Exhibit 10.16
RECEIVABLES TRANSFER AGREEMENT
Dated as of April 29, 1996
by and between
PAMECO CORPORATION
and
PAMECO SECURITIZATION CORPORATION
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS AND INTERPRETATION
SECTION 1.01. Definitions.......................................... 1
SECTION 1.02. Other Terms and Interpretation....................... 1
ARTICLE II TRANSFERS OF RECEIVABLES
SECTION 2.01. Agreement to Transfer................................ 1
SECTION 2.02. Grant of Security Interest........................... 2
SECTION 2.03. Addition of Originator............................... 3
SECTION 2.04. Termination of Status as an Originator............... 3
ARTICLE III CONDITIONS OF SALE
SECTION 3.01. Conditions Precedent to the Initial Sale............. 4
SECTION 3.02. Conditions Precedent to All Sales.................... 6
ARTICLE IV REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 4.01. Representations and Warranties of the Originator..... 7
SECTION 4.02. Covenants of the Originator.......................... 15
SECTION 4.03. Negative Covenants of the Originator................. 20
SECTION 4.04. Breach of Representations, Warranties or Covenants... 22
ARTICLE V INDEMNIFICATION
SECTION 5.01. Indemnification...................................... 23
SECTION 5.02. Assignment of Indemnities............................ 24
ARTICLE VI MISCELLANEOUS
SECTION 6.01. Notices, Etc......................................... 24
SECTION 6.02. No Waiver; Remedies.................................. 24
SECTION 6.03. Binding Effect; Assignability........................ 25
SECTION 6.04. No Proceedings....................................... 25
SECTION 6.05. Amendments; Consents and Waivers..................... 25
SECTION 6.06. GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF JURY TRIAL................................. 25
SECTION 6.07. Execution in Counterparts; Severability.............. 26
SECTION 6.08. Descriptive Headings................................. 26
SECTION 6.09. No Setoff............................................ 26
i
Page
----
SECTION 6.10. Further Assurances................................... 26
SECTION 6.11. Confidentiality...................................... 27
SECTION 6.12. Assignment of Agreement.............................. 27
ARTICLE VII PSC LOANS TO PAMECO CORPORATION
SECTION 7.01. PSC Loans............................................ 28
SECTION 7.02. Notices Relating to Loans............................ 28
SECTION 7.03. Disbursement of Loan Proceeds........................ 28
SECTION 7.04. Pameco Note.......................................... 28
SECTION 7.05. Principal Repayments................................. 29
SECTION 7.06. Interest............................................. 29
SECTION 7.07. Time and Method of Payments.......................... 29
SCHEDULE 1 LIST OF CHIEF EXECUTIVE OFFICES OF ORIGINATOR AND OTHER OFFICES
WHERE RECORDS ARE KEPT AND NAMES OF THE ORIGINATOR
SCHEDULE 2 PRIOR NAMES OF ORIGINATOR
SCHEDULE 3 LOCATIONS FOR WHICH LOCKBOXES ARE NOT IN USE
EXHIBIT A FORM OF ASSIGNMENT
EXHIBIT B FORM OF PAMECO NOTE
ANNEX X DEFINITIONS AND INTERPRETATION
ii
Receivables Transfer Agreement, dated as of April 29, 1996 (this
"AGREEMENT"), between PAMECO CORPORATION, a Delaware corporation (the
"ORIGINATOR") and Pameco Securitization Corporation, a Delaware corporation
("PSC").
R E C I T A L S
- - - - - - - -
A. PSC is a wholly owned subsidiary of the Originator.
B. PSC has been formed for the sole purpose of purchasing or
otherwise acquiring certain trade receivables originated by the Originator
and/or its subsidiaries.
C. The Originator intends to sell, and PSC intends to purchase, such
trade receivables, from time to time, as described herein.
D. The Originator may, from time to time, contribute capital to PSC
in the form of Contributed Receivables or cash.
The parties agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION 1.01. Definitions. Except as otherwise expressly provided
-----------
herein or unless the context otherwise requires, capitalized terms not otherwise
defined herein shall have the meanings assigned to such terms in Annex X hereto,
which is incorporated by reference herein. All other capitalized terms used
herein shall have the meanings specified herein.
SECTION 1.02. Other Terms and Interpretation. All other terms and
------------------------------
the interpretation of this Agreement shall be as set out in Annex X hereto.
ARTICLE II
TRANSFERS OF RECEIVABLES
SECTION 2.01. Agreement to Transfer. (a) On and after the date of
---------------------
this Agreement, the Originator agrees to sell or contribute without recourse,
except as specifically provided herein, to PSC all Receivables originated by the
Originator. On or before the Effective Date, the Originator and PSC shall enter
into a separate Certificate of Assignment substantially in the form of Exhibit A
hereto (the "ASSIGNMENT").
(b) The Originator shall, on the Effective Date and on a date
occurring no less frequently than weekly thereafter, deliver to PSC a Request
Notice identifying (i) the amount of outstanding Receivables originated and
owned by the Originator through such date, (ii) at its option, a certain number
of such Receivables to be contributed to PSC (the "CONTRIBUTED RECEIVABLES"),
and (iii) the amount of all other Receivables not previously identified as
purchased and sold or contributed, to be purchased and sold (the "SOLD
RECEIVABLES"), in each case in accordance with the procedures described in this
Section 2.01(b). No later than the following Business Day (the "TRANSFER
DATE"), the Originator shall transfer the Receivables designated in such Request
Notice which are to be purchased, sold and, if applicable, contributed. Each
such identification shall be made as of the opening of business of the
Originator on each Transfer Date.
(c) The price paid for such Sold Receivables shall be the Sale Price.
Such Sale Price shall be paid by means of an immediate cash payment to the
Originator. On each Transfer Date the Sold Receivables and Contributed
Receivables shall be assigned, and PSC shall pay the Sale Price for such Sold
Receivables. The portion of the Sale Price payable in cash shall be payable in
immediately available funds on the applicable Transfer Date to an account
designated by the Originator (and approved by the Operating Agent) on or before
such Transfer Date.
(d) On and after each applicable Transfer Date hereunder, PSC shall
own the Sold Receivables and the Contributed Receivables which have been
(assuming compliance with the terms hereof) identified as being transferred to
PSC under this Section 2.01 and the Originator shall not take any action
inconsistent with such ownership, nor shall the Originator claim any ownership
interest in any such Transferred Receivables.
(e) Until the occurrence of an Event of Servicer Termination or a
resignation of the Servicer pursuant to the Purchase Agreement, (i) the
Originator, as Servicer, shall conduct the servicing, administration and
collection of such Transferred Receivables and shall take, or cause to be taken,
all such actions as may be necessary or advisable to service, administer and
collect such Transferred Receivables, from time to time, all in accordance with
(A) the terms of the Purchase Agreement, (B) customary and prudent servicing
procedures for trade receivables of a similar type and (C) all applicable laws,
rules and regulations, and (ii) documents relating to Transferred Receivables
shall be held in trust by the Originator, as Servicer, for the benefit of PSC
and its assignees as the owners thereof, and possession of any incident relating
to the Transferred Receivables and Contracts so retained is for the sole purpose
of facilitating the servicing of the Transferred Receivables. Such retention and
possession thereof is at the will of PSC and its assignees and in a custodial
capacity for their benefit only.
SECTION 2.02. Grant of Security Interest. It is the intention of the
--------------------------
parties hereto that each transfer of Transferred Receivables to be made
hereunder shall constitute a purchase and sale or capital contribution, as the
case may be, and not a loan. In the
2
event, however, that a court of competent jurisdiction were to hold that any
transaction provided for hereby constitutes a loan and not a purchase and sale
or capital contribution, it is the intention of the parties hereto that this
Agreement shall constitute a security agreement under applicable law and that
the Originator shall be deemed to have granted to PSC a first priority security
interest in all of the Originator's right, title and interest in, to and under
the Transferred Receivables, all payments of principal, interest, fees, charges
and indemnities on or under such Transferred Receivables and all Proceeds of any
such Transferred Receivables.
SECTION 2.03. Addition of Originator. Any Subsidiary or Affiliate of
----------------------
the Parent may become an Originator hereunder if the Rating Agency Condition is
satisfied with respect to such addition. The Originator and any Subsidiary or
Affiliate of the Parent that is proposed to be added as an Originator shall give
to PSC and its assigns prior written notice of its desire to add or be added, as
the case may be, as an Originator. Once the notice has been given, any addition
of a Subsidiary or Affiliate of the Parent as an Originator pursuant to this
section shall become effective on the first Business Day following the date on
which (i) the Rating Agency Condition has been satisfied, (ii) the Subsidiary or
Affiliate and the parties hereto shall have executed and delivered the
agreements, instruments and other documents and the amendments or other
modifications to the Related Documents, in form and substance reasonably
satisfactory to PSC and the Operating Agent, that PSC or the Operating Agent
reasonably determine are necessary or appropriate to effect the addition and
(iii) the Operating Agent shall have given written notice of its approval of
such addition. Upon such effectiveness, any reference to "Originator" in this
Agreement shall refer to the Originator and the Subsidiary or Affiliate of the
Parent added as an Originator pursuant to this Section collectively or
individually as the context shall require.
