FORM 10-Q EXECUTION COPY
Exhibit 2.1(m)
RECEIVABLES PURCHASE AGREEMENT
dated as of March 25, 1997
Among
CONE RECEIVABLES LLC,
as Seller
and
CONE MILLS CORPORATION,
as Servicer
and
DELAWARE FUNDING CORPORATION,
as Buyer
Page 76
FORM 10-Q
Exhibit 2.1(m) (continued)
Table of Contents
Page
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.01. Certain Definitions. . . . . . . . . . . . . . . . . 1
1.02. Interpretation and Construction. . . . . . . . . . . 21
1.03. Obligor Classification . . . . . . . . . . . . . . . 22
ARTICLE II
PURCHASES AND SETTLEMENTS
2.01. General Assignment and Conveyance. . . . . . . . . . 22
2.02. Purchase Limits. . . . . . . . . . . . . . . . . . . 22
2.03. Purchase Price . . . . . . . . . . . . . . . . . . . 23
2.04. Deferred Purchase Price. . . . . . . . . . . . . . . 23
2.05. Reinvestment Purchases . . . . . . . . . . . . . . . 23
2.06. Funding of the Net Investment. . . . . . . . . . . . 24
2.07. Discount . . . . . . . . . . . . . . . . . . . . . . 25
2.08. Non-Liquidation Settlements and Other Payment
Procedures . . . . . . . . . . . . . . . . . . . . . 25
2.09. Liquidation Settlement Procedures. . . . . . . . . . 27
2.10. Fees . . . . . . . . . . . . . . . . . . . . . . . . 27
2.11. Optional Reduction of Maximum Net Investment;
Optional Reduction of Net Investment . . . . . . . . 27
2.12. Mandatory Repurchase Under Certain
Circumstances. . . . . . . . . . . . . . . . . . . . 28
2.13. Payments and Computations, Etc.; Allocation of
Collections. . . . . . . . . . . . . . . . . . . . . 28
2.14. Reports. . . . . . . . . . . . . . . . . . . . . . . 29
2.15. Expiration Date. . . . . . . . . . . . . . . . . . . 29
ARTICLE III
CLOSING PROCEDURES
3.01. Purchase and Sale Procedures . . . . . . . . . . . . 29
3.02. Conditions to Closing. . . . . . . . . . . . . . . . 30
3.03. Conditions to Reinvestment and Incremental
Purchases. . . . . . . . . . . . . . . . . . . . . . 32
Page 77
FORM 10-Q
Exhibit 2.1(m) (continued)
ARTICLE IV
PROTECTION OF THE BUYER;
ADMINISTRATION AND COLLECTIONS
4.01. Acceptance of Appointment and Other Matters
Relating to the Servicer . . . . . . . . . . . . . . 33
4.02. Maintenance of Information and Computer Records. . . 33
4.03. Protection of the Interests of the Buyer . . . . . . 34
4.04. Maintenance of Writings and Records. . . . . . . . . 35
4.05. Information. . . . . . . . . . . . . . . . . . . . . 35
4.06. Performance of Undertakings Under the
Receivables. . . . . . . . . . . . . . . . . . . . . 35
4.07. Administration and Collections . . . . . . . . . . . 35
4.08. Complete Servicing Transfer. . . . . . . . . . . . . 37
4.09. Lockboxes. . . . . . . . . . . . . . . . . . . . . . 38
4.10. Servicer Default . . . . . . . . . . . . . . . . . . 40
4.11. Servicer Indemnification of Affected Parties . . . . 40
4.12. Servicer Not to Resign . . . . . . . . . . . . . . . 41
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. General Representations and Warranties of the
Seller . . . . . . . . . . . . . . . . . . . . . . . 42
5.02. Representations and Warranties of the Seller
With Respect to Each Sale of Receivables . . . . . . 45
5.03. General Representations and Warranties of the
Corporation. . . . . . . . . . . . . . . . . . . . . 46
ARTICLE VI
COVENANTS
6.01. Affirmative Covenants. . . . . . . . . . . . . . . . 49
6.02. Negative Covenants . . . . . . . . . . . . . . . . . 55
ARTICLE VII
TERMINATION
7.01. Termination Events . . . . . . . . . . . . . . . . . 57
7.02. Consequences of a Termination Event. . . . . . . . . 59
Page 78
FORM 10-Q
Exhibit 2.1(m) (continued)
ARTICLE VIII
MISCELLANEOUS
8.01. Expenses . . . . . . . . . . . . . . . . . . . . . . 60
8.02. Indemnity for Taxes, Reserves and Expenses . . . . . 61
8.03. Indemnity. . . . . . . . . . . . . . . . . . . . . . 62
8.04. Holidays . . . . . . . . . . . . . . . . . . . . . . 63
8.05. Records. . . . . . . . . . . . . . . . . . . . . . . 64
8.06. Amendments and Waivers . . . . . . . . . . . . . . . 64
8.07. Term of Agreement. . . . . . . . . . . . . . . . . . 64
8.08. No Implied Waiver; Cumulative Remedies . . . . . . . 64
8.09. No Discharge . . . . . . . . . . . . . . . . . . . . 64
8.10. Notices. . . . . . . . . . . . . . . . . . . . . . . 65
8.11. Severability . . . . . . . . . . . . . . . . . . . . 65
8.12. Governing Law; Submission to Jurisdiction. . . . . . 65
8.13. Prior Understandings . . . . . . . . . . . . . . . . 66
8.14. Survival . . . . . . . . . . . . . . . . . . . . . . 66
8.15. Counterparts . . . . . . . . . . . . . . . . . . . . 66
8.16. Set-Off. . . . . . . . . . . . . . . . . . . . . . . 66
8.17. Successors and Assigns . . . . . . . . . . . . . . . 66
8.18. Waiver of Confidentiality. . . . . . . . . . . . . . 67
8.19. Payments Set Aside . . . . . . . . . . . . . . . . . 67
8.20. No Petition. . . . . . . . . . . . . . . . . . . . . 67
8.21. No Recourse. . . . . . . . . . . . . . . . . . . . . 67
Exhibits
Exhibit A (Intentionally Omitted)
Exhibit B Description of Qualifying Receivables
Exhibit C Form of Purchase Notice for Incremental Purchase
Exhibit D Form of Tranche Selection Notice
Exhibit E Form of Report Showing Discount
Exhibit F (Intentionally Omitted)
Exhibit G Form of Monthly Report
Exhibit H Form of Lockbox Transfer Letter
Exhibit I (Intentionally Omitted)
Exhibit J (Intentionally Omitted)
Exhibit K (Intentionally Omitted)
Exhibit L Information regarding Chief Executive Office, Etc.
pursuant to Section 5.03(f)
Page 79
FORM 10-Q
Exhibit 2.1(m) (continued)
Schedules to Disclosure Schedule
Schedule 1 Credit and Collections Policy
Schedule 2 Information regarding Material Adverse Changes
pursuant to Section 5.03(k)
Schedule 3 Information regarding Litigation, etc. pursuant to
Sections 5.01(k) and 5.03(l)
Schedule 4 Permitted Lockbox Banks, Lockbox Account Numbers
and Permitted Lockboxes
Schedule 5 Persons that may not be Successor Servicers
Page 80
FORM 10-Q
Exhibit 2.1(m) (continued)
RECEIVABLES PURCHASE AGREEMENT
RECEIVABLES PURCHASE AGREEMENT, dated as of March 25, 1997,
among CONE RECEIVABLES LLC, a Delaware limited liability company
(the Seller"), CONE MILLS CORPORATION, a North Carolina
corporation ("the "Corporation") as Servicer (the "Servicer") and
in its individual capacity, and DELAWARE FUNDING CORPORATION, a
Delaware corporation (with its successors and assigns, the
"Buyer").
RECITALS
WHEREAS, pursuant to the Purchase Agreement, the Seller
purchases from the Corporation, as Originator, trade receivables
resulting from the sale of goods or services to customers of the
Corporation; and
WHEREAS, the Buyer may from time to time purchase from the
Seller undivided percentage ownership interests in such
receivables pursuant to and in accordance with the terms hereof;
and
WHEREAS, the Servicer has agreed to service and administer
or cause to be serviced and administered the receivables in
accordance with the terms hereof;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
DEFINITIONS; CONSTRUCTION
1.01. Certain Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Affected Party" shall mean each of the Buyer, any assignee
of the Buyer, the Collateral Agent, the Banks, the LOC Bank, any
assignee of any of the Buyer's obligations to the Banks or the
LOC Bank under the Credit Agreement or the Letter of Credit
Reimbursement Agreement, respectively, and the Agent.
"Affiliate" shall mean, with respect to a Person, any other
Person which directly or indirectly controls, is controlled by or
is under common control with, such Person. The term "control"
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by
contract or otherwise.
Page 81
FORM 10-Q
Exhibit 2.1(m) (continued)
"Agent" shall mean Morgan Guaranty Trust Company of New
York, together with its successors and assigns, in its capacity
as agent for the Banks.
"Aggregate Unpaids" shall mean, at any time, an amount equal
to the sum of (i) the aggregate accrued and unpaid Discount with
respect to all Tranche Periods for all Tranches at such time,
(ii) the Net Investment at such time, (iii) all fees accrued and
unpaid hereunder at such time and (iv) all other amounts owed
(whether due or accrued) hereunder by the Seller to the Buyer at
such time.
"Agreement" shall mean this Receivables Purchase Agreement,
as the same may from time to time be amended, supplemented or
otherwise modified.
"Allowance for Collection Delays" shall mean 10 days.
"Average Collection Period" shall mean, at any time, the
Days' Sales Outstanding.
"Banks" shall mean the banks which are party to the Credit
Agreement.
"Base Rate" shall mean, for any day, the higher of (i) the
prime rate announced from time to time by Morgan Guaranty Trust
Company of New York in effect on such day, and (ii) (x) the rate
equal to 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 next preceding
Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day,
the average of the quotations for such day for such transactions
received by Morgan Guaranty Trust Company of New York from three
Federal funds brokers of recognized standing selected by it, plus
(y) one-half of one percent (1/2%).
"Business Day" shall mean any day other than a Saturday,
Sunday, public holiday under the Laws of the State of Delaware or
the State of New York or any other day on which banking
institutions are authorized or obligated to close in the State of
Delaware or the State of New York.
"Buyer's Discount" shall mean, at any time, an amount equal
to the following:
NI x (((TR + PF) x RV) + SC) x (D)
WAP
Page 82
FORM 10-Q
Exhibit 2.1(m) (continued)
Where:
NI = the Net Investment at such time;
TR = the highest Tranche Rate applicable to any outstanding
Tranche at such time;
PF = the Program Fee;
RV = the Rate Variance Factor;
SC = the Servicer's Compensation;
D = the greater of (i) the sum of the Average Collection
Period and the Allowance for Collection Delays and (ii)
the number of days remaining in the last expiring
outstanding Tranche Period; and
WAP the weighted average number of days in the annual
period of all Tranches then outstanding, with Tranches
having Tranche Rates calculated by reference to a
rating other than Base Rate having a 360-day annual
period and Tranches having Tranche Rates calculated by
reference to the Base Rate having a 365-day or 366-day,
as the case may be, annual period.
"Buyer's Percentage Interest" shall mean, at any time
of determination, a percentage equal to the following:
NI + DPP + BD
NRB
Where:
NI = the Net Investment at the time of such determination;
DPP = the Deferred Purchase Price at the time of such
determination;
BD = the Buyer's Discount at the time of such determination;
and
NRB = the Net Receivables Balance at the time of such
determination.
Notwithstanding the foregoing computation, the Buyer's
Percentage Interest shall not exceed 100%. The Buyer's
Page 83
FORM 10-Q
Exhibit 2.1(m) (continued)
Percentage Interest shall be calculated as of the end of the
immediately preceding month by the Servicer on the closing date
of the initial Incremental Purchase hereunder. Thereafter, until
the Expiration Date, the Buyer's Percentage Interest shall be
recomputed in Monthly Reports delivered pursuant to Section 2.14
hereof, in Purchase Notices delivered pursuant to Section 2.03
hereof and otherwise in writing upon request of the Buyer made to
the Servicer. Absent any error in calculation, the Buyer's
Percentage Interest shall remain constant from the time as of
which any such computation or recomputation is made until the
time as of which the next such recomputation shall be made,
notwithstanding any additional Receivables arising or any
reinvestment Purchase made pursuant to Sections 2.05 and 2.08(a)
hereof during any period between computations of the Buyer's
Percentage Interest; provided, however, that on and after the
Expiration Date, the Buyer's Percentage Interest shall be equal
to the greater of (i) the Buyer's Percentage Interest on the
first Business Day preceding the occurrence of the Expiration
Date, and (ii) the Buyer's Percentage Interest on each Business
Day after the occurrence of the Expiration Date. If the Servicer
shall fail to promptly calculate the Buyer's Percentage Interest
as required herein, the Buyer may compute the Buyer's Percentage
Interest, which computation shall be conclusive absent manifest
error.
"Capitalized Lease" of a Person shall mean any lease of
property by such Person as lessee which would be capitalized on a
balance sheet of such Person prepared in accordance with GAAP.
"Charge-Off" shall mean a Receivable (or any portion
thereof): (i) which has been identified by the Servicer as
uncollectible, or (ii) which, in accordance with the Credit and
Collection Policy, should be written off the Seller's books as
uncollectible.
