tranche Period shall end
on the last Business Day of such succeeding month; and
(c) if Discount for such Receivable Interest is calculated on the
basis of the Base Rate, a period commencing on a Business Day and ending on
the effective date of any new Tranche Period under the foregoing clause (b)
or (c).
If any Tranche Period would end on a day which is not a Business Day, such
Tranche Period shall end on the next succeeding Business Day, provided, however,
that in the case of Tranche Periods corresponding to the LIBO Rate, if such next
succeeding Business Day falls in a new month, such Tranche Period shall end on
the immediately preceding Business Day. In the case of any Tranche Period for
any Receivable Interest of which commences before the Termination Date and would
otherwise end on a date occurring after the Termination Date, such Tranche
Period shall end on the Termination Date. The duration of each Tranche Period
which commences after the Termination Date shall be of such duration as selected
by the Agent.
"TRANSACTION DOCUMENTS" means, collectively, this Agreement, the Sale
Agreement, the Fee Letter, each Collection Account Agreement, each Collections
Notice and all other instruments, documents and agreements executed and
delivered by the Seller or the Originator in connection herewith or with the
Sale Agreement.
"TRIGGER EVENT" means the occurrence of any Servicer Default or a
Termination Event under SECTION 7.2(C).
"UCC" means the Uniform Commercial Code as from time to time in effect
in the specified jurisdiction.
"WHOLLY-OWNED SUBSIDIARY" means each existing and future Subsidiary of
the Originator in which the Originator owns, directly or indirectly, 100% of the
outstanding capital stock.
ALL ACCOUNTING TERMS NOT SPECIFICALLY DEFINED HEREIN SHALL BE
CONSTRUED IN ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. ALL TERMS
USED IN ARTICLE 9 OF THE UCC IN THE STATE OF ILLINOIS, AND NOT SPECIFICALLY
DEFINED HEREIN, ARE USED HEREIN AS DEFINED IN SUCH ARTICLE 9.
64
CAPITALIZED TERMS USED AND NOT OTHERWISE DEFINED HEREIN ARE USED WITH
THE MEANINGS ATTRIBUTED THERETO IN THE SALE AGREEMENT.
65
EXHIBIT II
CHIEF EXECUTIVE OFFICE OF THE SELLER; LOCATIONS OF RECORDS;
TRADE NAMES; FEDERAL EMPLOYER IDENTIFICATION NUMBER
Chief Executive Office:
Location of Records:
Federal Employer Identification Number:
Trade Names and Assumed Names:
66
EXHIBIT III
COLLECTION ACCOUNTS
None, except:
KOHL'S DEPARTMENT STORES, INC.
------------------------------
TYPE OF ACCT. ACCOUNT # BANK NAME CITY, STATE
------------- --------- --------- -----------
KOHL'S RECEIVABLES CORPORATION
------------------------------
67
EXHIBIT IV
FORM OF COMPLIANCE CERTIFICATE
This Compliance Certificate is furnished pursuant to that certain
Receivables Purchase Agreement dated as of January 31, 1997 (the "AGREEMENT"),
among Kohl's Receivables Corporation (the "SELLER"), various Purchasers and The
First National Bank of Chicago, as Agent. Capitalized terms used and not
otherwise defined herein are used with the meanings attributed thereto in the
Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _____________________ of the Seller;
2. I have reviewed the terms of the Agreement and I have made, or
have caused to be made under my supervision, a detailed review of the
transactions and conditions of the Seller during the accounting period covered
by the attached financial statements; and
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which constitutes
an Event of Default or a Potential Event of Default, as each such term is
defined under the Agreement, during or at the end of the accounting period
covered by the attached financial statements or as of the date of this
Certificate, except as set forth below.
Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it has
existed and the action which the Seller has taken, is taking, or proposes to
take with respect to each such condition or event:
The foregoing certifications, together with the computations set forth
in SCHEDULE I hereto and the financial statements delivered with this
Certificate in support hereof, are made and delivered this ____ day of
______________, 19__.
______________________________
[Name]
68
EXHIBIT V
FORM OF COLLECTION ACCOUNT AGREEMENT
[On letterhead of Seller]
__________ 19__
[Lock-Box Bank/Concentration Bank/Depositary Bank]
Re: Kohl's Receivables Corporation
Kohl's Department Stores, Inc.
Ladies and Gentlemen:
You have exclusive control of P.O. Box #_____________ in **[city,
-----
state, zip code]** (the "LOCK-BOX") for the purpose of receiving mail and
---------------
processing payments therefrom pursuant to that certain **[name of lock-box
agreement]** between you and Kohl's Department Stores, Inc. dated __________
(the "AGREEMENT"). You hereby confirm your agreement to perform the services
described therein. Among the services you have agreed to perform therein, is to
endorse all checks and other evidences of payment, and credit such payments to
checking account no. ________ maintained with you in the name of Kohl's
Department Stores, Inc. (the "LOCK-BOX ACCOUNT").
Kohl's Department Stores, Inc. ("ORIGINATOR") hereby transfers and
assigns all of its right, title and interest in and to, and exclusive ownership
and control over, the Lock-Box and the Lock-Box Account to Kohl's Receivables
Corporation ("SPC"). Originator and SPC hereby request that the name of the
Lock-Box Account be changed to the Kohl's Receivables Corporation, as
"COLLECTION AGENT" for the benefit of The First National Bank of Chicago
("FNBC"), as agent under that certain Receivables Purchase Agreement (the
"RECEIVABLES PURCHASE AGREEMENT") dated as of January 31, 1997 among SPC,
Preferred Receivables Funding Corporation, certain financial institutions
parties thereto and FNBC.
SPC hereby irrevocably instructs you, and you hereby agree, that upon
receiving notice from FNBC in the form attached hereto as Annex A: (i) the name
of the Lock-Box Account will be changed to FNBC for itself and as agent (or any
designee of FNBC) and FNBC will have exclusive ownership of and access to such
Lock-Box Account, and neither Originator, SPC nor any of their respective
affiliates will have any control of such Lock-Box Account or any access thereto,
(ii) you will either continue to send the funds from the Lock-Box to the Lock-
Box Account, or will redirect the funds as FNBC may otherwise request, (iii) you
will transfer monies on deposit in the Lock-Box Account, at any time, as
directed by FNBC, (iv) all
69
services to be performed by you under the Agreement will be performed on behalf
of FNBC, and (v) all correspondence or other mail which you have agreed to send
to either Originator or SPC will be sent to FNBC at the following address:
The First National Bank of Chicago
Suite 0079, 21st Floor
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Credit Manager, Asset-Backed Finance
Moreover, upon such notice, FNBC for itself and as agent will have all
rights and remedies given to Originator or SPC under the Agreement. Each of
Originator and SPC agrees, however, to continue to pay all fees and other
assessments due thereunder at any time.
You hereby acknowledge that monies deposited in the Lock-Box Account
or any other account established with you by FNBC for the purpose of receiving
funds from the Lock-Box are subject to the liens of FNBC for itself and as agent
under the Receivables Purchase Agreement, and will not be subject to deduction,
set-off, banker's lien or any other right you or any other party may have
against Originator or SPC, except that you may debit the Lock-Box Account for
any items deposited therein that are returned or otherwise not collected and for
all charges, fees, commissions and expenses incurred by you in providing
services hereunder, all in accordance with your customary practices for the
charge back of returned items and expenses.
This letter agreement and the rights and obligations of the parties
hereunder will be governed by and construed and interpreted in accordance with
the laws of the State of Illinois. This letter agreement may be executed in any
number of counterparts and all of such counterparts taken together will be
deemed to constitute one and the same instrument.