SECTION 2.04. Termination of Status as an Originator. (a) At any
--------------------------------------
time when more than one Person is an Originator, an Originator may terminate its
obligations as an Originator hereunder if:
(i) the Originator (a "TERMINATING ORIGINATOR") shall have given
PSC and its assigns not less than 60 days' prior written notice of its
intention to terminate,
(ii) an Authorized Officer of the Terminating Originator shall have
certified that the termination by the Terminating Originator of its status
as an Originator will not have a material adverse effect on the business,
financial condition or operations or assets of PSC, and
(iii) both immediately before and after giving effect to the
termination by the Terminating Originator, no Termination Event shall have
occurred and be continuing or shall reasonably be expected to occur as a
result of such termination.
3
Any termination by an Originator shall become effective on the first
Business Day that follows the day on which the requirements of clauses (i)
through (iii) shall have been satisfied (or such later date specified in the
notice or certificate referred to in the clauses). Any termination by an
Originator shall terminate its rights and obligations hereunder; provided,
--------
however, that the termination shall not relieve the Terminating Originator of
-------
obligations which relate to Transferred Receivables originated by or obligations
of the Terminating Originator prior to the effective date of the termination.
(b) An Originator's right and obligation to sell its Receivables to
PSC shall terminate immediately if the Originator ceases to be a Subsidiary or
Affiliate of the Parent; provided, however, that the termination shall not
-------- -------
relieve the Originator of obligations which relate to Transferred Receivables
originated by or obligations of the Originator prior to the effective date of
the termination.
ARTICLE III
CONDITIONS OF SALE
SECTION 3.01. Conditions Precedent to the Initial Sale. The initial
----------------------------------------
Sale hereunder is subject to the conditions precedent that PSC shall have
received on or before the Effective Date, each dated such date (unless otherwise
indicated), in form and substance satisfactory to PSC:
(i) an Assignment executed by the Originator;
(ii) a copy of resolutions duly adopted by the Board of
Directors of the Originator approving this Agreement, the Assignment and
the other documents to be delivered by it hereunder and the transactions
and matters contemplated hereby, certified by its Secretary or Assistant
Secretary;
(iii) the charter, as amended, of the Originator, certified by
the Secretary of State of the Originator's state of incorporation, dated
not earlier than 10 days prior to the Effective Date;
(iv) a good standing certificate for the Originator issued by
the Secretary of State of the Originator's state of incorporation, dated
not earlier than 10 days prior to the Effective Date;
(v) a copy of the Originator's by-laws, as Amended, certified
by the Originator's Secretary or Assistant Secretary;
4
(vi) a certificate of the Secretary or Assistant Secretary of
the Originator certifying the names and true signatures of the officers
authorized on behalf of the Originator to sign this Agreement, the
Assignment, and the other documents to be delivered by the Originator
hereunder (on which certificate PSC may conclusively rely until such time
as PSC shall receive from the Originator a revised certificate meeting the
requirements of this Subsection (vi)) and certifying that (A) the charter
of the Originator has not changed since the date of the certificate
referred to in Section 3.01(iii), (B) the Originator is still in good
standing in all jurisdictions where it is qualified to do business,
including, without limitation, that referred to in Section 3.01(iv), (C)
all representations and warranties made by the Originator in this Agreement
are true and correct in all respects and (D) no financing statements or
other similar instruments relating to the Receivables have been filed in
any jurisdiction, other than those financing statements, other similar
instruments and documents shown on the certified copies of the requests for
information or copies (Form UCC-11)(or a similar search report certified by
a party acceptable to the Operating Agent) provided pursuant to clause
(ix);
(vii) copies of proper financing statements (Form UCC-1), dated
on or prior to the Effective Date, naming the Originator as the assignor of
the Transferred Receivables and PSC as assignee, or other similar
instruments or documents, in form and substance sufficient for filing under
the UCC or any comparable law of any and all jurisdictions as may be
necessary or, in the reasonable opinion of the Operating Agent desirable to
perfect PSC's ownership interest in all Transferred Receivables, in each
case in which an interest may be assigned hereunder;
(viii) copies of properly executed termination statements or
statements of release (Forms UCC-2 or UCC-3) or other similar instruments
or documents, if any, in form and substance satisfactory for filing under
the UCC or any comparable law of any and all jurisdictions as may be
necessary or, in the reasonable opinion of the Operating Agent, desirable
to release all security interests and similar rights of any Person in the
Transferred Receivables previously granted by the Originator;
(ix) certified copies of requests for information or copies
(Form UCC-11) (or a similar search report certified by a party acceptable
to the Operating Agent), dated a date reasonably near and prior to the
Effective Date, listing all effective financing statements and other
similar instruments and documents, which name the Originator (under its
present name and any previous name) as debtor and which are filed in the
jurisdictions in which filings are to be made pursuant to such Subsections
(vii) and (viii) above, together with copies of such financing statements,
none of which shall cover any Transferred Receivables unless termination
5
statements or statements of release are provided with respect thereto
pursuant to Subsection (viii) above;
(x) any necessary third party consents to the closing of the
transactions contemplated hereby, in the form and substance reasonably
satisfactory to the Operating Agent; and
(xi) the Lockbox Agreements in respect of each Lockbox
Account, in each case duly executed by the parties thereto and acknowledged
and agreed to by the applicable Lockbox Bank.
SECTION 3.02. Conditions Precedent to All Sales. The obligation of
---------------------------------
PSC to pay for each Sold Receivable on each Transfer Date (including the initial
Transfer Date) shall be subject to the further conditions precedent that on such
Transfer Date:
(a) The following statements shall be true (and delivery by the
Originator of a Request Notice and the acceptance by the Originator of the Sale
Price for any Receivables on any Transfer Date shall constitute a representation
and warranty by the Originator that on such Transfer Date such statements are
true):
(i) the representations and warranties of the Originator
contained in Section 4.01 shall be correct on and as of such Transfer Date
in all material respects (except with respect to Section 4.01(b) and those
already so qualified which are true and correct in all respects), before
and after giving effect to the Sale of Receivables on such Transfer Date
and to the application of proceeds therefrom, as though made on and as of
such date; and
(ii) the Originator is in compliance with each of its covenants
and other agreements set forth herein.