"Charge-Off Ratio" shall mean, for any period of
determination, the ratio (expressed as a percentage) of (i) the
aggregate Outstanding Balance of all Receivables which became
Charge-Offs during such period (after giving effect to any
recoveries during such period), to (ii) the aggregate amount of
Collections during the period for which such ratio is being
determined.
"Chief Executive Office" shall mean, with respect to the
Seller or the Originator, the place where the Seller or the
Originator is located, within the meaning of Section 9-103(3)(d),
or any analogous provision, of the UCC, in effect in the
Page 84
FORM 10-Q
Exhibit 2.1(m) (continued)
jurisdiction whose Law governs the perfection of the Buyer's
ownership interest in any Receivables.
"Closing Date" shall mean March 26, 1997.
"Collateral Agent" shall mean Morgan Guaranty Trust Company
of New York, together with its successors and assigns, as
collateral agent under the Security Agreement.
"Collections" shall mean, for any Receivable as of any date,
(i) the sum of all amounts, whether in the form of wire
transfers, cash, checks, drafts, or other instruments, received
by the Seller or the Servicer or in a Permitted Lockbox or
directly by the Buyer in payment of, or applied to, any amount
owed by an Obligor on account of such Receivable (including but
not limited to all amounts received on account of any Defaulted
Receivable) on or before such date, including, without
limitation, all amounts received on account of such Receivable,
all Finance Charges, if any, and other fees and charges (ii) cash
proceeds of Related Security with respect to such Receivable, and
(iii) all amounts deemed to have been received by the Seller or
the Servicer as a Collection pursuant to Section 2.08(c) hereof.
"Commercial Paper" shall mean promissory notes of the Buyer
issued by the Buyer in the commercial paper market.
"Complete Servicing Transfer" shall have the meaning
ascribed to such term in Section 4.08 hereof.
"Concentration Factor" shall mean (i) for any Group A
Obligor and its Subsidiaries, 13% of an amount equal to the
Outstanding Balances of all Eligible Receivables, (ii) for any
Group B Obligor and its Subsidiaries, other than VF Corporation
and its Subsidiaries, 6% of an amount equal to the Outstanding
Balances of all Eligible Receivables, (iii) for any Group C
Obligor and its Subsidiaries, 4% of an amount equal to the
Outstanding Balance of all Eligible Receivables, (iv) for any
Group D Obligor and its Subsidiaries, 2% of an amount equal to
the Outstanding Balance of all Eligible Receivables and (v) for
VF Corporation and its Subsidiaries, 7% of an amount equal to the
Outstanding Balance of all Eligible Receivables; provided that if
the implied senior unsecured long-term debt or senior unsecured
long-term debt (in each case disregarding any debt based upon
third party credit enhancement or collateral) of VF Corporation
shall be rated below "BBB-" by S&P or "Baa3" by Moody's, the
"Concentration Factor" for VF Corporation and its Subsidiaries
shall be 2% of an amount equal to the Outstanding Balances of all
Eligible Receivables.
Page 85
FORM 10-Q
Exhibit 2.1(m) (continued)
"Concentration Percentage" shall mean, for any Obligor, a
fraction, expressed as a percentage, the numerator of which is an
amount equal to the aggregate Outstanding Balances of the
Eligible Receivables of the related Obligor and its Subsidiaries
and the denominator of which is an amount equal to the
Outstanding Balances of all Eligible Receivables reduced by the
aggregate amount of the reserve for all Dilution Factors as shown
on the most recent Monthly Report.
"Consolidated Subsidiary" shall mean, at any date, any
Subsidiary or other entity the accounts of which would be
consolidated under GAAP with those of the Corporation in its
consolidated financial statements as of such date.
"Contract" shall mean a binding contract (including a
binding invoice) between the Originator and an Obligor which
gives rise to a short-term trade receivable with a maturity of
not greater than one year arising from the sale by the Originator
of goods or services in the ordinary course of the Originator's
business.
"Corporation" shall mean Cone Mills Corporation, a North
Carolina corporation and its successors and assigns.
"Credit Agreement" shall mean the Amended and Restated
Credit Agreement (Asset Group I) dated as of December 6, 1995
among the Buyer, the Banks and the Agent, as the same may from
time to time be amended, supplemented or otherwise modified, or
such other agreement providing liquidity support for the
Receivables.
"Credit and Collection Policy" shall mean the Originator's
credit, collection, enforcement and other policies and practices
relating to Contracts and Receivables existing on the date hereof
and as set forth on Schedule 1 of the Disclosure Schedule as the
same may be modified from time to time in compliance with Section
6.02(e) hereof.
"Days' Sales Outstanding" shall mean at any time, the "Days'
Sales Outstanding" as set forth in the most recent Monthly
Report.
"Dealers" shall have the meaning ascribed to such term in
Section 8.21 hereof.
"Debt" of a Person shall mean such Person's (i) obligations
for borrowed money, (ii) obligations representing the deferred
Page 86
FORM 10-Q
Exhibit 2.1(m) (continued)
purchase price of property, (iii) obligations, whether or not
assumed, which are 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 which, in accordance with
GAAP, should be included as a liability on such Person's
financial statements, (v) Capitalized Lease obligations, (vi)
obligations pursuant to a Guarantee and (vii) liabilities in
respect of unfunded vested benefits under plans covered by Title
IV Of ERISA.
"Default Ratio" shall mean, for any period of determination,
the ratio (expressed as a percentage) of (i) the aggregate
Outstanding Balance of all Receivables which are Defaulted
Receivables as of the last day of such period of determination to
(ii) the aggregate Outstanding Balance of all Receivables as of
the last day of such period of determination.
"Defaulted Receivable" shall mean a Receivable (i) in
respect of which the Obligor is not entitled to any further
extensions of credit, by reason of any default or nonperformance
by such Obligor, under the terms of the Credit and Collection
Policy, (ii) which has become uncollectible by reason of such
Obligor's inability to pay, as determined by the Buyer or the
Servicer, in either case in accordance with the Credit and
Collection Policy, (iii) in respect of which an Event of
Bankruptcy has occurred with respect to the related Obligor, (iv)
as to which the Obligor thereof is deceased, or (v) in respect of
which the Obligor is more than 90 days past due, except that
portion of the Outstanding Balance of the Receivables of such
Obligor which is the subject of a good faith Dispute between the
Originator and the Obligor as to the amount due on the related
Contract.
"Deferred Purchase Price" shall mean, at any time, the Loss
Percentage at such time multiplied by the Investment at such
time.
"Delayed Receivables" shall mean a Receivable in respect of
which the Obligor is more than 60 days but less than 91 days past
due, except that portion of the Outstanding Balance of the
Receivables of such Obligor which is the subject of a good faith
Dispute between the Seller and the Obligor as to the amount due
on the related Contract.
"Delayed Receivables Ratio" shall mean, for any period of
determination, the ratio (expressed as a percentage) of (i) the
Page 87
FORM 10-Q
Exhibit 2.1(m) (continued)
aggregate Outstanding Balance of Receivables that became Delayed
Receivables during such period of determination and (ii) the
aggregate Outstanding Balance of all Receivables as of the last
day of such period of determination.
"Dilution Factors" shall mean credits, cancellations, cash
discounts, warranties, allowances, disputes, rebates, charge
backs, returned or repossessed goods, and other allowances,
adjustments and deductions (including, without limitation, any
special or other discounts or any reconciliations) that are given
to an Obligor in accordance with the Credit and Collection
Policy.
"Dilution Ratio" shall mean, for any period of
determination, the ratio (expressed as a percentage) of (i) the
aggregate reduction in the original balance of all Receivables
which have been reduced by Dilution Factors during such period of
determination to (ii) the aggregate amount of Collections during
the period for which such ratio is being determined.
"Disclosure Schedule" shall mean the disclosure schedules
delivered by the Seller and the Corporation to the Buyer
simultaneously with the execution of this Agreement.
"Discount" shall mean with respect to any Tranche Period for
any Tranche:
(TR + PF) x TNI x AD
AP
Where:
TR = the Tranche Rate applicable to such Tranche Period
for such Tranche;
PF = the Program Fee if the Tranche Rate applicable to
such Tranche Period is based on commercial paper;
TNI = the amount of such Tranche; and
AD = the actual number of days (including the first but
excluding the last day) during such Tranche
Period;
AP = the number of days in the annual period on the
basis of which Discount for such Tranche Period is
calculated, being 360 if the Tranche Rate for such
Page 88
FORM 10-Q
Exhibit 2.1(m) (continued)
Tranche period is calculated by reference to any
rate other than Base Rate, and 365 or 366, as the
case may be, if the Tranche Rate for such Tranche
Period is calculated by reference to Base Rate.
provided, however, 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 shall not be considered paid by any
distribution if at any time such distribution is rescinded or
must be returned for any reason.
"Dispute" shall mean any dispute, deduction, claim, offset,
defense, counterclaim, set-off or obligation of any kind,
contingent or otherwise, relating to a Receivable, including,
without limitation, any dispute relating to goods or services
already paid for.
"Dollar" and "$" shall mean lawful currency of the United
States of America.
"Eligible Receivable" shall mean, at the time, any
Receivable:
(a) which together with the related Contract complies with
all applicable Laws and other legal requirements, whether
Federal, state or local, including, without limitation, to the
extent applicable, usury laws, the Federal Consumer Credit
Protection Act, the Fair Credit Billing Act, the Federal Truth in
Lending Act, and Regulation Z of the Board of Governors of the
Federal Reserve System;
(b) which constitutes an "account" or a "general
intangible" or is evidenced by "chattel paper", in each case as
defined in the UCC as in effect in the State of New York and the
jurisdiction whose Law governs the perfection of the Buyer's
ownership interest therein, or is evidenced by an "instrument",
as defined in the UCC as so in effect, which is in the possession
of the Buyer;
(c) which was originated in connection with a sale of goods
or the provision of services by the Originator in the ordinary
course of the Originator's business to an Obligor who was
approved by the Originator in accordance with the Credit and
Collection Policy, and which Obligor is not an Affiliate of the
Originator;
Page 89
FORM 10-Q
Exhibit 2.1(m) (continued)
(d) which (i) arises from a Contract and has been billed,
or will be billed to the related Obligor, or in respect of which
the related Obligor is otherwise liable, in accordance with the
terms of such Contract and (ii) arises from a Contract that (A)
does not require the Obligor under such Contract to consent to
the transfer, sale or assignment of the rights and duties of the
Originator under such Contract and (B) does not contain any
provision that restricts the ability of the Buyer to exercise its
rights under this Agreement, including, without limitation, its
right to review the Contract;
(e) which constitutes a legal, valid, binding and
irrevocable payment obligation of the related Obligor,
enforceable in accordance with its terms, subject to no offset,
counterclaim or other defense;
(f) which provides for payment in Dollars by the related
Obligor;
(g) which directs payment thereof to be sent to a Permitted
Lockbox;
(h) which has not been repurchased by the Seller pursuant
to the repurchase provisions of this Agreement;
(i) which is not a Defaulted Receivable;
(j) which was not originated in or subject to the Laws of a
jurisdiction whose Laws would make such Receivable, the related
Contract or the sale of the Purchased Interest to the Buyer
hereunder unlawful, invalid or unenforceable and is not subject
to any legal limitation on transfer;
(k) which is owned solely by the Seller free and clear of
all Liens, except for the Lien arising in connection with this
Agreement and the Security Agreement;
(1) for which there has been no rejection or return of, or
other Dispute (known to any Responsible Officer) having risen
with respect to, the goods or services which gave rise to such
Receivable and all goods and services in connection therewith
have been finally performed or delivered to and accepted by the
Obligor without Dispute;
(m) which is not an obligation of the United States of
America, any State or any agency or instrumentality or political
subdivision thereof, unless otherwise agreed to in writing by the
Seller, the Buyer and the other Affected Parties;
Page 90
FORM 10-Q
Exhibit 2.1(m) (continued)
(n) which does not provide the Obligor with the right to
obtain any cash advance thereunder;
(o) which is not a Receivable as to which the Buyer has
notified the Seller that the Buyer has determined that such
Receivable or class of Receivables is not acceptable for purchase
hereunder because of the nature of the business of the Obligor or
otherwise; provided, however, if the Buyer has not so notified
the Seller prior to the Purchase by the Buyer of such Receivable,
such Receivable shall continue to be an Eligible Receivable for
the purpose of this clause "(o)" notwithstanding any subsequent
notice, pursuant to this clause "(o)", from the Buyer to the
Seller;
(p) which, if such Receivable is not interest bearing, by
its terms requires the first payment in respect thereof to be
made no later than 120 days after the date of the original
invoice with respect thereto;
(q) which is owed by an Obligor not more than 25% of whose
aggregate Outstanding Balances of Receivables are more than 90
days past due, except that portion of the Outstanding Balance of
the Receivables of such Obligor which is the subject of a good
faith Dispute between the Originator and the Obligor as to the
amount due on the related Contract; provided, however, that all
Eligible Receivables of an Obligor purchased by the Buyer prior
to the date on which more than 25% of the aggregate Outstanding
Balances of Receivables of such Obligor are more than 90 days
past due, shall continue to be Eligible Receivables for the
purpose of this clause "(q)";
(r) which has an Obligor which is a Person domiciled in the
United States of America;
(s) which is an account receivable constituting all or a
part of the sales price of merchandise, insurance and services
within the meaning of Section 3(c)(5) of the Investment Company
Act of 1940, as amended from time to time; and
(t) the purchase of which with the proceeds of Commercial
Paper would constitute a "current transaction" within the meaning
of Section 3(a)(3) of the Securities Act of 1933 as amended from
time to time.