This letter agreement contains the entire agreement between the
parties, and may not be altered, modified, terminated or amended in any respect,
nor may any right, power or privilege of any party hereunder be waived or
released or discharged, except upon execution by all parties hereto of a written
instrument so providing. In the event that any provision in this letter
agreement is in conflict with, or inconsistent with, any provision of the
Agreement, this letter agreement will exclusively govern and control. Each
party agrees to take all actions reasonably requested by any other party to
carry out the purposes of this letter agreement or to preserve and protect the
rights of each party hereunder.
70
Please indicate your agreement to the terms of this letter agreement
by signing in the space provided below. This letter agreement will become
effective immediately upon execution of a counterpart of this letter agreement
by all parties hereto.
Very truly yours,
KOHL'S DEPARTMENT STORES, INC.
By ______________________________
Title ___________________________
KOHL'S RECEIVABLES CORPORATION
By ______________________________
Title ___________________________
Acknowledged and agreed to
this ____ day of ____________, 1997:
[COLLECTION BANK]
By:__________________________________
Title:_______________________________
Acknowledged and agreed to
this ____ day of ___________, 1997:
THE FIRST NATIONAL BANK OF CHICAGO (for itself and
as Agent)
By________________________________
Authorized Agent
71
ANNEX A
FORM OF COLLECTION NOTICE
[On letterhead of FNBC]
_____________________, 19__
[Collection Bank/Depositary Bank/Concentration Bank]
Re: Kohl's Receivables Corporation
Ladies and Gentlemen:
We hereby notify you that we are exercising our rights pursuant to
that certain letter agreement among Kohl's Department Stores, Inc., Kohl's
Receivables Corporation, you and us, to have the name of, and to have exclusive
ownership and control of, account number ____________ (the "LOCK-BOX ACCOUNT")
maintained with you, transferred to us. Lock-Box Account will henceforth be a
zero-balance account, and funds deposited in the Lock-Box Account should be sent
at the end of each day to _________________. You have further agreed to perform
all other services you are performing under that certain agreement dated
____________ between you and Kohl's Department Stores, Inc. on our behalf.
We appreciate your cooperation in this matter.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
(for itself and as agent)
By:_______________________________
Authorized Agent
72
EXHIBIT VI
CREDIT AND COLLECTION POLICY
[to be provided by the Seller]
73
EXHIBIT VII
FORM OF CONTRACT(S)
[to be provided by the Seller]
74
EXHIBIT VIII
FORM OF PERIODIC REPORT
[to be provided by First Chicago]
75
SCHEDULE A
DOCUMENTS AND RELATED ITEMS TO BE DELIVERED
ON OR PRIOR TO THE INITIAL PURCHASE
I. Receivables Sale Agreement
--------------------------
A. Receivables Sale Agreement dated as of January 31, 1997 (the "SALE
AGREEMENT"), by and between Kohl's Department Stores, Inc., a Delaware
corporation (the "ORIGINATOR"), and Kohl's Receivables Corporation, a Wisconsin
corporation (the "SPC"), with the following exhibits:
Exhibit I - Definitions
Exhibit II - Places of Business of the
Originator; Locations of
Records; Trade Names; Prior
Names; Federal Employer I.D.
Number
Exhibit III - Lockboxes; Collection
Accounts; Concentration
Accounts; and Depositary
Accounts
Exhibit IV - Compliance Certificate
Exhibit V - Collection Account Agreement
Exhibit VI - Credit and Collection Policy
Exhibit VII - Form(s) of Contract(s)
Exhibit VIII - Periodic Report
Exhibit IX - Stockholder and Subscription
Agreement
Exhibit X - Subordinated Note
B. Revolving Subordinated Note dated January 31, 1997 executed by the SPC
in favor of the Originator.
C. Stockholder and Subscription Agreement dated as of January 31, 1997 by
and between the Originator and the SPC.