(b) The Originator shall have taken such other action, including
delivery of approvals, consents, opinions, documents and instruments as PSC may
reasonably request.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 4.01. Representations and Warranties of the Originator. The
------------------------------------------------
Originator represents and warrants to PSC as of each Transfer Date, that:
(a) With respect to the Originator:
6
(i) the Originator is a corporation duly organized, validly
existing and in good standing under the laws of its respective jurisdiction
of incorporation and is duly qualified to do business and is in good
standing in every jurisdiction in which the nature of its business requires
it to be so qualified;
(ii) the Originator has the corporate power and authority to
own, pledge, mortgage, operate and convey all of its properties and assets,
to execute and deliver this Agreement and the Related Documents and to
perform the transactions contemplated hereby and thereby;
(iii) the execution, delivery and performance by the
Originator of this Agreement and the Related Documents and the transactions
contemplated hereby and thereby (A) have been duly authorized by all
necessary corporate or other action on the part of the Originator, (B) do
not contravene or cause the Originator to be in default under (1) the
Originator's certificate or articles of incorporation or by-laws, (2) any
contractual restriction with respect to any Debt of the Originator or
contained in any material indenture, loan or credit agreement, lease,
mortgage, security agreement, bond, note, or other material agreement or
instrument binding on or affecting the Originator, its affiliates or their
or its respective property or (3) any law, rule, regulation, order, writ,
judgment, award, injunction or decree applicable to, binding on or
affecting the Originator, or its property and (C) do not result in or
require the creation of any Adverse Claim upon or with respect to any of
its properties (other than in favor of PSC with respect to this Agreement
and Redwood and the Collateral Agent under the Purchase Agreement);
(iv) this Agreement and the Related Documents have each been
duly executed and delivered by the Originator;
(v) no approval or consent of, notice to, filing with or
licenses, permits, qualifications or other action by any Governmental
Authority or any other party, is required or necessary for the conduct of
the Originator's business as currently conducted and for the due execution,
delivery and performance by the Originator of this Agreement or any of the
Related Documents or for the perfection of or the exercise by PSC, Redwood,
the Operating Agent or the Collateral Agent of any of their rights or
remedies thereunder or hereunder, other than approvals, consents, notices,
filings and other actions which have been obtained or made and complete
copies of which have been provided to Redwood, the Operating Agent and the
Collateral Agent;
(vi) this Agreement and the other Related Documents
delivered by the Originator are the legal, valid and binding obligations of
the Originator enforceable against the Originator in accordance with their
respective terms subject
7
to (A) any applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to or affecting the
enforceability of creditors' rights generally and (B) general equitable
principles, whether applied in a proceeding at law or in equity;
(vii) there is no pending, threatened, nor any reasonable
basis for, any action, suit or proceeding against or affecting the
Originator, its officers or directors, or the property of the Originator,
in any court or tribunal, or before any arbitrator of any kind or before or
by any Governmental Authority (A) asserting the invalidity of this
Agreement or any of the Related Documents, (B) seeking to prevent the
transfer, sale, pledge or contribution of any Receivable or the
consummation of any of the transactions contemplated hereby or thereby, (C)
seeking any determination or ruling that might materially and adversely
affect (1) the performance by PSC or the Originator of its obligations
under this Agreement or any of the Related Documents, (2) the validity or
enforceability of this Agreement or any of the Related Documents, or (3)
the Transferred Receivables, the Contracts or the interests of PSC or its
assigns therein, or (D) reasonably likely to result in damages or penalties
in an uninsured amount in excess of $250,000;
(viii) no injunction, writ, restraining order or other order
(collectively, "Orders") of any nature adverse to the Originator or the
conduct of its business or which is inconsistent with the due consummation
of the transactions contemplated by this Agreement or the Purchase
Agreement or any of the other Related Documents has been issued by a
Governmental Authority nor been sought by any Person;
(ix) the principal place of business, the chief executive
office and all other places of business of the Originator are located at
the addresses of the Originator referred to in Schedule 1 and there are now
no, and during the past four months there have not been any, other
locations where the Originator is located (as that term is used in the UCC
of the jurisdiction where such principal place of business is located) or
keeps Records;
(x) the legal name of the Originator is as set forth at the
beginning of this Agreement and, except as set forth on Schedule 3, the
Originator has not changed its name in the last six years, and during such
period the Originator did not use, nor does the Originator now use, any
trade names, fictitious names, assumed names or "doing business as" names
other than as set forth in Schedule 1;
(xi) the Originator is solvent and will not become insolvent
after giving effect to the transactions contemplated by this Agreement and
the Related Documents; the Originator is paying its Debts as they mature;
the Originator has not incurred Debts beyond its ability to pay as they
mature; and the Originator, after
8
giving effect to the transactions contemplated by this Agreement and the
Related Documents, will have an adequate amount of capital to conduct its
business in the foreseeable future;
(xii) for federal income tax, reporting and accounting
purposes (except in any consolidated financial statements and consolidated
tax returns), the Originator will treat the sale of each Transferred
Receivable sold or assigned pursuant to this Agreement as a sale of, or
absolute assignment of, its full right, title and ownership interest in
such Receivable to PSC and all Contributed Receivables shall be accounted
for as an increase in the stated capital of PSC, and the Originator has not
in any other respect accounted for or treated the transactions contemplated
by this Agreement or the Related Documents.
(xiii) the Originator has complied in all material respects
with all applicable laws, rules, regulations, and orders with respect to
it, its business and properties and all Transferred Receivables and related
Contracts (including without limitation, all applicable environmental,
health and safety requirements) and all restrictions contained in any
indenture, loan or credit agreement, mortgage, security agreement, bond,
note or other agreement or instrument binding on or affecting the
Originator or its property;
(xiv) without limiting the generality of the prior
representation, no condition exists or event has occurred which, in itself
or with the giving of notice or lapse of time or both, would result in the
suspension, revocation, impairment, forfeiture or non-renewal of any
Governmental Consent applicable to the Originator or any Subsidiary except
where such conditions or events would not, separately or in the aggregate,
have a material adverse effect on (A) the performance by PSC or the
Originator of its obligations under this Agreement or any of the Related
Documents, (B) the validity or enforceability of this Agreement or any of
the Related Documents, or (C) the Transferred Receivables or the
Contracts or the interests of PSC or Redwood therein;
(xv) the Originator has filed on a timely basis all tax
returns (federal, state and local) required to be filed and has paid or
made adequate provisions for the payment of all taxes, fees, assessments
and other governmental charges due from the Originator (other than taxes,
fees, amendments or governmental charges which the Originator is contesting
in good faith with such taxing authority and in respect of which no final
unappealable order has been made against the Originator), no tax lien or
similar Adverse Claim has been filed, and no claim is being asserted, with
respect to any such tax, fee, assessment, or other governmental charge. Any
taxes, fees, assessments and other governmental charges payable by the
Originator in connection with the execution and delivery of this Agreement
and the Related Documents and the transactions contemplated
9
hereby or thereby have been paid or shall have been paid when due, at or
prior to such Transfer Date;
(xvi) the Originator is licensed or otherwise has the lawful
right to use all patents, trademarks, servicemarks, tradenames, copyrights,
technology, know-how and processes used in or necessary for the conduct of
its business as currently conducted which are material to its financial
condition, business, operations, assets and prospects, individually or
taken as a whole;
(xvii) as of the date of each Request Notice delivered by the
Originator, such Request Notice contains an accurate list of the aggregate
amount of all Transferred Receivables contributed or sold by the Originator
to PSC as of the relevant Transfer Date;
(xviii) each Obligor of a Transferred Receivable has been
directed, and is required to, remit all payments with respect to such
Receivable for deposit in a Lockbox Account or a Lockbox except with
respect to any Obligors serviced by branches of the Servicer in the
locations set forth on Schedule 4 hereto (as such schedule may be amended
or modified upon written notice from the Operating Agent to the Seller or
Servicer), as to which all payments shall be deposited in a Blocked Account
and subsequently transferred to a Lockbox Account or a Lockbox;
(xix) no Obligor of an Eligible Receivable has any claim of a
material nature against or affecting the Originator or the property of the
Originator.
(xx) the Originator is in compliance with ERISA and has not
incurred and does not expect to incur any liabilities (except for premium
payments arising in the ordinary course of business) payable to the PBGC
(or any successor thereof) under ERISA or the Internal Revenue Code;
(xxi) each pension plan or profit sharing plan to which the
Originator or any Affiliate is a party has been administered and fully
funded in accordance with the obligations of the Originator under law and
as set forth in such plan, and the Originator has complied with the
applicable provisions of ERISA or the Internal Revenue Code in effect as of
such Transfer Date;
(xxii) the Originator has not agreed to pay any fee or
commission to any agent, broker, finder or other person for or on account
of services rendered as a broker or finder in connection with this
Agreement or the Related Documents or the transactions contemplated hereby
or thereby which would give rise to any valid claim against PSC for any
brokerage commission or finder's fee or like payment;
10
(xxiii) all information heretofore or hereafter furnished with
respect to the Originator to PSC in connection with any transaction
contemplated by this Agreement or the Related Documents is and will be true
and complete in all material respects and does not and will not omit to
state a material fact necessary to make the statements contained herein or
therein not misleading;
(xxiv) no part of the proceeds received by the Originator or
any Affiliate from the Sale Price will be used directly or indirectly for
the purpose of purchasing or carrying, or for payment in full or in part
of, Debt that was incurred for the purposes of purchasing or carrying any
"margin stock," as such term is defined in Regulations G and U of the Board
of Governors of the Federal Reserve System;
(xxv) there are not now, nor will there be at any time in the
future, any agreement or understanding between the Originator and PSC
(other than as expressly set forth herein) providing for the allocation or
sharing of obligations to make payments or otherwise in respect of any
taxes, fees, assessments or other governmental charges;
(xxvi) no transaction contemplated by this Agreement or any of
the Related Documents requires compliance with any bulk sales act or
similar law;
(xxvii) the Request Notice with respect to such Transfer Date
is accurate in all material respects;
(xxviii) each purchase of Receivables under this Agreement will
constitute (A) a "current transaction" within the meaning of Section
3(a)(3) of the Securities Act of 1933, as amended, and (B) a purchase or
other acquisition of notes, drafts, acceptances, open accounts receivable
or other obligations representing part or all of the sales price of
merchandise, insurance or services within the meaning of Section 3(c)(5) of
the Investment Company Act of 1940, as amended;
(xxvix) (A) the Originator is not a party to any indenture,
loan or credit agreement or any lease or other agreement or instrument or
subject to any charter or corporation restriction that is reasonably likely
to have, and no provision of applicable law or governmental regulation is
reasonably likely to have, a material adverse effect on the ability of the
Originator to carry out its obligations under this Agreement and the other
Related Documents to which the Originator is a party and (B) the Originator
is not in default under or with respect to any contract, agreement, lease
or other instrument to which the Originator is a party and which is
material to the Originator's ability to perform its obligations hereunder
or to the quality or collectibility of the receivables, and the Originator
has not delivered or received any notice of default thereunder;
11
(xxx) the Originator is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company
Act of 1940, as amended. The purchase or acquisition of the Transferred
Receivables by PSC, the application of the proceeds and the consummation of
the transactions contemplated by this Agreement and the other Related
Documents to which the Originator is a party will not violate any provision
of such Act or any rule, regulation or order issued by the Securities and
Exchange Commission thereunder;
(xxxi) the bylaws or the articles of incorporation of the
Originator require it to maintain (A) books and records of account, and (B)
minutes of the meetings and other proceedings of its shareholders and board
of directors;
(xxxii) the Lockboxes, the Lockbox Accounts and the Blocked
Accounts are the only lockboxes and accounts maintained by the Originator
into which Collections of any Transferred Receivables are deposited; and
(xxxiii) each of the representations and warranties of the
Originator contained in the Related Documents (other than this Agreement)
is true and correct in all material respects and the Originator hereby
makes each such representation and warranty to, and for the benefit of, the
Collateral Agent, the Operating Agent and Redwood as if the same were set
forth in full herein.