"ERISA" shall mean the Employee Retirement Income Security
Act of 1974, as amended from time to time and any successor
thereto, and the regulations promulgated and rulings issued
thereunder.
Page 91
FORM 10-Q
Exhibit 2.1(m) (continued)
"ERISA Affiliate" shall mean any corporation or person which
is a member of any group of organizations (i) described in
Section 4.14(b) or (c) of the Internal Revenue Code of which the
Corporation is a member, or (ii) solely for purposes of potential
liability under Section 302(c)(11) of ERISA and Section
412(c)(11) of the Internal Revenue Code and the lien created
under Section 302(f) of ERISA and Section 412(n) of the Internal
Revenue Code, described in Section 414(m) or (o) of the Internal
Revenue Code of which the Corporation is a member.
"Event of Bankruptcy" shall mean, for any Person:
(a) that such Person shall fail generally to, or admit in
writing its inability to, pay its debts as they become due; or
(b) a proceeding shall have been instituted in a court
having jurisdiction in the premises seeking a decree or order for
relief in respect of such Person in an involuntary case under any
applicable bankruptcy, insolvency or other similar Law now or
hereafter in effect, or for the appointment of a receiver,
liquidator, assignee, trustee, custodian, sequestrator,
conservator (under the Bank Conservation Act, as amended from
time to time, or otherwise) or other similar official of such
Person or for any substantial part of its property, or for the
winding-up or liquidation of its affairs and, if instituted
against the Seller or the Corporation, any such proceeding shall
continue undismissed or unstayed and in effect for a period of 60
consecutive days, or any of the actions sought in such proceeding
shall occur; or
(c) the commencement by such Person of a voluntary case
under any applicable bankruptcy, insolvency or other similar Law
now or hereafter in effect, or such Person's consent to the entry
of an order for relief in an involuntary case under any such Law,
or consent to the appointment of or taking possession by a
receiver, liquidator, assignee, trustee, custodian, sequestrator,
conservator (under the Bank Conservation Act, as amended from
time to time, or otherwise) or other similar official of such
Person or for any substantial part of its property, or any
general assignment for the benefit of creditors; or
(d) such Person or any Subsidiary of such Person shall take
any action in furtherance of any of the actions set forth in the
preceding clause (a), (b) or (c).
"Event of Termination" shall mean with respect to any Plan,
a reportable event, as defined in Section 4043(b) of ERISA, as to
Page 92
FORM 10-Q
Exhibit 2.1(m) (continued)
which the PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of
the occurrence of such event, or the withdrawal of the
Corporation or any ERISA Affiliate from a Plan during a plan year
in which it is a substantial employer, as defined in Section
4043(b) of ERISA, or the failure by the Corporation or any ERISA
Affiliate to meet the minimum funding standard of Section 412 of
the Internal Revenue Code or Section 302 of ERISA with respect to
any Plan, including, without limitation, the failure to make on
or before its due date a required installment under Section
412(m) of the Internal Revenue Code or Section 302(e) of ERISA,
or (iv) the distribution under Section 4041 of ERISA of a notice
of intent to terminate any Plan or any action taken by the
Corporation or any ERISA Affiliate to terminate any Plan, or (v)
the adoption of an amendment to any Plan that pursuant to Section
401(a)(29) of the Internal Revenue Code or Section 307 of ERISA
would result in the loss of tax- exempt status of the trust of
which such Plan is a part if the Corporation or an ERISA
Affiliate fails to timely provide security to the Plan in
accordance with the provisions of said Sections, or (vi) the
institution by the PBGC of proceedings under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Plan, or (vii) the receipt by the Corporation or
any ERISA Affiliate of a notice from a Multiemployer Plan that
action of the type described in the previous clause (vi) has been
taken by the PBGC with respect to such Multiemployer Plan, or
(viii) the complete or partial withdrawal from a Multiemployer
Plan by the Corporation or any ERISA Affiliate that results in
liability under Section 4201 or 4204 of ERISA (including the
obligation to satisfy secondary liability as a result of a
purchaser default), or (ix) the receipt by the Corporation or any
ERISA Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has terminated under
Section 4041A of ERISA, or (x) any event or circumstance exists
which may reasonably be expected to constitute grounds for the
Corporation or any ERISA Affiliate to incur liability under Title
IV of ERISA (other than the liability for the payment of
premiums) or liability for failing timely to make required
contributions to meet the minimum funding standards of Section
412 of the Internal Revenue Code.
"Expiration Date" shall mean the earliest of (i) March 24,
1998 (ii) the date of termination of the commitment of the LOC
Page 93
FORM 10-Q
Exhibit 2.1(m) (continued)
Bank under the Letter of Credit Reimbursement Agreement, (iii)
the date of termination of the commitment of the Banks under the
Credit Agreement or (iv) the day on which the Buyer delivers a
Notice of Termination pursuant to Section 7.02 hereof or a
Termination Event described in Section 7.01(k) hereof occurs.
"Finance Charges" shall mean, with respect to a Contract,
any finance, interest, late or similar charges owing by an
Obligor pursuant to such Contract.
"Fiscal Year" shall mean the Monday following the Sunday
nearest December 31 through the Sunday nearest December 31 which
is the fiscal year of the Corporation and the Seller for
accounting purposes.
"Foreign Receivable" shall mean all receivables arising from
the sale by the Originator of goods or services to Obligors
located outside of the United States. For the purposes of this
definition, a sale of goods or services shall be deemed to have
been made to an Obligor located outside of the United States if
(i) the goods are shipped by the Originator or at the
Originator's direction to a facility of such Obligor which is not
located within the fifty states of the United States or (ii) such
Obligor is an entity existing under the laws of a jurisdiction
other than the fifty states of the United States and the
principal place of business of such Obligor is not located in any
of the fifty states of the United States.
"GAAP" shall mean generally accepted accounting principles
in the United States of America, applied on a consistent basis
and applied to both classification of items and amounts, and
shall include, without limitation, the official interpretations
thereof by the Financial Accounting Standards Board, its
predecessors and successors.
"Goldman" shall have the meaning ascribed to such term in
Section 8.21 hereof.
"Group A Obligor" shall mean any Obligor whose short-term
debt is rated at least "A-1" by S&P, and at least "P-1" by
Moody's, or, in the case of an Obligor with long-term ratings
only, at least "A" by S&P and at least "A2" by Moody's.
"Group B Obligor" shall mean any Obligor (i) who is not a
Group A Obligor and (ii) whose short-term debt is rated at least
"A-2" by S&P, and at least "P-2" by Moody's, or in the case of an
Obligor with long-term debt ratings only, at least "BBB+" by S&P
and at least "Baa1" by Moody's.
Page 94
FORM 10-Q
Exhibit 2.1(m) (continued)
"Group C Obligor" shall mean any Obligor (i) who is not a
Group A Obligor or a Group B Obligor and (ii) whose short-term
debt is rated at least "A-3" by S&P, and at least "P-3" by
Moody's, or in the case of an Obligor with long-term debt ratings
only, at least "BBB-" by S&P and at least "Baa3" by Moody's.
"Group D Obligor" shall mean any Obligor who is not a Group
A Obligor, Group B Obligor or Group C Obligor who is not
specifically referenced in the definition of "Concentration
Factor."
"Guarantee" shall mean, as applied to any Debt, (i) a
guarantee (other than by endorsement for collection in the
ordinary course of business), direct or indirect, in any manner,
of any part or all of such Debt or (ii) an agreement, direct or
indirect, contingent or otherwise, providing assurance of the
payment or performance (or payment of damages in the event of
non-performance) of any part or all of such Debt, including,
without limiting the foregoing, the payment of amounts drawn down
by letters of credit. The amount of any Guarantee shall be
deemed to be the maximum amount of the Debt guaranteed for which
the guarantor could be held liable under such Guarantee.
"Incremental Purchase" shall have the meaning ascribed to
such term in Section 2.02 hereof.
"Indemnified Parties" shall have the meaning ascribed to
such term in Section 8.02(a) hereof.
"Internal Revenue Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time and any successor thereto,
and the regulations promulgated and rulings issued thereunder.
"Investment" shall mean, at any time, the sum of the Net
Investment plus the Deferred Purchase Price, which amount can
also be computed as follows:
I = NI
1 - LP
Where:
NI = the Net Investment at such time; and
LP = the Loss Percentage at such time.
Page 95
FORM 10-Q
Exhibit 2.1(m) (continued)
"Investment Percentage" shall mean, at any time, the
Investment at such time divided by the Net Receivables Balance at
such time.
"JPM" shall have the meaning ascribed to such term in
Section 7.01(m) hereof.
"Law" shall mean any law (including common law),
constitution, statute, treaty, regulation, rule, ordinance,
order, injunction, writ, decree or award of any official Body.
"Letter Agreement" shall mean the agreement dated the date
of this Agreement, as amended from time to time, between the
Seller and the Buyer setting forth, among other things, certain
fees payable to the Buyer by the Seller in connection with the
Buyer's investment in the Seller's Receivables.
"Letter of Credit" shall mean the letter of credit issued by
the LOC Bank under the Letter of Credit Reimbursement Agreement.
"Letter of Credit Reimbursement Agreement" shall mean the
Amended and Restated Program Letter of Credit Agreement dated as
of December 6, 1995 between the Buyer and the LOC Bank, as the
same may from time to time be amended, supplemented or otherwise
modified.
"Lien", in respect of the property of any Person, shall mean
any ownership interest of any other Person, any mortgage, deed of
trust, hypothecation, pledge, lien, security interest, grant of a
power to confess judgment, filing of any financing statement,
charge or other encumbrance or security arrangement of any nature
whatsoever, including, without limitation, any conditional sale
or title retention arrangement, and any assignment, deposit
arrangement, consignment or lease intended as, or having the
effect of, security.
"LOC Bank" shall mean Morgan Guaranty Trust Company of New
York, together with its successors or assigns, as the party to
the Letter of Credit Reimbursement Agreement issuing the Letter
of Credit.
"Lockbox Account" shall mean a demand deposit account
identified on Schedule 4 of the Disclosure Schedule maintained
with a Permitted Lockbox Bank pursuant to the Lockbox Servicing
Instructions for the purpose of depositing payments made by the
Obligors or such other account as the Servicer and the Buyer may
agree upon from time to time.
Page 96
FORM 10-Q
Exhibit 2.1(m) (continued)
"Lockbox Servicing Instructions" shall mean the instructions
relating to lockbox services in connection with a Permitted
Lockbox and related Lockbox Account which are in compliance with
Section 4.09 hereof and otherwise in form and substance
satisfactory to the Buyer, which have been executed and delivered
by the Seller to a Permitted Lockbox Bank.
"Lockbox Transfer Letter" shall have the meaning ascribed to
such term in Section 3.02(i) hereof.
"Loss Percentage" shall mean, at any time, the greatest of:
(i) 13%; or
(ii) 5 x DR;
Where:
DR = the average of the Delayed Receivables Ratios for each of
the three months immediately preceding the date of
computation.
"Maximum Net Investment" shall mean $40,000,000, unless,
otherwise increased with the consent of the Buyer or reduced as
provided in Section 2.11(a) hereof; provided, however, that at all
times on and after the Expiration Date, the "Maximum Net
Investment" shall mean the Net Investment.
"Member" shall have the meaning assigned to such term in the
Delaware Limited Liability Company Act.
"Merrill" shall have the meaning ascribed to such term in
Section 8.21 hereof.
"Monthly Report" shall have the meaning ascribed to such term
in Section 2.14 hereof.
"Moody's" shall mean Moody's Investors Service, Inc., together
with its successors.
"Multiemployer Plan" shall mean a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA which is or was at any time
during the current year or the immediately preceding five years
contributed to by the Corporation or any ERISA Affiliate on behalf
of its employees and which is covered by Title V of ERISA.
Page 97
FORM 10-Q
Exhibit 2.1(m) (continued)
"Net Investment" shall mean, at any time, the sum of the
amounts of Purchase Price paid to the Seller for each Incremental
Purchase less the aggregate amount of Collections received and
applied by Buyer to reduce such Net Investment pursuant to Sections
2.08(b), 2.08(e), 2.09, 2.11(b) and 2.12 hereof (which shall not
include any amounts paid to the Buyer as Discount hereunder);
provided that the Net Investment shall be increased by the amount
of any Collections so received and applied if at any time the
distribution of such Collections is rescinded or must otherwise be
returned or restored for any reason.
"Net Investment Percentage" shall mean, at any time, the Net
Investment at such time divided by the Net Receivables Balance at
such time.
"Net Receivables Balance" shall mean, at any time, the
Outstanding Balances of the Eligible Receivables at such time
reduced by the aggregate amount by which the Outstanding Balances
of all Receivables of each Obligor at such time exceeds the
Concentration Factor for such Obligor at such time.
"Notice of Termination" shall have the meaning ascribed to
such term in Section 7.02 hereof.
"Obligor" shall mean, for any Receivable, each and every
Person who purchased goods or services on credit under a Contract
and who is obligated to make payments to the Originator or the
Seller, as assignee of the Originator, pursuant to such Contract.
"Office" shall mean, when used in connection with the Buyer,
the Seller, the Servicer or the Corporation, their respective
offices as set forth on the signature pages hereto, or at such
other office or offices of the Buyer, the Seller, the Servicer or
the Corporation, or branch, Subsidiary or Affiliate of any thereof
as may be designated in writing from time to time by the Buyer, the
Seller, the Servicer or the Corporation, to the other parties
hereto, as appropriate.