D. Certificate of the Originator's [Assistant] Secretary certifying:
1. An attached copy of the Originator's Certificate of Incorporation
(certified within 30 days prior to closing by the Delaware Secretary
of State)
2. An attached copy of the Originator's By-Laws
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3. An attached copy of resolutions of the Originator's Board of
Directors authorizing the Originator's execution, delivery and
performance of the Sale Agreement and related documents
4. The names, titles and specimen signatures of the Originator's
officers authorized to execute and deliver the Sale Agreement and
related documents
E. Good standing certificates for the Originator from the following
states certified within 30 days prior to closing:
1. Delaware
2. Wisconsin
F. Pre-filing state and federal tax lien, judgment lien and UCC lien
searches against the Originator from the following jurisdictions:
1. Wisconsin
2. As applicable for tax and judgment liens, ________ County
G. UCC/PPSA Financing Statements naming the Originator, as debtor, the
SPC, as secured party, and The First National Bank of Chicago, as Agent, as
assignee of secured party, for filing in the following jurisdictions:
1. State of Wisconsin
2. Province of Ontario
H. Post-filing UCC lien searches against the Originator from the
following jurisdictions:
1. State of Wisconsin.
I. Collection Account Agreement
1. FirstStar
J. Opinions:
1. Corporate/UCC opinions
2. True Sale/Non-consolidation opinion
K. CFO's Certificate re (1) no Event of Default or Potential Event of
Default and (2) absence of Material Adverse Effect since November 2, 1996.
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II. Additional Capitalization of SPC
--------------------------------
A. Not less than $28.53 million in cash invested by Originator in the
SPC.
B. Parent Demand Note to evidence loans by the SPC to the Originator.
III. Receivables Purchase Agreement
------------------------------
A. Receivables Purchase Agreement dated as of January 31, 1997 (the
"INVESTOR AGREEMENT") by and among the SPC, Preferred Receivables Funding
Corporation ("PREFCO"), various Investors, and The First National Bank of
Chicago, as Agent (in such capacity, the "AGENT") with the following exhibits:
Exhibit I - Definitions
Exhibit II - Places of Business of the SPC;
Locations of Records; Trade
Names; Federal Employer I.D.
Number
Exhibit III - Lockboxes; Collection
Accounts; Concentration
Accounts; and Depositary
Accounts
Exhibit IV - Compliance Certificate
Exhibit V - Collection Account Agreement
Exhibit VI - Credit and Collection Policy
Exhibit VII - Form(s) of Contract(s)
Exhibit VIII - Periodic Report
Exhibit IX - Form of Purchase Notice
B. Fee Letter dated as of January 31, 1997 by and between the SPC and the
Agent.
C. Certificate of the SPC's [Assistant] Secretary certifying:
1. An attached copy of the SPC's Articles of Incorporation (certified
within 30 days prior to closing by the Wisconsin Secretary of State)
2. An attached copy of the SPC's By-Laws
3. An attached copy of resolutions of the SPC's Board of Directors
authorizing the SPC's execution, delivery and performance of the
Investor Agreement and related documents
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4. The names, titles and specimen signatures of the SPC's officers
authorized to execute and deliver the Investor Agreement and related
documents
D. Good standing certificates for the SPC from the following states
certified within 30 days prior to closing:
1. Wisconsin
E. UCC/PPSA Financing Statements naming the SPC, as debtor, and the
Agent, as secured party, for filing in the following jurisdictions:
1. State of Wisconsin
2. Province of Ontario
F. Post-filing UCC lien searches against the SPC from the following
jurisdictions:
1. State of Wisconsin
G. Purchase Notice executed by the SPC.
H. Opinion of the SPC's counsel re corporate/UCC issues
I. CFO's Certificate re no Servicer Default, Termination Event, Potential
Servicer Default or Potential Termination Event and absence of Material Adverse
Effect since November 2, 1996.
IV. Unwinding Existing Receivables Purchase Agreement
-------------------------------------------------
A. Certificate of Re-assignment executed by the Agent in favor of the
Originator.
B. UCC/PPSA Termination Statements or Assignments:
1. State of Wisconsin
2. Province of Ontario
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