(b) On each Transfer Date and as of the date of each Investment Base
Certificate delivered under the Purchase Agreement with respect to each
Transferred Receivable designated as an Eligible Receivable:
(i) such Receivable is an Eligible Receivable and is a
receivable created through the provision of merchandise, goods or services
by the Originator in the ordinary course of its business;
(ii) such Receivable was created in accordance with and
satisfies in all material respects all applicable requirements of the
Credit and Collection Policies ;
(iii) such Receivable represents the genuine, legal, valid and
binding obligation in writing of the Obligor enforceable by the holder
thereof in accordance with its terms, subject to (A) any applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to or affecting the enforceability of
creditors' rights generally and (B) general equitable principles, whether
applied in a proceeding at law or in equity and neither such Receivable nor
its related Contract has been satisfied, subordinated, rescinded or amended
in any manner which would impair the collectibility of such
12
Receivable, adjust the value of such Receivable, or modify the payment
terms of such Receivable after its creation;
(iv) such Receivable is not and will not be subject to any
exercise of any right of rescission, set-off, recoupment, counterclaim or
defense;
(v) prior to its sale or contribution to PSC such Receivable
was owned by the Originator free and clear of any Adverse Claim, and the
Originator had the right to contribute, sell, assign and transfer the same
and interests therein as contemplated under this Agreement, upon such sale
or contribution, PSC will have acquired good and marketable title to and
the sole record and beneficial ownership interest in such Receivable, free
and clear of any Adverse Claim and, after such sale or contribution, such
Receivable did not become subject to any Adverse Claim as a result of any
action or inaction of the Originator;
(vi) this Agreement and the Assignment constitute a valid
sale, contribution, transfer, assignment, setover and conveyance to PSC of
all right, title and interest of the Originator in and to such Receivable;
(vii) such Receivable is entitled to be paid pursuant to the
terms of the related Contract, has not been paid in full or been
compromised, adjusted, extended, satisfied, subordinated, rescinded or
modified, and is not subject to compromise, adjustment, extension,
satisfaction, subordination, rescission, or modification by the Originator
except in accordance with any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the enforceability of creditors' rights generally;
(viii) the Originator has submitted all necessary documentation
for payment of such Receivable to the Obligor and has fulfilled all its
other obligations in respect thereof;
(ix) the stated term of such Receivable, if any, is not
greater than 120 days;
(x) such Receivable is an "account" within the meaning of
the UCC of the jurisdiction where the Originator's chief executive office
is located;
(xi) neither such Receivable nor its related Contract
contravenes in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to usury, consumer protection, truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy) and no party to such related Contract is
in violation of any such law, rule or regulation which could have a
material adverse
13
effect on the collectibility of such Receivable, the value of such
Receivable or the payment terms of such Receivable;
(xii) such Receivable does not represent "billed but not yet
shipped" goods or merchandise, unperformed services, consigned goods or
"sale or return" goods; nor does such Receivable arise from a transaction
for which any additional performance by the Originator or acceptance or
other act of the Obligor remains to be performed as a condition to any
payments on such Receivable;
(xiii) there are no proceedings or investigations pending or to
the Originator's knowledge threatened before any Governmental Authority (A)
asserting the invalidity of such Receivable or such Contract, (B) asserting
the bankruptcy or insolvency of the related Obligor, (C) seeking the
payment of such Receivable or payment and performance of such Contract, or
(D) seeking any determination or ruling that might materially and adversely
affect the validity or enforceability of such Receivable or such Contract;
(xiv) as of the relevant Transfer Date hereunder, no Obligor
on such Receivable is bankrupt or insolvent, is unable to make payment of
its obligations when due, is the debtor in a voluntary or involuntary
bankruptcy proceeding, or is the subject of a comparable receivership or
insolvency proceeding, other than Obligors under the protection of a
bankruptcy court or receivership which has approved payment by any such
Obligor of such Receivable; and
(xv) the Originator has no knowledge of any fact (including
any defaults by the Obligor on any other accounts) which leads it or should
have led it to expect that any payments on such Receivable will not be paid
in full when due or to expect any other material adverse effect on (A) the
performance by PSC or the Originator of its obligations under this
Agreement or any of the Related Documents, (B) the validity or
enforceability of this Agreement or any of the Related Documents, or (C)
the Transferred Receivables or the Contracts or the interests of PSC or
Redwood therein.
It is understood and agreed that the representations and warranties described in
this Section 4.01 shall survive the sale or contribution of the Transferred
Receivables to PSC, any subsequent assignment of the Transferred Receivables by
PSC, and the termination of this Agreement and the other Related Documents and
shall continue so long as any Transferred Receivable shall remain outstanding.
SECTION 4.02. Covenants of the Originator.
---------------------------
(a) Offices and Records. The Originator shall keep its chief place of
-------------------
business and chief executive offices and the office where it keeps its Records
at the
14
respective locations specified in Schedule 1 hereto or, upon at least 30 days
prior written notice to PSC and the Collateral Agent, at such other location in
a jurisdiction where all action required by Section 4.02(d) shall have been
taken with respect to the Transferred Receivables. The Originator shall, for
not less than three years or for such longer period as may be required by law,
from the date on which any Transferred Receivable arose, maintain adequate
Records with respect to each Transferred Receivable, including records of all
payments received, credits granted and merchandise returned. Upon prior notice
to the Originator, except after the occurrence of any Termination Event, the
Originator will permit representatives of PSC, the Servicer, the Operating Agent
or the Collateral Agent at any time and from time to time during normal business
hours, and at such times outside of normal business hours as PSC, the Servicer,
the Operating Agent or the Collateral Agent shall reasonably request, (i) to
inspect and make copies of and abstracts from such Records, (ii) to visit the
properties of the Originator utilized in connection with the collection,
processing or servicing of the Transferred Receivables for the purpose of
examining such Records, and (iii) to discuss matters relating to the Transferred
Receivables or the Originator's performance under this Agreement or the affairs,
finances and accounts of the Originator with any of its officers, directors,
employees, representatives or agents and with its independent certified
accountants. The Originator will advise its independent certified accountants
that PSC, the Operating Agent, the Servicer and the Collateral Agent have been
authorized to review and discuss with such accountants any and all financial
statements and other information of any kind that they may have with respect to
the Originator. The Originator shall be given prior notice of any discussions
with its accountants and the opportunity to participate; provided that the
Originator's failure or inability to participate shall not prevent any of PSC,
the Operating Agent, the Servicer and the Collateral Agent from engaging in such
discussions. In connection with the foregoing, in the event any of the
Operating Agent or the Collateral Agent determines that a deterioration has or
is reasonably likely to occur in the quality of servicing of the Transferred
Receivables, any of them, individually or collectively, may institute procedures
to permit it to confirm the Obligor's outstanding balances in respect of any
Transferred Receivables. The Originator agrees to render to PSC, the Operating
Agent and the Collateral Agent, at the Originator's own cost and expense, such
clerical and other assistance as may be reasonably requested with regard to the
foregoing. If a Termination Event under the Purchase Agreement shall have
occurred and be continuing, promptly upon request therefor, the Originator shall
assist PSC in delivering to the Operating Agent records reflecting activity
through the close of business on the immediately preceding Business Day.
(b) Compliance With Credit and Collection Policies. The Originator
----------------------------------------------
shall comply in all material respects with the Credit and Collection Policies
with regard to each Transferred Receivable and the related Contracts, and with
the terms of such Receivables and Contracts.
15
(c) Notice of Adverse Claim. The Originator shall advise PSC and any
-----------------------
assignees, promptly, in reasonable detail, (i) of any Adverse Claim known to it
made or asserted against any of the Transferred Receivables, (ii) of any
determination that a Transferred Receivable, or any other Receivable designated
as an Eligible Receivable in a Request Notice or otherwise, was not an Eligible
Receivable at such time and (iii) of the occurrence of any event which would
have a material adverse effect on the aggregate value of the Transferred
Receivables or on the validity of the transfers in this Agreement.