"Official Body" shall mean any government or political
subdivision or any agency, authority, bureau, central bank,
commission, department or instrumentality of either, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or
domestic.
"Operating Agreement" shall mean that Limited Liability
Company Agreement dated the date of this Agreement relating to the
Seller and executed by the Corporation as the sole Member of the
Seller.
Page 98
FORM 10-Q
Exhibit 2.1(m) (continued)
"Originator" shall mean the Corporation.
"Outstanding Balance" of any Receivable shall mean, at any
time, the then outstanding amount thereof, including any accrued
and outstanding Finance Charges related thereto
"PBGC" shall mean the Pension Benefit Guaranty Corporation and
any entity succeeding to any or all of its functions under ERISA.
"Permitted Lockbox" shall mean a post office box or other
mailing location identified on Schedule 4 of the Disclosure
Schedule maintained by a Permitted Lockbox Bank pursuant to the
Lockbox Servicing Instructions for the purpose of receiving
payments made by the Obligors for subsequent deposit into a related
Lockbox Account, or such other post office box or mailing location
as the Buyer and the Servicer may agree upon from time to time.
"Permitted Lockbox Bank" shall mean a bank identified on
Schedule 4 of the Disclosure Schedule or such other bank as the
Servicer and the Buyer may agree upon from time to time.
"Person" shall mean an individual, corporation, partnership
(general or limited), trust, business trust, unincorporated
association, joint venture, joint-stock company, Official Body or
any other entity of whatever nature.
"Plan" shall mean any employee benefit or other plan which is
or was at any time during the current year or immediately preceding
five years established or maintained by the Corporation or any
ERISA Affiliate and which is covered by Title IV of ERISA, other
than a Multiemployer Plan.
"Potential Termination Event" shall mean an event or condition
which with the giving of notice, the passage of time or any
combination of the foregoing, would constitute a Termination Event.
"Proceeds" shall mean "proceeds", as defined in Section
9-306(1) of the Uniform Commercial Code as in effect in the State
of New York and the jurisdiction whose Law governs the perfection
of the Buyer's ownership interest therein.
"Program Fee" shall have the meaning ascribed to such term in
the Letter Agreement.
"Purchase" shall mean a purchase by the Buyer of an undivided
percentage ownership interest in Receivables hereunder, together
with the Related Security and Collections with respect thereto.
Page 99
FORM 10-Q
Exhibit 2.1(m) (continued)
"Purchase Agreement" shall mean the Purchase Agreement, dated
as of March 25, 1997, by and between the Seller, as purchaser under
such Purchase Agreement, and the Originator, as seller, of the
Receivables, as the same may from time to time be amended,
supplemented or otherwise modified.
"Purchase Availability Amount" shall mean, as of any date, an
amount equal to the excess, if any, of (i) the Maximum Net
Investment as of such date over (ii) the Net Investment as of such
date.
"Purchase Availability Fee" shall have the meaning ascribed to
such term in the Letter Agreement.
"Purchase Documents" shall mean this Agreement, the Lockbox
Servicing Instructions, the Lockbox Transfer Letters, the Purchase
Agreement and the Subordinated Note issued thereunder and such
other agreements, documents and instruments entered into and
delivered by Seller, the Servicer or the Corporation in connection
with the transactions contemplated by this Agreement.
"Purchase Loan" shall have the meaning ascribed to such term
in Section 2.06(c) hereof.
"Purchase Notice" shall have the meaning ascribed to such term
in Section 2.03 hereof.
"Purchase Price" shall mean with respect to any Incremental
Purchase, the amount agreed to by the Seller and the Buyer and paid
to the Seller by the Buyer as set forth in the Purchase Notice
related to such Incremental Purchase. Purchase Price refers to an
amount actually paid and does not include any amount of Deferred
Purchase Price.
"Purchased Interest" shall mean (a) at any time prior to the
close of business on the Expiration Date, an undivided percentage
ownership interest in (i) each and every then outstanding
Receivable, (ii) all Related Security with respect to each such
Receivable, (iii) all Collections with respect thereto, and (iv)
other Proceeds of the foregoing, equal to the Buyer's Percentage
Interest at such time, and only at such time (without regard to
prior calculations) and (b) at any time after the close of
business on the Expiration Date, an ownership interest in (i) each
and every Receivable outstanding as of the close of business on the
Expiration Date, (ii) all Related Security with respect to each
such Receivable (iii) all Collections with respect thereto and (iv)
Page 100
FORM 10-Q
Exhibit 2.1(m) (continued)
other Proceeds of the foregoing, equal to the Buyer's Percentage
Interest at such time (without regard to prior calculations). The
Purchased Interest in each Receivable, together with Related
Security and Collections with respect thereto, shall at all times
be equal to the Purchased Interest in each other Receivable,
together with Related Security and Collections. To the extent that
the Purchased Interest shall decrease as a result of a
recalculation of the Buyer's Percentage Interest, the Buyer shall
be deemed to have reconveyed to the Seller an undivided percentage
ownership interest in each Receivable, together with Related
Security and Collections, in an amount equal to such decrease such
that in each case the Purchased Interest in each Receivable shall
be equal to the Purchased Interest in each other Receivable.
"Rate Variance Factor" shall mean a variance factor, not to
exceed 110%, as the Buyer shall select from time, to time in its
sole discretion.
"Receivable" shall mean, all indebtedness owed to the Seller
or the Originator by any Obligor (without giving effect to any
purchase hereunder by the Buyer at any time) under a Contract,
whether or not constituting an account or a general intangible and
whether or not evidenced by chattel paper or an instrument, whether
now existing or hereafter arising and wherever located, arising in
connection with the sale of goods or the rendering of services by
the Originator and satisfying the description set forth on Exhibit
B hereto, all monies due or to become due under such Contracts and
including the right to payment of any Finance Charges and other
obligations of such Obligor with respect thereto, but excluding any
amount of sales tax, excise tax or other similar tax or charge
incurred in connection with the sale of the goods or services which
gave rise to such indebtedness; provided that the term Receivable
shall not mean and shall not include any Foreign Receivables and
shall not mean and shall not include receivables arising from the
sale of goods or services to Levi Strauss & Co. Notwithstanding
the foregoing, once a Receivable has been deemed collected pursuant
to Section 2.08(c) hereof and the Seller has complied with all of
its obligations in respect of such deemed Collections pursuant to
Section 2.08(e) hereof, it shall no longer constitute a Receivable
hereunder.
"Records" shall mean correspondence, memoranda, computer
programs, tapes, discs, papers, books or other documents or
transcribed information of any type whether expressed in ordinary
or machine readable language.
Page 101
FORM 10-Q
Exhibit 2.1(m) (continued)
"Referral Agent" shall mean Morgan Guaranty Trust Company of
New York together with its successors or assigns, in its capacity
as referral agent for the Buyer under the Amended and Restated
Referral Agreement dated as of December 6, 1995 between the Buyer
and the Referral Agent, as the same may from time to time be
amended, supplemented or otherwise modified.
"Related Security" shall mean with respect to any Receivable:
(a) all of the Seller's interest, if any, in the goods,
merchandise (including returned merchandise) or equipment, if any,
the sale of which by the Originator gave rise to such Receivable;
(b) all other security interests or liens and property
subject thereto from time to time, if any, purporting to secure
payment of such Receivable, whether pursuant to the Contract
related to such Receivable or otherwise, together with all
financing statements signed by an Obligor describing any collateral
securing such Receivable;
(c) all guarantees, insurance or other agreements or
arrangements of any kind from time to time supporting or securing
payment of such Receivable whether pursuant to the Contract related
to such Receivable or otherwise;
(d) all Records retaking to, and all service contracts and
any other contracts associated with, the Receivables, the Contracts
or the Obligors; and
(e) all of the Seller's right, title and interest in and to
the Purchase Agreement.
"Remainder" shall have the meaning ascribed to such term in
Section 2.08(a) hereof.
"Responsible Officer" shall mean the chief executive officer,
president, chief financial officer, treasurer or any assistant
treasurer of the Seller or the Corporation.
"Security Agreement" shall mean the Amended and Restated
Security Agreement dated as of December 6, 1995 between the Buyer
and Morgan Guaranty Trust Company of New York as collateral agent
for the Banks, the Agent, the LOC Bank and the holders from time to
time of the Commercial Paper, as the same may from time to time be
amended, supplemented or otherwise modified.
Page 102
FORM 10-Q
Exhibit 2.1(m) (continued)
"Servicer" shall mean the Corporation or any Person other than
the Corporation or any of its Affiliates, which upon the
termination of the Corporation as the Servicer succeeds to the
functions performed by the Corporation as the Servicer of the
Receivables pursuant to a Complete Servicing Transfer and a
Servicing Agreement.
"Servicer's Compensation" shall have the meaning ascribed to
such term in Section 4.07(e) hereof.
"Servicing Agreement" shall mean any agreement between the
Buyer and any Person, other than Cone Mills Corporation or any of
its Affiliates, which contains provisions concerning the servicing
of the Receivables substantially similar to the provisions
contained herein, including Sections 2.04, 2.08, 2.09, 4.01, 4.02,
4.03, 4.04, 4.05, 4.07 and 4.08 hereof, pursuant to which such
Person performs servicing functions for the Receivables, and all
agreements, instruments and documents attached thereto or delivered
in connection therewith, as any of the same may from time to time
be amended, supplemented or otherwise modified.
"Subordinated Note" shall mean the Subordinated Note dated the
Closing Date and delivered by the Seller to the Originator pursuant
to the Purchase Agreement.
"Subsidiary" shall mean any corporation or other entity of
which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other
persons performing similar functions are at the time directly or
indirectly owned by the Corporation.
"S&P" shall mean Standard & Poor's Ratings Service, together
with its successors.
"Termination Event" shall have the meaning ascribed to such
term in Section 7.01 hereof.
"Tranche" shall have the meaning ascribed to such term in
Section 2.06(b) hereof.
"Tranche Period" shall mean, with respect to any Tranche,
prior to the Expiration Date, a period of up to 120 days requested
by the Seller and determined by the Buyer commencing on the
Business Day requested by the Seller and determined by the Buyer,
and after the Expiration Date, a period of one day (unless the
Buyer, in any case other than the occurrence of the Expiration Date
Page 103
FORM 10-Q
Exhibit 2.1(m) (continued)
due to a Termination Event described in Section 7.01(f), (i), (j),
(k) or (l) hereof, agrees in its sole discretion at such time to a
longer period). If such 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, that for any Tranche funded by a
Eurodollar Loan (as defined in the Credit Agreement) obtained by
the Buyer under the Credit Agreement, if the next succeeding
Business Day is in the next calendar month, such Tranche Period
shall end on the next preceding Business Day).
"Tranche Rate" shall mean, for any Tranche Period for any
Tranche, a rate per annum equal to the rate of interest (or if more
than one rate, the weighted average of the rates) at which funds
are borrowed or obtained during such Tranche Period, in connection
with the issuance of Commercial Paper, the provision of loans under
the Credit Agreement, drawing under the Letter of Credit or
otherwise, by the Buyer for the purpose of making or maintaining
its investment in such Tranche, excluding from the computation of
such rates any dealer's discount or fees and excluding any and all
other fees directly attributable to such funding. In the case of
the issuance of Commercial Paper, such rate of interest shall equal
the rate of interest of Commercial Paper issued by the Buyer. In
the case of borrowings under the Credit Agreement or drawings under
the Letter of Credit, such rate of interest, at the option of the
Buyer, may be determined by the weighted average of such interest
rates as applicable to all sellers of receivables to the Buyer. At
all times on and after the Expiration Date occurring for the reason
set forth in clause (iv) of the definition of such term (other than
due to a Termination Event described in Section 7.01(m) hereof),
the Buyer may in its sole discretion declare the "Tranche Rate" for
any Tranche Period to be equal to the Base Rate plus 1% per annum.
"Tranche Rejection Notice" shall have the meaning ascribed to
such term in Section 2.06(b) hereof.
"Transaction Costs" shall have the meaning ascribed to such
term in Section 8.01 hereof.
"UCC" shall mean, with respect to any jurisdiction, the
Uniform Commercial Code, or any successor statute, or any
comparable law, as the same may from time to time be
amended,supplemented or otherwise modified and in effect in such
jurisdiction.
Page 104
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Exhibit 2.1(m) (continued)
1.02. Interpretation and Construction. Unless the context of
this Agreement otherwise clearly requires, references to the plural
include the singular, the singular the plural and the part the
whole. References in this Agreement to "determination" by the
Buyer shall be conclusive absent manifest error and include good
faith estimates by the Buyer (in the case of quantitative
determinations) and good faith beliefs by the Buyer (in the case of
qualitative determinations). The words "hereof", "herein",
"hereunder" and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise stated in this Agreement, in the
computation of a period of time from a specified date to a later
specified date, the word "from" means "from and including" and the
words "to" and "until" each means "to but excluding." The section
and other headings contained in this Agreement are for reference
purposes only and shall not control or affect the construction of
this Agreement or the interpretation hereof in any respect.
Section, subsection and exhibit references are to this Agreement
unless otherwise specified. As used in this Agreement, the
masculine, feminine or neuter gender shall each be deemed to
include the others whenever the context so indicates. All
accounting terms not specifically defined herein shall be construed
in accordance with GAAP. Terms not otherwise defined herein which
are defined in the UCC as in effect in the State of New York on the
date hereof shall have the respective meanings ascribed to such
terms therein unless the context otherwise clearly requires.
1.03. Obligor Classification. In determining whether an
Obligor is a Group A Obligor, a Group B Obligor, a Group C Obligor
or a Group D Obligor:
(i) any debt rating of an Obligor which is based upon credit
enhancement provided by a third party or based upon collateral
shall be disregarded; and
(ii) if more than one rating agency provides a rating of any
type of the Obligor's debt, the lowest rating for such type of debt
shall be utilized.
Page 105
FORM 10-Q
Exhibit 2.1(m) (continued)
ARTICLE II
PURCHASES AND SETTLEMENTS
2.01. General Assignment and Conveyance. At the time of each
Incremental Purchase pursuant to Sections 2.02 and 2.03 hereof and
each reinvestment Purchase pursuant to Section 2.05 hereof, the
Seller hereby bargains, grants, assigns, transfers and conveys to
the Buyer, without recourse, except as specifically set forth
herein and the Buyer hereby purchases and accepts assignment and
transfer from the Seller of, all of the Seller's right, title and
interest in and to the Purchased Interest in the Receivables then
existing as well as any additional Receivables thereafter arising
through the close of business on the Expiration Date.
2.02. Purchase Limits. Subject to the terms and conditions
hereof, the Seller may at any time and from time to time at its
option sell to the Buyer, and the Buyer agrees to purchase from the
Seller, without recourse, except as specifically set forth herein
undivided percentage ownership interests in each and every
Receivable (including any additional Receivables thereafter arising
through the close of business on the Expiration Date), together
with the Related Security and Collections with respect thereto
(each an "Incremental Purchase"). The Buyer shall have no
obligation to make an Incremental Purchase on any day, to the
extent that the amount of such purchase shall exceed the Purchase
Availability Amount, or shall cause the Investment Percentage
(after giving effect to such purchase) to exceed 95%. The Buyer
shall not be obligated to increase the Maximum Net Investment. The
Buyer shall have no obligation to make an Incremental Purchase (x)
if the Buyer determines that it is not practicable to issue
Commercial Paper or otherwise borrow in order to fund the purchase
or (y) to make any such purchase at or after the earlier to occur
of (i) the Expiration Date and (ii) the reduction of the Maximum
Net Investment to zero pursuant to Section 2.11(a) hereof. Each
Incremental Purchase shall be in an amount of $2,000,000 or any
higher multiple of $1,000,000.
2.03. Purchase Price. The Seller shall provide the Buyer
with a notice in substantially the form of Exhibit C hereto (a
"Purchase Notice") at least three Business Days prior to each
Incremental Purchase (including the initial Incremental Purchase).
On the closing date for each Incremental Purchase, the Buyer shall
deposit to the Seller's account at the location indicated on the
signature page hereof, in immediately available funds, an amount
equal to the Purchase Price for such Incremental Purchase. The
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Exhibit 2.1(m) (continued)
Purchase Price of the initial Incremental Purchase shall equal the
Buyer's initial Net Investment. Each Purchase Notice shall be
irrevocable and binding on the Seller and the Seller shall
indemnify the Buyer against any loss or expense incurred by the
Buyer, either directly or through the Credit Agreement or the
Letter of Credit Reimbursement Agreement or otherwise, as a result
of any failure by the Seller to complete such Incremental Purchase
including, without limitation, any loss (including loss of
anticipated profits) or expense incurred by the Buyer, either
directly or pursuant to the Credit Agreement or the Letter of
Credit Reimbursement Agreement or otherwise, by reason of the
liquidation or reemployment of funds acquired by the Buyer or any
Bank (including, without limitation, funds obtained by issuing
commercial paper or promissory notes or obtaining deposits as loans
from third parties) for the Buyer to fund such Incremental
Purchase. The Buyer shall notify the Seller of the amount
determined by the Buyer to be necessary to compensate the Buyer for
such loss or expense. Such amount shall be due and payable by the
Seller to the Buyer ten Business Days after such notice is given.
2.04. Deferred Purchase Price. The Buyer shall defer from
paying to the Seller with respect to its purchase of ownership
interests in the Receivables an amount equal to the Deferred
Purchase Price. The Seller shall calculate the Deferred Purchase
Price as of the closing date for each Incremental Purchase and the
Servicer shall calculate the Deferred Purchase Price as of the date
of each Monthly Report and at such other times as the Buyer shall
request in writing.
2.05. Reinvestment Purchases. On each Business Day occurring
after the initial Incremental Purchase hereunder and prior to the
Expiration Date, the Seller hereby bargains, grants, sells,
assigns, transfers and conveys to the Buyer, and, subject to
Section 3.03 hereof, the Buyer hereby purchases from the Seller
undivided percentage ownership interests in each and every
Receivable (including any additional Receivables arising through
the close of business on the Expiration Date), together with
Related Security and Collections with respect thereto, to the
extent that Collections are available for such Purchase in
accordance with Section 2.08(a) hereof, such that after giving
effect to such Purchase, (i) the amount of the Net Investment at
the close of the Buyer's business on such Business Day shall be
equal to the amount of the Net Investment at the close of the
Buyer's business on the Business Day immediately preceding such
Business Day, plus the Purchase Price paid with respect to any
Incremental Purchase made on such day, if any, minus the reduction
in Net Investment pursuant to Section 2.08(b) or 2.11(b) hereof
Page 107
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Exhibit 2.1(m) (continued)
made on such day, if any and (ii) the Buyer's Purchased Interest in
each Receivable, together with Related Security and Collections
with respect thereto, shall be equal to its Purchased Interest in
each other Receivable, together with Related Security and
Collections with respect thereto.
2.06. Funding of the Net Investment.
(a) At all times hereafter, but prior to the Expiration Date,
the Buyer shall utilize its best efforts to issue Commercial Paper
prior to obtaining a loan under the Credit Agreement to fund the
Net Investment; provided, however, that nothing herein shall
require the Buyer to issue Commercial Paper or limit the rights of
the Buyer to obtain a loan under the Credit Agreement or a drawing
under the Letter of Credit to fund the Net Investment.
(b) At all times hereafter, but prior to the occurrence of
the Expiration Date, the Seller shall, subject to the Buyer's
approval and the limitations described below, request Tranche
Periods and allocate a portion of the Net Investment to each
selected Tranche Period (each such portion so allocated being
herein called a "Tranche"), so that the aggregate amount of all
Tranches shall at all times equal the Net Investment. The Tranche
Period corresponds to the funding term for each Tranche and the
Seller shall not request a Tranche Period whose final day would be
a day on or after the third Business Day prior to the Expiration
Date. The Seller shall give the Buyer notice of a requested
initial Tranche Period or Periods for each Incremental Purchase at
least three Business Days prior to each Incremental Purchase and
notice of each new requested Tranche Period for any Tranche at
least three Business Days prior to the expiration of any then
existing Tranche Period for such Tranche (each such notice shall be
irrevocable, shall be in the form of Exhibit D hereto and shall be
referred to as a "Tranche Selection Notice"); provided, however,
that the Buyer may select, in its sole discretion, any such Tranche
Period if (i) the Seller fails to provide such notice on a timely
basis or (ii) the Buyer determines, in its sole discretion, that
the Tranche Period requested by the Seller is unavailable or for
any reason undesirable. The Buyer may, in its sole discretion, at
any time or from time to time, by written notice to the Seller,
declare any Tranche Period to be terminated and allocate the amount
of Net Investment allocated to the Tranche for such Tranche Period
to one or more other Tranches and Tranche Periods as the Buyer
shall select. In the case of any Tranche Period ending after the
Expiration Date, such Tranche Period shall end on the Expiration
Date and thereafter, all such Tranche Periods shall be a period of
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Exhibit 2.1(m) (continued)
one day (unless the Buyer, in any case other than the occurrence of
the Expiration Date due to a Termination Event described in Section
7.01(f), (i), (j), (k) or (l) hereof, agrees in its sole discretion
at such time to a longer period).
(c) At all times hereafter, but prior to the Expiration Date,
if the Buyer shall fund any Incremental Purchase with a borrowing
under Section 3.02 of the Credit Agreement (a "Purchase Loan"), the
Seller shall, subject to the Buyer's approval, request that such
Purchase Loan be a CD Rate Loan, a Eurodollar Loan or a Base Rate
Loan (each as defined in the Credit Agreement); provided, however,
that the Buyer may, in its sole discretion, select the type of
Purchase Loan if the Seller shall fail to make such request at
least four Business Days prior to such Incremental Purchase.
(d) At all times on and after the Expiration Date occurring
for the reason set forth in clause (iv) of the definition of such
term (other than due to a Termination Event described in Section
7.01(m) hereof), the Buyer shall in its sole discretion be
permitted to declare the Tranche Rates applicable to the Net
Investment to be equal to the Base Rate plus: 1%.
2.07. Discount. The Buyer will provide the Seller and the
Servicer with a report in substantially the form of Exhibit E
hereto showing the Discount attributable to each Tranche for its
then current Tranche Period prior to the third Business Day of each
month and otherwise upon the reasonable request of the Seller and
setting forth the Rate Variance Factor then in effect. The Tranche
Rate and the Program Fee with respect to each Tranche shall accrue
on each day occurring during the Tranche Period related thereto and
the related Discount shall be payable by the Seller on the last day
of the applicable Tranche Period. If any amount hereunder shall be
payable on a day which is not a Business Day, such amount shall be
payable on the next succeeding Business Day (unless the amount is
payable in respect of a Eurodollar Loan (as defined in the Credit
Agreement) obtained by the Buyer under the Credit Agreement, and
the next succeeding Business Day is in the next calendar month, in
which event the amount shall be payable on the next preceding
Business Day). Nothing in this Agreement shall limit in any way
the obligations of Seller to pay the amounts set forth in this
Section 2.07.
2.08. Non-Liquidation Settlements and Other Payment
Procedures.
(a) On each day after the day of any Incremental Purchase but
prior to the Expiration Date the Servicer shall allocate to the
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Exhibit 2.1(m) (continued)
Buyer an amount of Collections equal to the product of (i) the
Buyer's Percentage Interest, expressed as a decimal, and (ii)
Collections, if any, received on or prior to such day and not
previously applied or accounted for and after the Expiration Date
the provisions of Section 2.09 hereof shall apply. The Servicer
shall set aside and hold in trust for the benefit of the Buyer out
of such amount in respect of the Buyer's Percentage Interest an
amount equal to all Discount accrued through such day and not
previously so held or paid. The remainder of such amount (the
"Remainder") in respect of such Buyer's Percentage Interest shall,
subject to the terms and conditions of this Agreement, be utilized
by the Servicer to make for the benefit of the Buyer a reinvestment
Purchase of additional undivided percentage interests in each
Receivable pursuant to Section 2.05 hereof. On the last day of
each Tranche Period, from the amounts set aside, the Servicer shall
deposit to the Buyer's account, an amount equal to the accrued and
unpaid Discount for such Tranche Period.
(b) If and for so long as any of the Remainder cannot be
reinvested in additional undivided percentage interests in
Receivables pursuant to Sections 2.05 and 2.08(a) hereof, the
Servicer shall set aside and hold in trust for the Buyer such
Collections and shall use any such Collections not reinvested and
not set aside to pay Discount pursuant to Section 208(a) hereof to
the Buyer on the next date on which Discount is payable or on such
other date as specified by the Buyer The receipt of such payment
by the Buyer shall result in a reduction of the Net Investment
(c) If on any day the Outstanding Balance of a Receivable is
(w) reduced or canceled as a result of any defective or rejected
goods or services, any cash discount or any adjustment by the
Seller, or (x) reduced or canceled as a result of a set-off in
respect of any claim by any Person (whether such claim arises out
of the same or a related transaction or an unrelated transaction),
or (y) reduced or canceled as a result of any forgiveness of the
obligation or of any adjustment by the Seller, or (z) otherwise
reduced or canceled as a result of any Dilution Factor with respect
to such Receivable, the Servicer shall be deemed to have received
on such day a Collection of such Receivable in the amount of such
reduction or cancellation If on any day any of the representations
or warranties in Section 5.02 hereof is no longer true or was not
true when made with respect to a Receivable, the Seller shall be
deemed to have received on such day a Collection of such Receivable
in full.
(d) If any Receivable was, on the date of any Purchase,
Page 110
FORM 10-Q
Exhibit 2.1(m) (continued)
included in the calculation of Net Receivables Balance but was
not, at such time an Eligible Receivable, the Seller shall, on the
date of discovery by or notice to the Seller of such fact, be
deemed to have received on such day a Collection of such Receivable
in full.
(e) Any Collections deemed to be received by the Seller
pursuant to Section 2.08(c) or (d) hereof shall be paid by the
Seller to the Servicer on the next date on which Discount is
payable or on such other day as specified by the Buyer. The
Servicer shall hold or distribute all Collections deemed received
pursuant to Section 2.08(c) or (d) hereof to the same extent as if
such Collections had actually been received. All collections
actually received by the Seller which are not mailed directly to a
Permitted Lockbox for deposit by a Permitted Lockbox Bank into a
Lockbox Account shall be transferred by the Seller to a Lockbox
Account not later than two Business Days after such receipt. So
long as the Seller or the Servicer shall hold any Collections or
deemed Collections required to be paid to the Buyer, it shall hold
such Collections in trust for the Buyer.