(d) Further Assurances; Financing Statements.
----------------------------------------
(i) The Originator agrees that at any time and from time to
time, at its expense, upon the request of PSC or PSC's assignees it shall
promptly execute and deliver all further instruments and documents, and
take all further action, that may be necessary or, in the reasonable
opinion of PSC or any assignee, desirable or that PSC or any assignee may
reasonably request to perfect, preserve, continue and maintain fully and
protect the transfers made and the right, title and interests (including
any security interests) granted to PSC by this Agreement or to enable PSC
or any assignee to exercise and enforce its rights and remedies under this
Agreement or any of the Related Documents with respect to any Transferred
Receivables. Without limiting the generality of the foregoing, the
Originator shall execute and file such financing or continuation
statements, or amendments thereto, and such other instruments or notices as
may be necessary or in the reasonable opinion of PSC or any assignee
desirable or that PSC or any assignee may reasonably request to protect and
preserve and perfect the transfers and security interests granted by this
Agreement, free and clear of all Adverse Claims.
(ii) The Originator hereby authorizes PSC and its assignees to
file one or more financing or continuation statements, and amendments
thereto, relating to all or any part of the Transferred Receivables without
the signature of the Originator where permitted by law. A carbon,
photographic or other reproduction of this Agreement or any notice or
financing statement covering the Transferred Receivables or any part
thereof shall be sufficient as a notice or financing statement where
permitted by law. PSC will promptly send to the Originator any financing or
continuation statements thereto which it files without the signature of the
Originator except, in the case of filings of copies of this Agreement as
financing statements, PSC will promptly send the Originator the filing or
recordation information with respect thereto.
(e) Assignment. The Originator acknowledges and agrees that, to the
----------
extent permitted under the Purchase Agreement, PSC may assign all of its right,
title and interest in, to and under the Transferred Receivables and its right,
title and interest under this Agreement, including its right to exercise the
remedies created by Section 4.04. The
16
Originator agrees that, upon such assignment, the assignee under the Purchase
Agreement may enforce directly, without joinder of PSC, the repurchase
obligations of the Originator set forth in Section 4.04 with respect to breaches
of the representations and warranties or covenants set forth in Section 4.01 and
4.02.
(f) Compliance With Agreements and Applicable Laws. The Originator
----------------------------------------------
shall perform each of its obligations under this Agreement and the Related
Documents and comply with all material requirements of any law, rule or
regulation applicable to it.
(g) Corporate Existence. The Originator shall maintain its corporate
-------------------
existence and shall at all times continue to be duly organized under the laws of
the state of its incorporation and duly qualified and duly authorized (as
described in Section 4.01) and shall conduct its business in accordance with the
terms of its certificate of incorporation and bylaws.
(h) Notice of Material Event. The Originator shall promptly inform
------------------------
PSC and any assignee (except in respect of clause (i), in which event the
Originator shall immediately inform PSC and any assignee) in writing of the
occurrence of any of the following which shall set forth the details thereof and
what action the Originator proposes to take with respect thereto:
(i) the submission of any claim or the initiation of any legal
process, litigation or administrative or judicial investigation against the
Originator or with respect to or in connection with all or any portion of
the Transferred Receivables, which, if adversely determined, could
reasonably be expected to have a material adverse effect on the Originator;
(ii) any change in the location of the Originator's principal
office or any change in the location of the Originator's books and records;
(iii) the commencement or threat of any rule making or
disciplinary proceedings or any proceedings instituted by or against the
Originator in any federal, state or local court or before any governmental
body or agency, or before any arbitration board, or the promulgation of any
proceeding or any proposed or final rule which, if adversely determined,
would have a material adverse effect with respect to the Originator;
(iv) the commencement of any proceedings by or against the
Originator under any applicable bankruptcy, reorganization, liquidation,
rehabilitation, insolvency or other similar law now or hereafter in effect
or of any proceeding in which a receiver, liquidator, conservator, trustee
or similar official shall have been, or may be, appointed or requested for
the Originator or any of its assets;
17
(v) the receipt of notice that (A) the Originator is being
placed under regulatory supervision, (B) any license, permit, charter,
registration or approval necessary for the conduct of the Originator's
business is to be, or may be, suspended or revoked, or (C) the Originator
is to cease and desist any practice, procedure or policy employed by the
Originator in the conduct of its business, and such cessation may have a
material adverse effect with respect to the Originator; or
(vi) any other event, circumstance or condition that has had,
or has a material possibility of having, a material adverse effect in
respect of the Originator.
(i) Maintenance of Licenses. The Originator shall maintain all
-----------------------
licenses, permits, charters and registrations which are material to the conduct
of its business.
(j) Use of Proceeds. The Originator shall apply its funds towards
---------------
general corporate purposes (including the retirement or repayment of third party
debt) and towards the other sums payable by the Originator under this Agreement
and the Related Documents in connection with the transactions contemplated
hereby and by the Related Documents and for no other purpose.
(k) Separate Identity.
-----------------
(i) The Originator shall maintain corporate records and books
of account separate from those of PSC.
(ii) The financial statements of the Parent and its
consolidated Subsidiaries shall (i) disclose the effects of the
Originator's transactions in accordance with GAAP and (ii) either (a)
disclose that the assets of PSC are not available to pay creditors of the
Originator or any other Affiliate of the Originator or (b) contain the
language set forth in Section 4.02(k)(iii)(b).
(iii) The annual financial statements of the Parent and its
consolidated Subsidiaries (including PSC) will contain footnotes or other
information to the effect that with respect to PSC: (a) PSC's business
consists of the purchase of the Receivables from the Originator and (b) PSC
is a separate corporate entity with its own separate creditors, which upon
its liquidation will be entitled to be satisfied out of PSC's assets prior
to any value in PSC becoming available to PSC's equityholders.
(iv) The resolutions and other instruments underlying the
transactions described in this Agreement shall be continuously maintained
by the Originator as official records.
18
(v) The Originator shall use its best efforts to maintain an
arm's-length relationship with PSC and will not hold itself out as being
liable for the debts of PSC.
(vi) The Originator shall use its best efforts to keep its
assets (except with respect to any Records necessary for the servicing of
the Transferred Receivables) and its liabilities wholly separate from those
of PSC.
(vii) The Originator will conduct its business solely in its own
name (including any trade or fictitious name) through its duly authorized
officers or agents so as not to mislead others as to the identity of the
Originator.
(viii) The Originator will use its best efforts to avoid the
appearance of conducting business on behalf of PSC or that the assets of
the Originator are available to pay the creditors of PSC.
(ix) The Originator will cause operating expenses and
liabilities of PSC to be paid from PSC's funds.
(l) ERISA. The Originator shall give the Operating Agent prompt
-----
notice of each of the following events (but in no event more than 30 days after
the occurrence of the event): (i) an Accumulated Funding Deficiency, (ii) the
failure to make a material required contribution to a Plan or Multiemployer Plan
(but in no event will a contribution failure sufficient to give rise to a lien
under (S)302(f) of ERISA be considered immaterial), (iii) a Reportable Event,
(iv) any action by a Commonly Controlled Entity to terminate any Plan or
withdraw from any Multiemployer Plan, (v) any action by the PBGC to terminate or
appoint a trustee to administer a Plan, (vi) the reorganization or insolvency of
any Multiemployer Plan and (vii) an aggregate Underfunding for all Underfunded
Plans in excess of $250,000.
(m) Cooperation With Requests for Information or Documents. The
------------------------------------------------------
Originator will cooperate fully with all reasonable requests of PSC or any
assignee regarding the provision of any information or documents, necessary,
including the provision of such information or documents in electronic or
machine-readable format, or desirable to allow PSC and each assignee to carry
out its responsibilities under the Related Documents.
(n) Payment, Performance and Discharge of Obligations. The
-------------------------------------------------
Originator will pay, perform and discharge all of its obligations and
liabilities, including, without limitation, all taxes, assessments and
governmental charges upon its income and properties when due the non-payment,
performance or discharge of which would materially and adversely affect (1) the
performance of PSC or the Originator of its obligations under this Agreement or
any of the Related Documents, (2) the validity or enforceability of this
19
Agreement or any of the Related Documents, (3) the Transferred Receivables or
the Contracts or the interests of PSC or its assigns therein, or (4) the
business, operations, financial condition or prospects of PSC or the Originator,
unless and to the extent only that such obligations, liabilities, taxes,
assessments and governmental charges shall be contested in good faith and by
appropriate proceedings and that, to the extent required by GAAP, proper and
adequate book reserves relating thereto are established by the Originator and
then only to the extent that a bond is filed in cases where the filing of a bond
is necessary to avoid the creation of an Adverse Claim against any of its
properties.
SECTION 4.03. Negative Covenants of the Originator. The Originator
------------------------------------
shall not, without the written consent of PSC and each assignee of PSC's rights:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist any Adverse Claim upon or with respect
to, or assign any right to receive income in respect of any Transferred
Receivable or related Contract with respect thereto, or upon or with respect to
any Lockbox, any Lockbox Account or any Blocked Account;
(b) extend, amend, forgive, discharge, compromise, cancel or
otherwise modify the terms of any Transferred Receivable, or amend, modify or
waive any term or condition of any Contract related thereto (except as to the
Originator in its capacity as the Servicer under the Purchase Agreement);
(c) make any change in its instructions to Obligors regarding
payments to be made to PSC or payments to be deposited to a Lockbox or a Lockbox
Account other than changes redirecting payments from one Lockbox or Lockbox
Account to another Lockbox Account in respect of which all actions required
under Section 6.01 of the Purchase Agreement have been taken;
(d) merge with or into, consolidate with or into, convey, transfer,
lease or otherwise dispose of all or substantially all of its assets (whether
now owned or hereafter acquired) to, or acquire all or substantially all of the
assets or capital stock or other ownership interest of, any Person (whether in
one transaction or in a series of transactions) other than the acquisition by
purchase or otherwise of the capital stock of all or substantially all of the
business, properties or assets of any one or more Persons for aggregate
consideration not to exceed $1,000,000;
(e) make statements or disclosures or prepare any financial
statements which shall account for the transactions contemplated by this
Agreement in any manner other than as a sale or absolute assignment of the
Transferred Receivables to PSC, or in any other respect account for or treat the
transactions contemplated hereby (including but not limited to, for accounting,
tax and reporting purposes) in any manner other than as a
20
sale or absolute assignment of the Transferred Receivables (except in any
consolidated financial statements or consolidated tax returns);
(f) amend, supplement or otherwise modify its certificate of
incorporation or bylaws (or permit any of the foregoing) in any manner which may
(x) adversely affect the Purchaser or its assigns, the Transferred Receivables
or the ability of such Originator to perform its obligations under the Related
Documents or (y) violate (or authorize or permit acts or events which may
violate) any of the provisions of the Related Documents;
(g) (i) take any action, or fail to take any action, with respect to
the Transferred Receivables, if such action or failure to take action may
materially interfere with the enforcement of any rights under this Agreement or
the Related Documents (ii) waive or alter any rights with respect to the
Transferred Receivables, (or any agreement or instrument relating thereto; (iii)
take any action, or fail to take any action, if such action or failure to take
action may materially interfere with the enforcement of any rights with respect
to the Transferred Receivables; or (iv) fail to pay any tax, assessment, charge,
fee or other obligation of the Originator with respect to the Transferred
Receivables, or fail to defend any action, if such failure to pay or defend may
adversely affect the priority or enforceability of the first priority perfected
interest of PSC in the Transferred Receivables or the Originator's right, title
or interest in the Transferred Receivables;
(h) neither the Originator nor any Commonly Controlled Entity will:
(i) terminate any Plan so as to incur any material liability to
the PBGC;
(ii) knowingly participate in any "prohibited transaction" (as
defined in ERISA) involving any Plan or Multiemployer Plan or any trust
created thereunder which would subject any of them to a material tax or
penalty on prohibited transactions imposed under Section 4975 of the
Internal Revenue Code or ERISA;
(iii) fail to pay to any Plan or Multiemployer Plan any
contribution which it is obligated to pay under the terms of such Plan or
Multiemployer Plan, if such failure would cause such plan to have any
material Accumulated Funding Deficiency, whether or not waived; or
(iv) allow or suffer to exist any occurrence of a Reportable
Event, or any other event or condition, which presents a material risk of
termination by the PBGC on any Plan or Multiemployer Plan, to the extent
that the occurrence or nonoccurrence of such Reportable Event or other
event or condition is within the control of it or any Commonly Controlled
Entity;
21
(i) make any material change to the Credit and Collection
Policies without the prior written consent of PSC and each assignee; or
(j) take or permit (other than with respect to actions taken or to be
taken solely by a Government Authority) to be taken any action which would have
the effect directly or indirectly of subjecting interest on any of the Purchases
or the Commercial Paper to withholding taxation in the hands of, respectively,
PSC, Redwood or holders of the Commercial Paper generally who are residents of
the United States, and will perform all of the Originator's obligations under
this Agreement and the Related Documents to prevent or cure any default by the
Originator which would have the effect, directly or indirectly, of subjecting
interest on any of the Purchases or the Commercial Paper to withholding
taxation.
SECTION 4.04. Breach of Representations, Warranties or Covenants.
--------------------------------------------------
Upon discovery by the Originator, PSC, or any assignee of PSC's rights
hereunder, that any of the representations, warranties or covenants described in
Sections 4.01(b), 4.02(b) or (c) or 4.03(a), (b), (c) or (g) have been breached
such that they are or were untrue or incorrect in any respect, which breach is
reasonably likely to have a material adverse effect on the value of a
Transferred Receivable or the interests of PSC or any assignee therein, the
party discovering the same shall give prompt written notice to the other
parties. Thereafter, if requested by notice from PSC or any assignee, or if the
Originator so desires, the Originator shall, on the next succeeding Business
Day, either (i) repurchase such Transferred Receivable from PSC in consideration
of cash, (ii) transfer ownership of a new Eligible Receivable or new Eligible
Receivables on such Business Day; or (iii) make a capital contribution of the
Rejected Amount in cash to PSC by remitting the amount of such capital
contribution to the Collection Account in accordance with the terms of the
Purchase Agreement, in the case of clauses (i), (ii) and (iii) in an amount
equal to the Billed Amount of the Transferred Receivable materially adversely
affected by the breach less Collections received in respect thereof.
Notwithstanding the foregoing, if any Receivable is not paid in full on account
of any Dilution Factors, the Originator's repurchase obligation under this
Section 4.04 shall be reduced by the amount of any such Dilution Factors taken
into account in the Sale Price.
ARTICLE V
INDEMNIFICATION
SECTION 5.01. Indemnification.
---------------
Without limiting any other rights that PSC, any of its shareholders,
officers or agents, or any assignee of PSC's rights hereunder or such assignee's
shareholders, officers, employees or agents (each, an "INDEMNIFIED PARTY") may
have hereunder or
22
under applicable law, the Originator hereby agrees to indemnify each Indemnified
Party from and against any and all claims, losses, liabilities, obligations,
damages, penalties, actions, judgments, suits, and costs and expenses of any
nature whatsoever related thereto, including reasonable attorneys' fees and
disbursements (all of the foregoing being collectively referred to as
"INDEMNIFIED AMOUNTS") which may be imposed on, incurred by or asserted against
an Indemnified Party in any way arising out of or resulting from this Agreement
or any Related Documents or the use by the Originator of proceeds of any
purchase or assignment hereunder or in respect of any Transferred Receivable or
any Contract, excluding, however, (a) Indemnified Amounts to the extent
resulting solely from gross negligence, acts of bad faith or willful misconduct
on the part of such Indemnified Party or (b) recourse for uncollectible or
uncollected Transferred Receivables. Without limiting or being limited by the
foregoing, the Originator shall pay on demand to each Indemnified Party any and
all Indemnified Amounts necessary to indemnify such Indemnified Party from and
against any and all Indemnified Amounts relating to or resulting from:
(a) reliance on any representation or warranty made or deemed
made by the Originator (or any of its officers) under or in connection with
this Agreement or any Related Document, any report or any other information
delivered by the Originator pursuant hereto, which shall have been
incorrect in any material respect when made or deemed made or delivered;
(b) the failure by the Originator to comply with any term,
provision or covenant contained in this Agreement, any Related Document or
any agreement executed in connection with this Agreement, with any
applicable law, rule or regulation with respect to any Transferred
Receivable or the related Contract, or the nonconformity of any Transferred
Receivable or the related Contract with any such applicable law, rule or
regulation; or
(c) the failure to vest and maintain vested in PSC, or to
transfer to PSC, legal and equitable title to and ownership of the
Receivables which are, or are purported to be, Transferred Receivables,
together with all Collections and Proceeds in respect thereof, free and
clear of any Adverse Claim (except as permitted hereunder) whether existing
at the time of the proposed sale of such Receivable or at any time
thereafter.
SECTION 5.02. Assignment of Indemnities. The Originator acknowledges
-------------------------
that, to the extent permitted under the Purchase Agreement, PSC may assign its
rights of indemnity granted hereunder and upon such assignment, such assignee
shall have all rights of PSC hereunder and may in turn assign such rights. The
Originator agrees that, upon such assignment, such assignee may enforce
directly, without joinder of PSC, the indemnities set forth in this Article V.
23
ARTICLE VI
MISCELLANEOUS
SECTION 6.01. Notices, Etc. All notices and other communications
-------------
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile, telex and express mail) and mailed or telecommunicated, or
delivered as to each party hereto, at its address set forth under its name on
the signature page hereof or at such other address as shall be designated by
such party in a written notice to the other parties hereto. All such notices
and communications shall not be effective until received by the party to whom
such notice or communication is addressed.