2.09. Liquidation Settlement Procedures. On the Expiration
Date and on each day thereafter, the Servicer shall set aside and
hold in trust for the Buyer, an amount equal to the product of the
Buyer's Percentage Interest, expressed as a decimal, and
Collections, if any, received on such day. On the last day of the
Tranche Period for each Tranche to occur on or after the Expiration
Date, the Servicer shall deposit into the Buyer's account the
amounts set aside pursuant to the preceding sentence, together with
any remaining amounts set aside pursuant to Section 2.08(a) hereof
prior to the Expiration Date, but not to exceed the sum of the
Discount due for such Tranche Period, the amount of such Tranche,
and all other Aggregate Unpaids (whether due or accrued). 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, in payment of all fees
and expenses payable to the Buyer, second, in payment of the
Discount due, third, in reduction of the Net Investment allocated
to such Tranche Period, and fourth, in payment of all other
Aggregate Unpaids (whether due or accrued). Following the date on
which the Net Investment has been reduced to zero and all Discount
due and all other Aggregate Unpaids have been indefeasibly paid in
full, the Deferred Purchase Price shall be deemed to have been paid
in full, the Servicer shall recompute the Buyer's Percentage
Interest, the Buyer shall be deemed to have reconveyed to the
Seller any interest in the Receivables (including the Purchased
Interest), (iv) the Servicer shall pay to the Seller any remaining
Page 111
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Exhibit 2.1(m) (continued)
Collections set aside and held by the Servicer pursuant to the
first sentence of this Section 2.09 and (v) the Buyer shall execute
and deliver to the Seller, at Seller's expense, such documents or
instruments as are reasonably necessary to terminate its interest
in the Receivables.
2.10. Fees. (a) Notwithstanding any limitation on recourse
contained in this Agreement, the Seller shall pay in arrears, on
the last Business Day of each calendar quarter, to the Buyer, the
accrued Purchase Availability Fee, which fee shall be
nonrefundable.
(b) The Seller shall pay to the Buyer the fees as and when
set forth in the Letter Agreement.
2.11. Optional Reduction of Maximum Net Investment; Optional
Reduction of Net Investment.
(a) The Seller may reduce in whole or in part the Maximum Net
Investment (but not below the Net Investment) by giving the Buyer
written notice thereof at least three Business Days before such
reduction is to take place; provided, however, that any partial
reduction shall be in an amount of $2,000,000 or any higher
multiple of $1,000,000. The Seller shall pay the Buyer any accrued
and unpaid Purchase Availability Fee on the date of such reduction
with respect to the reduction amount.
(b) The Seller may reduce the Net Investment in whole or in
part with respect to any Tranche on the last day of the related
Tranche Period by giving the Buyer at least three Business Days'
written notice. If the Seller delivers such a notice of reduction,
the Seller shall pay to the Buyer (or cause the Servicer to pay to
the Buyer) on the last day of such Tranche Period an amount equal
to (i) the amount of the proposed reduction, (ii) any Discount
otherwise payable on such date and (iii) if such reduction reduces
the Net Investment to zero, all other Aggregate Unpaids; provided,
however, that any partial reduction shall be in an amount of
$2,000,000 or any higher multiple of $1,000,000. Such reduction
shall become effective upon payment of the amounts in the preceding
clauses (i), (ii) and, if applicable, (iii).
2.12. Mandatory Repurchase Under Certain Circumstances. The
Seller agrees to repurchase from the Buyer the Purchased Interest
if at any time the Buyer shall cease to have a perfected ownership
interest, or a first priority perfected security interest, in the
Receivables, free and clear of any Lien (except as provided
herein), within five days of notice thereof by the Buyer. The
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FORM 10-Q
Exhibit 2.1(m) (continued)
repurchase price shall be paid by the Seller to the Buyer on such
fifth day in an amount equal to the Aggregate Unpaids.
2.13. Payments and Computations, Etc.; Allocation of
Collections.
(a) All per annum fees payable under this Agreement shall be
calculated for the actual days elapsed on the basis of a 360-day
year. All amounts to be paid or deposited by the Seller or the
Servicer hereunder shall be paid or deposited in accordance with
the terms hereof no later than 11:00 a.m. (New York City time) on
the day when due in immediately available funds; if such amounts
are payable to the Buyer they shall be paid or deposited in the
account indicated on the signature page hereof, until otherwise
notified by the Buyer. The Seller shall, to the extent permitted
by Law, pay to the Buyer upon demand, interest on all amounts not
paid or deposited when due to the Buyer hereunder at a rate equal
to 2% per annum plus the Base Rate. All computations of interest
hereunder shall be made on the basis of a year of 360 days for the
actual number of days (including the first but excluding the last
day) elapsed. Any computations of amounts payable by the Seller
hereunder made by the Buyer, the Agent or the LOC Bank shall be
binding absent manifest error.
(b) 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 Buyer, be applied as a Collection,
allocated in accordance with Sections 2.08 and 2.09 hereof, as the
case may be, of any Receivable of such Obligor included in the
Purchased Interest (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 indebtedness of such
Obligor.
2.14. Reports.
(a) Prior to the fifteenth Business Day of each month, the
Servicer shall prepare and forward to the Buyer (i) a monthly
report, substantially in the form of Exhibit G (a "Monthly
Report"), as of the close of business of the Servicer on the last
day of the immediately preceding month and (ii) if requested by the
Buyer, a listing by Obligor of all Receivables together with an
aging of such Receivables and such other information concerning
actual and historical collections experience and other matters as
the Buyer may reasonably request.
Page 113
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Exhibit 2.1(m) (continued)
(b) In connection with each Monthly Report, the Servicer
shall provide in writing to the Buyer a listing of all changes to
the list of Obligors under Contracts related to the Receivables
including, for each Obligor added to the list, the name, address,
telephone number and account number of such Obligor and if there
have been changes in the name, address, telephone number or account
number of any existing Obligor, the revisions shall be provided.
(c) The Seller shall or shall cause the Servicer to, furnish
to the Buyer at any time and from time to time, such other or
further information in respect of the Receivables, the Seller and
the Obligors as the Buyer may reasonably request.
2.15. Expiration Date. Subject to other provisions of this
Agreement requiring earlier termination, this Agreement shall
terminate on March 24, 1998.
ARTICLE III
CLOSING PROCEDURES
3.01. Purchase and Sale Procedures.
(a) General. Each Purchase hereunder shall constitute a
purchase of, and shall transfer ownership to the Buyer of,
undivided percentage ownership interests in each and every
Receivable, together with Related Security and Collections with
respect thereto, then existing as well as each and every
Receivable, together with Related Security and Collections, which
may arise at any time after the date of such Purchase through the
close of business on the Expiration Date.
(b) Maximum Net Investment. If, on any closing date for an
Incremental Purchase, the Purchase Price to be paid on such date
for such Incremental Purchase would cause the Net Investment to
exceed the Maximum Net Investment, the Buyer may, at its option,
either refuse to make such Incremental Purchase or make a smaller
Incremental Purchase such that, immediately after the payment of
the smaller Purchase Price, the Net Investment would not exceed the
Maximum Net Investment.
(c) Sale Without Recourse. The sale of the Purchased
Interest by the Seller hereunder shall be made without recourse
except as specifically provided herein.
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FORM 10-Q
Exhibit 2.1(m) (continued)
(d) Grant of Security Interest. This Agreement also
constitutes a security agreement under the UCC. The Seller hereby
grants to the Buyer a first priority perfected security interest in
and against all of the Seller's right, title and interest in and to
each and every Receivable (together with Related Security,
Collections and other Proceeds), whether now existing or hereafter
arising through the close of business on the Expiration Date, for
the purpose of securing the rights of the Buyer under this
Agreement.
(e) Non-Assumption by the Buyer of Obligations. No
obligation or liability of the Seller to any Obligor or any third
party under any Receivable or Contract which is part of the
Receivables in which the Buyer has a Purchased Interest shall be
assumed by the Buyer, and any such assumption is hereby expressly
disclaimed. The Buyer shall be indemnified by the Seller in
accordance with Section 8.03 hereof in respect of any losses,
claims, damages, liabilities, costs or expenses arising out of or
incurred in connection with any obligor's assertion of such
obligation or liability against the Buyer.
3.02. Conditions to Closing. On or prior to the Closing
Date, the Seller shall deliver to the Buyer the following documents
and instruments, all of which shall be in a form and substance
acceptable to the Buyer, and the following fee:
(a) A copy of the resolution of the Board of Directors of the
Corporation certified by the Corporation's secretary authorizing
the formation of the Seller and the execution, delivery and
performance of this Agreement and the other documents to be
delivered by the Corporation hereunder and approving the
transactions contemplated hereby and thereby;
(b) The Articles of Incorporation of the Corporation
certified as of a date reasonably near the date hereof by the
Secretary of State or other similar official of the Corporation's
jurisdiction of incorporation, and a certified copy of the
Certificate of Formation of the Seller and a fully executed copy of
the Operating Agreement;
(c) A good standing certificate for the Corporation issued by
the Secretary of State or other similar official of the
Corporation's jurisdiction of incorporation, certificates of
qualification as a foreign corporation issued by the Secretaries of
State or other similar officials of each jurisdiction where such
qualification is material to the transactions contemplated by this
Agreement and certificates of the appropriate state official in
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FORM 10-Q
Exhibit 2.1(m) (continued)
each jurisdiction specified by the Buyer as to the absence of any
tax Liens against such Person under the Laws of such jurisdiction,
each such certificate to be dated a date reasonably near the date
hereof;
(d) A certificate of the secretary of the Corporation
certifying (i) the names and signatures of the officers authorized
to execute, and the officers and other employees authorized to
perform, on behalf of the Corporation both in its individual
capacity and as sole member of the Seller, this Agreement, the
Purchase Agreement, the Operating Agreement and any other documents
to be delivered by such Person hereunder (on which certificate the
Buyer may conclusively rely until such time as the Buyer shall
receive from such Person a revised certificate meeting the
requirements of this clause (d)(i)) and (ii) a copy of the
Corporation's By-laws;
(e) Evidence of filing by the Seller of a Certificate of
Authority with the Secretary of State of the State of North
Carolina;
(f) Acknowledgment copies of proper financing statements
(Form UCC-1) dated a date reasonably near to the date of the
initial Incremental Purchase naming (i) the Seller as the debtor of
Receivables and the Buyer as the secured party or other similar
instruments or documents as may be necessary or, in the opinion of
the Buyer, desirable under the UCC of all appropriate jurisdictions
to evidence or perfect the Buyer's ownership interest in all
Receivables and (ii) naming the Originator as the debtor of the
Receivables and the Seller as the secured party, or other similar
instruments or documents as may be necessary or, in the opinion of
the Buyer, desirable under the UCC of all appropriate jurisdictions
to evidence or perfect the Seller's ownership interest in all
Receivables;
(g) Acknowledgment copies of proper financing statements
(Form UCC-3) necessary to release all security interests and other
rights of any person in Receivables previously granted by the
Seller or the Originator;
(h) Certified copies of requests for information or copies
(Form UCC-11) (or a similar search report certified by parties
acceptable to Buyer) dated a date reasonably near the date of the
initial Incremental Purchase listing all effective financing
statements which name the Seller or the Originator (under their
respective present names and any previous names) as debtor and
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Exhibit 2.1(m) (continued)
which are filed in jurisdictions in which the filings were made
pursuant to item (e) above, together with copies of such financing
statements;
(i) Copies of Lockbox Servicing Instructions (to the extent
available) and all other agreements previously given or entered
into with each of the Permitted Lockbox Banks;
(j) Undated duly executed letters (a "Lockbox-Transfer
Letter") from the Servicer addressed to each Permitted Lockbox Bank
substantially in the form of Exhibit H hereto;
(k) A favorable opinion of Lindy Bode Aucoin, counsel for the
Seller, the Servicer, the Originator and the Corporation dated the
Closing Date in form and substance acceptable to the Buyer;
(l) An opinion of counsel acceptable to the Corporation and
the Seller and which specifically allows reliance thereon by the
Corporation's outside auditors with respect to the treatment of the
transfer of the Receivables from the Corporation to the Seller as
provided in the Purchase Agreement as a true sale;
(m) Officer's certificates executed by a Responsible Officer
of the Seller and of the Corporation, respectively, and in form and
substance acceptable to the Buyer;
(n) The arrangement fee described in the Letter Agreement;
(o) A Monthly Report for the immediately preceding month
(Part I, Schedule 3 to Part II, and Part III, Items A. through D.
only);
(p) The Purchase Notice and the Tranche Selection Notice for
the initial Incremental Purchase hereunder;
(q) A form of Contract or Contracts;
(r) An executed copy of the Purchase Agreement;
(s) An executed copy of the Omnibus Termination and Release
and Reconveyance dated the Closing Date by and between the
Corporation and the Buyer;
(t) Creditor Approvals; and
(u) Such other documents as the Buyer shall reasonably
request.
Page 117
FORM 10-Q
Exhibit 2.1(m) (continued)
3.03. Conditions to Reinvestment and Incremental Purchases.
The truth and correctness of the representations and warranties in
Article V hereof as of the date of the Incremental Purchase or
reinvestment Purchase referred to below as though made on and as of
such date, compliance with the covenants and agreements in Articles
II, IV and VI hereof, the requirement that no Termination Event or
Potential Termination Event shall occur as a result of such
Incremental Purchase or reinvestment Purchase, in the case of an
Incremental Purchase, the satisfactory completion of any due
diligence conducted by the Buyer with respect to the Receivables
and the related Obligors and Contracts which are the subject of
such Purchase and the receipt by the Buyer of any approvals,
opinions or other documents as the Buyer shall have reasonably
requested shall be conditions precedent to any Incremental Purchase
under Sections 2.02 and 2.03 hereof and any reinvestment Purchase
under Section 2.05 hereof.