SECTION 6.02. No Waiver; Remedies. No failure on the part of an
-------------------
Originator or PSC or any assignee of PSC to exercise, and no delay in
exercising, any right hereunder or under any Assignment shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
other remedies provided by law.
SECTION 6.03. Binding Effect; Assignability. This Agreement shall be
-----------------------------
binding upon and inure to the benefit of the Originator and PSC, and their
respective successors and permitted assigns. Except as contemplated herein, none
of the parties may assign any of its rights and obligations hereunder or any
interest herein without the prior written consent of the other parties. This
Agreement shall create and constitute the continuing obligations of the parties
hereto in accordance with its terms, and shall remain in full force and effect
until its termination; provided, that the rights and remedies pursuant to
--------
Section 4.04 and the indemnification and payment provisions of Article V shall
be continuing and shall survive any termination of this Agreement.
SECTION 6.04. No Proceedings. The Originator hereby agrees that it
--------------
will not, directly or indirectly, institute, or cause to be instituted, against
PSC any proceeding of the type referred to in Section 9.01(c) of the Purchase
Agreement so long as there shall not have elapsed one year plus one day since
the latest maturing commercial paper issued by Redwood and allocated to PSC has
been paid in full in cash.
SECTION 6.05. Amendments; Consents and Waivers. No modification,
--------------------------------
amendment or waiver of, or with respect to, any provision of this Agreement, the
Purchase Agreement and any exhibits or schedules hereto or thereto, nor consent
to any departure by the Originator or PSC from any of the terms or conditions
hereof or thereof, shall be effective unless it shall be in writing and signed
by each of the parties hereto, and prior written consent is given by Redwood and
the Collateral Agent. Any waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No
24
consent or demand in any case shall, in itself, entitle any party to any other
consent or further notice or demand in similar or other circumstances. This
Agreement and the documents referred to herein embody the entire agreement of
the Originator and PSC with respect to the Transferred Receivables and supersede
all prior agreements and understandings relating to the subject hereof.
SECTION 6.06. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY
------------------------------------------------------
TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
-----
WITH, THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE
OF NEW YORK.
(b) THE ORIGINATOR AND PSC HEREBY SUBMIT TO THE NON-EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES
DISTRICT COURT LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY, AND EACH
WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL
SUCH SERVICE OF PROCESS BE MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS SET
FORTH ON THE SIGNATURE PAGE HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED FIVE DAYS AFTER THE SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS,
POSTAGE PREPAID. THE ORIGINATOR AND PSC HEREBY WAIVE ANY OBJECTION BASED ON
FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
--------------------
HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS
DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT
OF THE ORIGINATOR OR PSC TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW.
(c) THE ORIGINATOR AND PSC HEREBY WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR
OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH THIS
AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH
TRIAL WITHOUT A JURY.
SECTION 6.07. Execution in Counterparts; Severability. This
---------------------------------------
Agreement may be executed by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and both of which
when taken together shall constitute one and the same agreement. In case any
provision in or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations in any jurisdiction, or of such
provision or obligation in any jurisdiction, shall not in any way be affected or
impaired thereby.
25
SECTION 6.08. Descriptive Headings. The descriptive headings of the
--------------------
various sections of this Agreement are inserted for convenience of reference
only and shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
SECTION 6.09. No Setoff. The Originator's obligations under this
---------
Agreement shall not be affected by any right of setoff, counterclaim,
recoupment, defense or other right the Originator might have against PSC,
Redwood, the Operating Agent, the Collateral Agent or any assignee, all of which
rights are hereby waived by the Originator.
SECTION 6.10. Further Assurances. The Originator agrees to do such
------------------
further acts and things and to execute and deliver to PSC, Redwood, the
Operating Agent or any assignee such additional assignments, agreements, powers
and instruments as PSC, Redwood, the Operating Agent or any assignee may require
or deem advisable to carry into effect the purposes of this Agreement or to
better assure and confirm unto any such party its respective rights, powers and
remedies hereunder.
SECTION 6.11. Confidentiality. (a) The Originator and PSC agree to
---------------
maintain the confidentiality of this Agreement (and all drafts of this agreement
and documents ancillary to this Agreement) in their communications with third
parties other than any Affected Party or any Indemnified Party and otherwise and
not to disclose, deliver or otherwise make available to any third party (other
than its directors, officers, employees, accountants or counsel) the original or
any copy of all or any part of this Agreement (or any draft of this Agreement
and documents ancillary to this Agreement) except to an Affected Party or an
Indemnified Party.
(b) Notwithstanding Section 6.11(a), (i) the general terms of the
transactions contemplated by this Agreement and the Related Documents may be
disclosed to any existing lender to or potential investor in the Parent that has
agreed in writing not to disclose such terms, and (ii) this Agreement and the
Related Documents may be disclosed (A) if required to be filed publicly with the
Securities and Exchange Commission, (B) to the certified public accountants of
the Parent to the extent necessary, (C) to the extent otherwise required by
applicable law, rule or regulation, (D) to the extent required under a valid and
appropriately limited subpoena or equivalent legal process or (E) if the
Affected Party otherwise consents in writing.
(c) The Originator agrees that it shall not (and shall not permit any
of its Subsidiaries to) issue any news release or make any public announcement
pertaining to the transactions contemplated by this Agreement and the Related
Documents without the prior written consent of PSC and its assignees (which
consent shall not be unreasonably withheld) unless such news release or public
announcement is required by law, in which case the Originator shall consult with
PSC and its assignees prior to the issuance of such news release or public
announcement.
26
SECTION 6.12. Assignment of Agreement. The Originator acknowledges
-----------------------
that PSC may assign its rights granted hereunder, including, without
limitation, any rights in the Collateral granted under Article VII, and upon
such assignment, such assignee shall have all rights of PSC hereunder and may in
turn assign such rights. The Originator agrees that, upon such assignment, such
assignee may enforce directly, without joinder of PSC, the rights set forth in
this Agreement.
ARTICLE VII
PSC LOANS TO PAMECO CORPORATION
SECTION 7.01. PSC Loans. From time to time, PSC may, on the terms
---------
and subject to the conditions of this Agreement upon request of Pameco
Corporation, make advances (each, a "PSC LOAN") to Pameco Corporation to the
extent of its available funds during the term of this Agreement in an aggregate
principal amount at any one time outstanding up to, but not exceeding, the
Maximum Purchase Limit. Subject to the terms of this Agreement, Pameco
Corporation may borrow, repay and reborrow; provided that no such PSC Loans may
--------
be made if, after giving effect thereto, a Termination Event or an Event of
Servicer Termination, or an event which, upon the giving of notice or the
passage of time, or both would become a Termination Event or an Event of
Servicer Termination has occurred and is continuing or there would be a Purchase
Excess.
SECTION 7.02. Notices Relating to Loans. Pameco Corporation shall
-------------------------
give PSC and each assignee one Business Day prior written notice of each
borrowing and repayment of each PSC Loan. Each such notice of borrowing or
repayment shall specify the amount of PSC Loans to be borrowed or repaid and the
date of such action (which shall be a Business Day).
SECTION 7.03. Disbursement of Loan Proceeds. Not later than 11:00
-----------------------------
a.m., New York City time, on the date specified for each PSC Loan hereunder, PSC
shall transfer, by wire transfer or otherwise, but in any event in immediately
available funds, the amount of PSC Loan to be made on such date, to the account
designated by Pameco Corporation, in accordance with instructions previously
supplied to PSC.
SECTION 7.04. Pameco Note.
-----------
(a) PSC Loans made by PSC hereunder shall be evidenced by a single
promissory note of Pameco Corporation in substantially the form of Exhibit B
hereto (the "PAMECO NOTE"). The Pameco Note shall be dated the date of this
Agreement, shall be payable to the order of PSC in a principal amount equal to
$40,000,000 and shall otherwise be duly completed.
27
(b) PSC shall enter on a schedule attached to the Pameco Note a
notation (which may be computer generated) with respect to each PSC Loan made
hereunder of: (i) the date and principal amount thereof and (ii) each payment
and repayment of principal thereof. The failure of PSC to make a notation on the
schedule to the Pameco Note as aforesaid shall not limit or otherwise affect the
obligation of Pameco Corporation to repay PSC Loans in accordance with their
respective terms as set forth herein.
SECTION 7.05. Principal Repayments. PSC Loans may be repaid by
--------------------
Pameco Corporation at any time and from time to time, in whole or in part, upon
prior written notice to PSC and each assignee as provided in Section 7.02. In
addition, PSC Loans shall be payable immediately on demand of PSC. Any amount so
repaid may, subject to the terms and conditions hereof, be reborrowed hereunder;
provided, however, that all repayments of PSC Loans or any portion thereof shall
be made together with payment of all interest accrued on the amount repaid to
(but excluding) the date of such repayment.