ARTICLE IV
PROTECTION OF THE BUYER;
ADMINISTRATION AND COLLECTIONS
4.01. Acceptance of Appointment and Other Matters Relating to
the Servicer.
(a) Cone Mills Corporation agrees to act, and is hereby
appointed by the Buyer to act, subject to the terms hereof, as the
Servicer under this Agreement. The Servicer shall collect payments
due under the Receivables in accordance with its customary and
usual servicing procedures for servicing receivables owned by it
and comparable to the Receivables and in accordance with its Credit
and Collection Policy and shall have full power and authority,
acting alone or through any party properly designated by it
hereunder, to do any and all things in connection with such
servicing and administration which it may deem necessary or
desirable; provided, however, that if any Person succeeds the
Corporation as the Servicer, such Servicer shall service the
Receivables in accordance with the standards that would be employed
by a prudent institution in servicing comparable receivables for
its own account. Without limiting the generality of the foregoing
and subject to Sections 4.09 and 4.10 hereof, the Servicer is
hereby authorized and empowered (i) to receive and hold in trust
for the Buyer Collections received from Receivables as set forth in
Article II and elsewhere in this Agreement and (ii) to execute and
deliver, on behalf of the Buyer (for the benefit of the Buyer), any
and all instruments of satisfaction or cancellation, or of partial
or full release or discharge, and all other comparable instruments,
Page 118
FORM 10-Q
Exhibit 2.1(m) (continued)
with respect to the Receivables permitted under and in compliance
with applicable Law and regulations.
(b) Subject to the rights retained by the Buyer pursuant to
Section 4.09 hereof, each of the Seller and the Buyer hereby
appoints the Servicer to enforce its respective rights and
interests in and to the Purchased Interest and the Receivables. If
any Person succeeds the Corporation as the Servicer, the
Corporation shall promptly deliver to such Successor Servicer, and
the Servicer shall hold in trust for the Buyer and the Seller, in
accordance with their respective interests, all documents
instruments and records (including computer tapes or disks) that
are reasonably necessary to service or collect the Receivables.
4.02. Maintenance of Information and Computer Records. The
Seller will, or will cause the Servicer to, hold in trust and keep
safely for the Buyer all evidence of the Buyer's right, title and
interest in and to the Purchased Interest in the Receivables. The
Seller will, or will cause the Servicer to, on or prior to each
Incremental Purchase, and with respect to all Receivables that are
added to the pool of Receivables in which the Buyer has a Purchased
Interest after the initial Incremental Purchase, on each respective
date such Receivables are added, place an appropriate code or
notation in its Records to indicate that the Buyer has a Purchased
Interest in each and every Receivable.
4.03. Protection of the Interests of the Buyer.
(a) The Seller will, or will cause the Servicer to, from time
to time and at Seller's sole expense do and perform any and all
acts and execute any and all documents (including, without
limitation, the obtaining of additional search reports, the
delivery of further opinions of counsel, the execution, amendment
or supplementation of any financing statements, continuation
statements and other instruments and documents for filing under the
provisions of the UCC of any applicable jurisdiction, the
execution, amendment or supplementation of any instrument of
transfer and the making of notations on the Records of the Seller)
as may be reasonably requested by the Buyer in order to effect the
purposes of this Agreement and the sale of Purchased Interest
hereunder, to protect or perfect the Buyer's right, title and
interest in the Purchased Interest in the Receivables, together
with Related Security and all Collections with respect thereto,
against all Persons whomsoever or to enable the Buyer to exercise
or enforce any of its rights hereunder.
Page 119
FORM 10-Q
Exhibit 2.1(m) (continued)
(b) To the fullest extent permitted by applicable Law, the
Seller hereby irrevocably grants to the Buyer and the Referral
Agent an irrevocable power of attorney, with full power of
substitution, coupled with an interest, to sign and file in the
name of the Seller, or in its own name, such financing statements
and continuation statements and amendments thereto or assignments
thereof as the Buyer deems necessary to protect or perfect the
Purchased Interest.
(c) At any reasonable time and from time to time at the
Buyer's reasonable request upon notice to the Seller, the Servicer
or the Corporation, the Seller, the Servicer or the Corporation, as
the case may be, shall permit such Person as the Buyer may
designate (other than the Persons listed on Schedule 5 of the
Disclosure Schedule and such other Persons as the Seller may
designate in writing based on such business considerations as the
Seller reasonably believes to be applicable) to conduct audits or
visit and inspect any of the properties of the Seller, the Servicer
or the Corporation, as the case may be, to examine the Records,
internal controls and procedures maintained by the Seller, the
Servicer or the Corporation, as the case may be, and take copies
and extracts therefrom, and to discuss the Seller's, the Servicer's
or the Corporation's, as the case may be, affairs with its
officers, employees and independent accountants. The Seller, the
Servicer or the Corporation, as the case may be, hereby authorizes
such officers, employees and independent accountants to discuss
with the Buyer the affairs of the Seller, the Servicer or the
Corporation, as the case may be. The Seller shall reimburse the
Buyer for all reasonable fees, costs and expenses incurred by or on
behalf of the Buyer in connection with the foregoing actions
promptly upon receipt of a written invoice therefor.
(d) The Buyer shall have the right to do all such acts and
things as it may deem necessary to protect its interests,
including, without limitation, confirmation and verification of the
existence, amount and status of the Receivables.
4.04. Maintenance of Writings and Records. The Servicer will
at all times until completion of a Complete Servicing Transfer keep
or cause to be kept at its Chief Executive Office or at an office
of the Servicer designated in advance to the Buyer, each writing or
Record which evidences, and which is necessary or desirable to
establish or protect, including such books of account and other
Records as will enable the Buyer or its designee to determine at
any time the status of, the Purchased Interest of the Buyer in each
Page 120
FORM 10-Q
Exhibit 2.1(m) (continued)
Receivable. The Servicer shall at its own expense prepare and
maintain machine-readable magnetic tapes in such format as the
Servicer customarily maintains its records; provided, however, that
upon a Complete Servicing Transfer, the Servicer shall within 15
days of such Complete Servicing Transfer prepare such records in
such format as may be required to permit or facilitate the transfer
of such records to the successor Servicer.
4.05. Information. The Servicer will, or will cause the
Seller to, furnish to the Buyer such additional information with
respect to the Receivables (including but not limited to the
Seller's or the Originator's procedures for selecting Receivables
for sale and the Seller's or the Originator's standards and
procedures for selling goods or services on credit) as the Buyer
may reasonably request. The Servicer will also furnish to the
Buyer all modifications, adjustments or supplements to the Credit
and Collection Policy; provided, however, the Servicer shall not,
without the Buyer's prior written consent, alter the Credit and
Collection Policy as in effect from time to time unless such
alteration is in compliance with Section 6.02(e) hereof.
4.06. Performance of Undertakings Under the Receivables. The
Servicer will at all times observe and perform, or cause to be
observed and performed, all material obligations and undertakings
to the Obligors arising in connection with each Receivable or
related Contract and will not take any action or cause any action
to be taken to impair the rights of the Buyer to its Purchased
Interest in the Receivables.
4.07. Administration and Collections.
(a) General. Until a Complete Servicing Transfer shall have
occurred, the Servicer will be responsible for the administration,
servicing and collection of the Receivables; provided, however,
that upon written approval by the Buyer such duties may be
delegated by the Servicer to any of the Servicer's Affiliates or a
third party (without impairment of the Servicer's obligations as
Servicer). The Servicer agrees to exercise or cause such Affiliate
or third party to exercise the same degree of skill and care and
apply the same standards, policies, procedures and diligence that
it applies to the performance of the same functions with respect to
accounts owned by the Servicer.
(b) Administration. The Servicer shall, to the full extent
permitted by Law, have the power and authority, on behalf of the
Buyer, to take such action in respect of any such Receivable as the
Page 121
FORM 10-Q
Exhibit 2.1(m) (continued)
Servicer may deem advisable, including the resale of any
repossessed, returned or rejected goods; provided, however, that
the Servicer may not under any circumstances compromise, rescind,
cancel, adjust or modify (including by extension of time for
payment or granting any discounts, allowances or credits) the
Outstanding Balance of the related Contract for any Receivable,
except in accordance with the Credit and Collection Policy or
otherwise with the Buyer's prior written consent.
(c) Enforcement Proceedings. In the event of a default under
any Receivable before a Termination Event, the Servicer shall, at
the Seller's sole expense, to the full extent permitted by Law,
have the power and authority, on behalf of the Buyer, to take any
action in respect of any such Receivable as the Servicer may deem
advisable; provided, however, that the Servicer or the Seller, as
the case may be shall take no enforcement action (judicial or
otherwise) with respect to such Receivable, except in accordance
with the Credit and Collection Policy or otherwise with the written
consent of the Buyer. The Servicer or the Seller, as the case may
be, will apply or will cause to be applied at all times before a
Termination Event the same standards and follow the same procedures
with respect to deciding to commence, and in prosecuting,
litigation on such Receivable as is applied and followed with
respect to like accounts not owned by the Buyer. In no event shall
the Servicer or the Seller, as the case may be, be entitled to make
or authorize any Person to make the Buyer a party to any litigation
without the Buyer's express prior written consent.
(d) Obligations of the Buyer. The Buyer may, but shall have
no obligation to, take any action or commence any proceeding to
realize upon any Receivable, any such action or commencement of
proceeding to be at the sole expense of the Seller. At such time
as the Servicer or the Seller, as the case may be, has any
obligation to pursue the collection of Receivables and the Buyer
possesses any documents necessary therefor, the Buyer agrees to
furnish such documents to the Servicer or the Seller, as the case
may be, to the extent and for the period necessary for the Servicer
or the Seller, as the case may be, to comply with its obligations
hereunder.
(e) Servicer's Compensation. The servicer's compensation
(the "Servicer's Compensation") for performing its responsibility
as the Servicer with respect to any Receivable on any day shall be
equal to the quotient of (A) the product of (1) 0.75%, expressed as
a decimal, and (2) the Outstanding Balances of all Receivables on
such day, divided by (B) 360. Subject to Section 4.08(a) hereof,
Page 122
FORM 10-Q
Exhibit 2.1(m) (continued)
the Servicer's Compensation shall be paid to the Servicer by the
Seller in arrears on the last Business Day of each month; provided,
however, that if the Seller is the Servicer, the Servicer shall not
be entitled to any compensation on or after the date of the
Complete Servicing Termination.
4.08. Complete Servicing Transfer.
(a) General. If at any time a Termination Event or a
Potential Termination Event shall have occurred and be continuing,
the Buyer may by notice in writing to the Seller and the Servicer,
terminate the Servicer's capacity as Servicer in respect of the
Receivables (such termination referred to herein as a "Complete
Servicing Transfer"). After a Complete Servicing Transfer, the
Buyer may administer, service and collect the Receivables itself
and in such event, may retain the Servicer's Compensation for its
own account, in any manner it sees fit, including, without
limitation, by compromise, extension or settlement of such
Receivables. Alternatively, the Buyer may engage affiliated or
unaffiliated contractors (other than the Persons listed on Schedule
5 of the Disclosure Schedule and such other Persons as the Seller
may designate in writing based on such business considerations as
the Seller reasonably believes to be applicable) to perform all or
any part of the administration, servicing and collection of the
Receivables and require the Seller to pay to such contractors all
or a portion of the Servicer's Compensation in consideration
thereof. The Buyer shall give S&P and Moody's prompt notice of the
occurrence of a Complete Servicing Transfer; provided, however,
that failure to give such notice shall not affect the effectiveness
of the notice delivered with respect to, or the rights of the Buyer
resulting from, such Complete Servicing Transfer.
(b) Transition. The Servicer, within ten Business Days after
receiving a notice pursuant to Section 4.08(a) hereof, shall, at
the Servicer's sole expense, (x) deliver to the Buyer or its
designated agent a schedule of the Receivables in which the Buyer
has a Purchased Interest indicating as to each such Receivable
information as to the related Obligor, the Outstanding Balance as
of such date of the related Contract and the location of the
evidences of such Receivable and related Contract, together with
such other information as the Buyer may reasonably request and all
evidence of such Receivables and related Contracts and such other
Records related thereto (including, without limitation, true copies
of any computer tapes and data in computer memories), and (y)
permit the Buyer access to the Servicer's premises, equipment and
files and other Records, in each case as the Buyer may reasonably
deem necessary to enable it to protect and enforce its rights to,
Page 123
FORM 10-Q
Exhibit 2.1(m) (continued)
or its position as owner of, the Purchased Interest therein. After
any such delivery, the Servicer will not hold or retain any
executed counterpart or any document evidencing such Receivables or
related Contracts without clearly marking the same to indicate
conspicuously that the same is not the original and that transfer
thereof does not transfer any rights against the related Obligor or
any other Person.
(c) Collections. If at any time there shall be a Complete
Servicing Transfer, the Servicer will cause to be transmitted and
delivered directly to the Buyer or its designated agent, for the
Buyer's own account, forthwith upon receipt and in the exact form
received, all Collections (properly endorsed, where required, so
that such items may be collected by the Buyer) on account of its
Purchased Interest in any Receivables. All such Collections
consisting of cash shall not be commingled with other items or
monies of the Servicer for a period longer than two Business Days.
If the Buyer or its designated agent receives items or monies that
are not payments on account of its interest in any Receivables,
such items or monies shall be delivered promptly to the Seller
after being so identified by the Buyer or its designated agent.