SECTION 7.06. Interest.
--------
(a) On each monthly anniversary of the date hereof, Pameco
Corporation shall pay to PSC interest at the rate shown in the Wall Street
Journal as the "Prime Rate" on such date (the "PAMECO INTEREST RATE") on the
unpaid principal amount of each PSC Loan for the period commencing on and
including the date of such PSC Loan until but excluding the date such PSC Loan
shall be paid in full.
(b) Notwithstanding the foregoing, Pameco Corporation shall pay
interest on unpaid interest, on any PSC Loan or any installment thereof, and on
any other amount payable by Pameco Corporation hereunder (to the extent
permitted by law) that shall not be paid in full when due (whether at stated
maturity, by acceleration or otherwise) for the period commencing on the due
date thereof to (but excluding) the date the same is paid in full at the
applicable Pameco Interest Rate.
SECTION 7.07. Time and Method of Payments. All payments of
---------------------------
principal, interest and other amounts (including indemnities) payable by Pameco
Corporation under this Article VII shall be made in Dollars, in immediately
available funds, to PSC not later than 11:00 a.m., New York City time, on the
date on which such payment shall become due. Any such payment made on such date
but after such time shall, if the amount paid bears interest, be deemed to have
been made on, and interest shall continue to accrue and be payable thereon
until, the next succeeding Business Day. If any payment of principal or interest
becomes due on a day other than a Business Day, such payment may be made on the
next succeeding Business Day and such extension shall be included in computing
interest in connection with such payment. All payments under this Article VII
and under the Pameco Note shall be made without set-off or counterclaim and in
such
28
amounts as may be necessary in order that all such payments shall not be less
than the amounts otherwise specified to be paid under this Agreement and the
Pameco Note. Upon payment in full of the Pameco Note, following the end of the
term of this Agreement, PSC shall ββββ the Pameco Note "Paid" and return it to
Pameco Corporation.
29
IN WITNESS WHEREOF, the parties have caused this Receivables Transfer
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
Pameco Corporation
By: _____________________________
Name: ββββββββ β. ββββββββ
Title: Vice President
Address: ββββ ββββββ βββββ
ββββββββ, βββββββ βββββ
Attention: ββ. ββββ β. ββββββββ
Phone number: (βββ) βββ-ββββ
Telecopier number: (βββ) βββ-ββββ
Pameco Securitization Corporation
By: _____________________________
Name: ββββββββ β. ββββββββ
Title: President
Address: ββββ ββββββ βββββ, βββββ β
ββββββββ, βββββββ βββββ
Attention: ββ. ββββ β. ββββββββ
Phone number: (βββ) βββ-ββββ
Telecopier number: (βββ) βββ-ββββ
Schedule 1 to
Transfer Agreement
LIST OF CHIEF EXECUTIVE
OFFICES OF THE ORIGINATOR
-------------------------
ββββ ββββββ βββββ
ββββββββ, βββββββ βββββ
LIST OF OTHER OFFICES OF THE
ORIGINATOR WHERE RECORDS ARE KEPT
---------------------------------
ββββ ββββββ βββββ
ββββββββ, βββββββ βββββ
TRADE NAMES, FICTITIOUS NAMES, ASSUMED NAMES
AND "DOING BUSINESS AS" NAMES OF THE ORIGINATOR
-----------------------------------------------
Trade Names
-----------
Pameco Corp. Knoxville Refrigeration
National Temperature Control Centers R &R Supply
NTCC Thermal Company
Melchoir, Armstrong, Dessau Thermal Supply
Melco βββββββββ Distribution
ββββββ Refrigeration Pameco-Aire
ββββββ Brothers Gulf Coast Air Conditioning
J & P Supply Rick's Supply
Schedule 2 to
Transfer Agreement
PRIOR NAMES OF ORIGINATOR
-------------------------
MARCH 19, 1992 - Name changed from MLX Refrigeration & Air Conditioning
Group, Inc. To Pameco Corp.
MARCH 1, 1989 - Name changed from National Temperature Control Centers, Inc.
to MLX Refrigeration & Air Conditioning Group, Inc.
JANUARY 16, 1986 - Name changed from NTCC Acquisition Company to National
Temperature Control Centers, Inc.
OCTOBER 1, 1985 - Incorporated as NTCC Acquisition Company
Schedule 3 to
Transfer Agreement
LOCATIONS FOR WHICH
LOCKBOXES ARE NOT IN USE
------------------------
1. Queens, New York
2. Guam
3. Hawaii
EXHIBIT A
---------
FORM OF ASSIGNMENT
ASSIGNMENT, dated as of April 29, 1996 between Pameco Corporation (the
"ORIGINATOR") and Pameco Securitization Corporation ("PSC").
1. We refer to the Receivables Transfer Agreement (the "TRANSFER
AGREEMENT") dated as of April 29, 1996 between the Originator and PSC. All
provisions of such Transfer Agreement are incorporated herein by reference. All
capitalized terms shall have the meanings set forth in the Transfer Agreement.
2. The Originator does hereby sell or contribute, to PSC, without
recourse, except as provided in Section 4.04 of the Transfer Agreement, all
right, title and interest of the Originator in and to all Transferred
Receivables transferred from time to time from the Originator under the Transfer
Agreement.
3. THIS CERTIFICATE OF ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
PAMECO CORPORATION PAMECO SECURITIZATION
CORPORATION
By: ________________________ By: _________________________
Name: Name:
Title: Title:
EXHIBIT B
---------
FORM OF PAMECO NOTE
$40,000,000.00 April 29, 1996
FOR VALUE RECEIVED, PAMECO CORPORATION, a Delaware corporation
("PAMECO"), hereby promises to pay to PAMECO SECURITIZATION CORPORATION (the
"LENDER"), for its account, the principal sum of Forty Million Dollars
$40,000,000 (or such lesser amount as shall equal the aggregate unpaid principal
amount of the PSC Loans made by the Lender to Pameco under the Transfer
Agreement referred to below), in lawful money of the United States of America
and in immediately available funds immediately on the demand of the Lender.
The date, amount and interest rate, of each PSC Loan made by the
Lender to Pameco, and each payment made on account of the principal thereof,
shall be recorded by the Lender on its books and, prior to any transfer of this
Note, endorsed by the Lender on the schedule attached hereto or any continuation
thereof.
This Note is the Pameco Note referred to in the Receivables Transfer
Agreement (as modified and supplemented and in effect from time to time, the
"TRANSFER AGREEMENT") dated as of the date hereof by and among the Pameco and
the Lender and evidences PSC Loans made by the Lender thereunder. Capitalized
terms used in this Note and not defined herein have the respective meanings
assigned to them in the Transfer Agreement.
The Transfer Agreement provides for prepayments of PSC Loans upon the
terms and conditions specified therein.
Notwithstanding any other provisions contained in this Note, if at any
time the rate of interest payable by Pameco under this Note, when combined with
any and all other charges provided for in this Note, in the Purchase Agreement
or in any other document (to the extent such other charges would constitute
interest for the purpose of any applicable law limiting interest that may be
charged on this Note), exceeds the highest rate of interest permissible under
applicable law (the "MAXIMUM LAWFUL RATE"), then so long as the Maximum Lawful
Rate would be exceeded the rate of interest under this Note shall be equal to
the Maximum Lawful Rate. If at any time thereafter the rate of interest payable
under this Note is less than the Maximum Lawful Rate, Pameco shall continue to
pay interest under this Note at the Maximum Lawful Rate until such time as the
total interest paid by Pameco is equal to the total interest that would have
been paid had such
applicable law not limited the interest rate payable under this Note. In no
event shall the total interest received by the Lender under this Note exceed the
amount which the Lender could lawfully have received had the interest due under
this Note been calculated since the date of this Note at the Maximum Lawful
Rate.
If any payment under this Note falls due on a day which is not a
Business Day, then such due date shall be extended to the next succeeding
Business Day and interest (calculated at the Pameco Interest Rate for each day
during the period then ending) shall be payable on any principal so extended.
Pameco expressly waives presentment, demand, diligence, protest and
all notices of any kind whatsoever with respect to this Note.
This Note is made and delivered in New York, New York and shall be
governed by, and construed in accordance with, the internal laws (without
application of its conflict of laws provisions) of the State of New York.
IN WITNESS WHEREOF, Pameco has caused this Note to be signed and
delivered by its duly authorized officer as of the date set forth above.
Very truly yours,
PAMECO CORPORATION
By:____________________________
Name:
Title:
SCHEDULE OF LOANS
-----------------
This Note evidences PSC Loans made under the within-described Transfer
Agreement to Pameco Corporation, on the date, at the interest rate, and in the
principal amounts set forth below, subject to the payments and prepayments of
principal set forth below:
================================================================================
Principal Unpaid
Amount of Amount Principal Notation
Date Loan Interest Paid or Amount Made By
Rate Prepaid
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
================================================================================