Each of the Seller and the terminated Servicer hereby irrevocably
grants the Buyer or its designated agent, if any, an irrevocable
power of attorney, with full power of substitution, coupled with an
interest, to take in the name of the Seller or the terminated
Servicer, as the case may be, all steps with respect to any
Receivable which the Buyer, in its sole discretion, may deem
necessary or advisable to negotiate or otherwise realize on any
right of any kind held or owned by the Seller or transmitted to or
received by the Buyer or its designated agent (whether or not from
the Seller or any Obligor) in connection with its Purchased
Interest in any Receivable. The Buyer will provide such periodic
accountings and other information related to the disposition of
funds so collected as the Seller may reasonably request.
(d) Collection and Administration at Expense of the Seller.
The Seller agrees that in the event of a Complete Servicing
Transfer, it will reimburse the Buyer for all reasonable out-of-
pocket expenses (including, without limitation, attorneys' and
accountants' and other third parties' fees and expenses, expenses
incurred by the Buyer's credit recovery group (or any successor),
expenses of litigation or preparation therefor, and expenses of
audits and visits to the offices of the Seller) incurred by the
Buyer in connection with and following the transfer of functions
following a Complete Servicing Transfer.
Page 124
FORM 10-Q
Exhibit 2.1(m) (continued)
(e) Payments by Obligors. At any time, and from time to time
following a Complete Servicing Transfer, or if a Termination Event
or Potential Termination Event shall have occurred and be
continuing, the Seller and the Servicer shall permit such Persons
as the Buyer may designate to open and inspect all mail received by
the Seller or the terminated Servicer, as the case may be, at any
of its offices, and to remove therefrom any and all Collections or
other correspondence from Obligors or the Servicer in respect of
Receivables. All Collections received by the Buyer shall be
applied in accordance with Section 2.13(b) hereof. The Buyer shall
be entitled to notify the Obligors of Receivables to make payments
directly to the Buyer of amounts due thereunder at any time and
from time to time following the occurrence of (i) a Termination
Event, (ii) a Complete Servicing Transfer or (iii) a violation by
the Servicer of the provisions of Section 4.09 hereof.
4.09. Lockboxes. The Servicer hereby agrees (i) to instruct
all Obligors to cause all Collections on account of Receivables to
be mailed directly to a Permitted Lockbox; (ii) not to suffer or
permit any funds other than such Collections to be mailed to
Permitted Lockboxes or deposited into related Lockbox Accounts;
(iii) to make the necessary bookkeeping entries to reflect such
Collections on the Records pertaining to such Receivables; (iv) to
apply all such Collections as provided in this Agreement; (v) not
to amend or modify any term of any Lockbox Servicing Instructions
without the prior written consent of the Buyer to such amendment or
modification; and (vi) not to amend or modify any term, with
respect to the disposition of such Collections or any other amounts
received by the Seller or the Servicer or any Permitted Lockbox
Bank, of this Agreement or any other agreement (other than Lockbox
Servicing Instructions) without the prior written consent of the
Buyer to such amendment or modification. The Seller and the
Servicer further represent, warrant, covenant and agree as follows:
each Lockbox Account shall be maintained with a Permitted Lockbox
Bank; each Lockbox Account shall be a segregated account and the
funds deposited in such Lockbox Account from time to time shall not
be commingled with any other funds of the Seller or the Servicer;
each Lockbox Account shall be in the name of the Seller; the
location of each Permitted Lockbox and each related Lockbox Account
shall not be changed without the consent of the Buyer; funds
deposited in each Lockbox Account shall be transferred to the
Servicer not later than the next Business Day after such funds are
deposited in each such Lockbox Account; it shall cause each
Permitted Lockbox Bank listed on Schedule 4 to the Disclosure
Schedule, to the extent that any such Permitted Lockbox Bank has
not previously done so, within 30 days of the date of this
Page 125
FORM 10-Q
Exhibit 2.1(m) (continued)
Agreement, to waive any deductions, set-off, banker's lien or any
other right in favor of any person other than the Agent; it shall
cause any bank, prior to such bank becoming a Permitted Lockbox
Bank, to waive any deductions, set-off, banker's lien or any other
right in favor of any person other than the Agent; each Lockbox
Account shall be insured by the Federal Deposit Insurance
Corporation to, the full extent permitted by law; the Buyer or the
Collateral Agent shall have the right to obtain control over each
Permitted Lockbox and each related Lockbox Account, or appoint a
successor servicer, and, in either case, direct the Permitted
Lockbox Bank not to transfer funds in such Lockbox Account to the
Seller or the Servicer, and direct the Permitted Lockbox Bank to
transfer the funds in such Lockbox Account to an account designated
by the Buyer or the Collateral Agent, as the case may be, if an
event or circumstance arises which would permit a Complete
Servicing Transfer under this Agreement (whether or not the Buyer
exercises its right to terminate the Servicer) by dating and
delivering the Lockbox Transfer Letter with respect to such
Permitted Lockbox, and the Seller and the Servicer hereby
irrevocably authorize the Buyer to date and deliver a Lockbox
Transfer Letter to each Permitted Lockbox Bank; the Seller and the
Servicer have not given and shall not give any instructions to any
Permitted Lockbox Bank inconsistent with the Lockbox Transfer
Letter; and the Seller and the Servicer shall cooperate fully with
the Buyer in effecting any such transfer of control. Neither the
Seller nor the Servicer shall enter into any Lockbox Servicing
Instructions or other lockbox servicing agreement which does not
contain the foregoing provisions and terms, unless such deviation
is consented to by the Affected Parties.
4.10. Servicer Default. A "Servicer Default" shall mean
the occurrence and continuance of one or more of the following
events or conditions:
(a) the Servicer shall fail to remit or fail to cause to
be remitted to the Buyer on any day any Collections or Discount
required to be remitted to the Buyer on such day and, with respect
to failure to remit Collections or Discount, such failure shall
continue for three Business Days after the date on which such
Collections or Discount became due; or
(b) the Servicer shall fail to deposit, or pay or fail
to cause to be deposited or paid when due any other amount due
hereunder and such failure shall continue for three Business Days
after the date when such amount became due; or
Page 126
FORM 10-Q
Exhibit 2.1(m) (continued)
(c) any material representation, warranty, certification
or statement made by the Servicer under this Agreement or in any
agreement, certificate, report, appendix, schedule or document
furnished by the Servicer to the Buyer pursuant to or in connection
with this Agreement shall prove to have been false or misleading in
any respect material to this Agreement or the transactions
contemplated hereby as of the time made (including by omission of
material information necessary to make such representation,
warranty, certification or statement not misleading); or
(d) the Servicer (if not the Buyer) shall default or
fail in the performance or observance of any other material
covenant, agreement or duty applicable to it contained herein and
such default or failure shall continue for seven Business Days
after either (i) any Responsible Officer of the Servicer becomes
aware thereof or (ii) notice thereof to such Person by the Buyer;
or
(e) there shall be pending any litigation, investigation
or proceeding, or any material adverse development in any such
litigation shall have occurred, which is likely to materially
adversely affect the financial position or results of operations of
the Servicer or impair the ability of the Servicer to perform its
respective obligations under this Agreement; or
(f) there shall have occurred any event which materially
adversely affects the ability of the Servicer to collect
Receivables or the ability of the Servicer to perform hereunder; or
(g) an Event of Bankruptcy shall occur with respect to
the Servicer.
4.11. Servicer Indemnification of Affected Parties.
(a) The Servicer agrees to indemnify and hold harmless
the Buyer and its assigns (and its respective directors, officers,
employees and agents), from and against any loss (other than any
losses relating to defaults or collectibility of the Receivables),
liability, expense, damage or injury suffered or sustained by
reason of any material breach by the Servicer of any of its
representations, warranties or covenants contained in this
Agreement, including any judgment, award, settlement, reasonable
attorneys fees and other costs or expenses incurred in connection
with the defense of any actual action, proceeding or claim;
provided, however, that the Servicer shall not indemnify the Buyer
and its assigns if such acts or omissions were attributable to
fraud, negligence, breach of fiduciary duty or willful misconduct
by the Buyer.
Page 127
FORM 10-Q
Exhibit 2.1(m) (continued)
(b) Promptly upon receipt by the Buyer under this
Section 4.11 of notice of the commencement of any suit, action,
claim, proceeding or governmental investigation against the Buyer,
the Buyer shall, if a claim in respect thereof is to be made
against the Servicer hereunder, notify the Servicer in writing of
the commencement thereof. The Servicer may participate in and
assume the defense of any such suit, action, claim, proceeding or
investigation at its expense, and no settlement thereof shall be
made without the approval of the Servicer and the Buyer. The
approval of the Servicer and the Buyer will not be unreasonably
withheld or delayed. After notice from the Servicer to the Buyer
of its intention to assume the defense thereof with counsel
reasonably satisfactory to the Buyer, and so long as the Servicer
so assumes the defense thereof in a manner reasonably satisfactory
to the Buyer, the Servicer shall not be liable for any legal
expenses of counsel unless there shall be a conflict between the
interests of the Servicer and the Buyer.
(c) Any indemnification pursuant to this Section 4.11
shall be had only from the assets of the Servicer. The provisions
of such indemnity shall run directly to and be enforceable by an
injured party subject to the limitations hereof. The provisions of
this Section 4.11 shall survive the termination of this Agreement.
4.12. Servicer Not to Resign. (a) Subject to Section
4.12(b) hereof, the Servicer shall not resign from the obligations
and duties hereby imposed on it except upon its reasonable
determination that (i) the performance of its duties hereunder is
no longer permissible under applicable law, regulation or order and
(ii) there is no reasonable action which the Servicer could take to
make the performance of its duties hereunder permissible under
applicable law, regulation or order. No such resignation shall
become effective until the Buyer or a successor Servicer shall have
assumed the responsibilities and obligations of the Servicer in
accordance with Section 4.08 hereof. The Buyer shall promptly
notify S&P and Moody's of receipt of the Servicer's notice of
resignation and of the appointment of a successor Servicer.
(b) The Corporation may resign from the obligations and
duties imposed on it as Servicer pursuant to the terms of this
Agreement if (i) a successor Servicer shall have assumed the
responsibilities and obligations of the Servicer in accordance with
Section 4.08 hereof, and (ii) if such successor Servicer is not an
Affiliate of the Corporation (x) such successor Servicer shall
agree to establish a Permitted Lockbox and Lockbox Account with a
Permitted Lockbox Bank and comply with the other requirements of
Page 128
FORM 10-Q
Exhibit 2.1(m) (continued)
Section 4.09(b) hereof and (y) such successor Servicer shall be
acceptable to Buyer in its reasonable judgment and acceptable to
the Rating Agencies.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01. General Representations and Warranties of the Seller.
The Seller, in addition to its other representations and warranties
contained herein or made pursuant hereto, hereby represents and
warrants to the Buyer on and as of the date hereof and on and as of
the date of each Incremental Purchase and each reinvestment
Purchase that:
(a) Organization and Qualification. The Seller is a limited
liability company, validly formed and existing and in good standing
under the Laws of its jurisdiction of formation. The Seller is
duly qualified or authorized to do business as a foreign limited
liability company in good standing in North Carolina and each other
jurisdiction, if any, in which the ownership of its properties or
the nature of its activities (including transactions giving rise to
Receivables), or both, requires it to be so qualified or authorized
or, if not so qualified, the failure to so qualify would not have
a material adverse effect on its financial condition or results of
operations.
(b) Authorization. The Seller has the power and authority to
execute and deliver the Purchase Documents, to make the sales
provided for herein and to perform its obligations hereunder and
thereunder.
(c) Execution and Binding Effect. Each of the Purchase
Documents to which the Seller is a party has been duly and validly
executed and delivered by the Seller and (assuming the due and
valid execution and delivery thereof by the other parties thereto),
constitutes a legal, valid and binding obligation of the Seller
enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or other similar Laws of general application
relating to or affecting the enforcement of creditors, rights or by
general principles of equity, and will vest absolutely and
unconditionally in the Buyer a valid undivided ownership interest
in the Receivables purported to be assigned thereby, subject to no
Liens whatsoever. Upon the filing of the necessary financing
statements under the UCC as in effect in the jurisdiction whose Law
Page 129
FORM 10-Q
Exhibit 2.1(m) (continued)
governs the perfection of the Buyer's ownership interest in the
Receivables, the Buyer's ownership interest in the Receivables will
be perfected under Article Nine of such UCC, prior to and
enforceable against all creditors of and purchasers from the Seller
and all other Persons whatsoever (other than the Buyer and its
successors and assigns).
(d) Authorizations and Filings. No authorization, consent,
approval, license, exemption or other action by, and no
registration, qualification, designation, declaration or filing
with, any Official Body is or will be necessary or, in the opinion
of the Seller, advisable in connection with the execution and
delivery by the Seller of the Purchase Documents, the consummation
by the Seller of the transactions herein or therein contemplated or
the performance by the Seller of or the compliance by the Seller
with the terms and conditions hereof or thereof, to ensure the
legality, validity or enforceability hereof or thereof, or to
ensure that the Buyer will have an undivided ownership interest in
and to the Receivables which is perfected and prior to all other
Liens (including competing ownership interests), other than the
filing of financing statements under the UCC in the jurisdiction of
the Seller's Chief Executive office.
(e) Absence of Conflicts. Neither the execution and delivery
by the Seller of the Purchase Documents, nor the consummation by
the Seller of the transactions herein or therein contemplated, nor
the performance by the Seller of or the compliance by the Seller
with the terms and conditions hereof or thereof, will (i) violate
any Law or (ii) conflict with or result in a breach of or a default
under (A) the Operating Agreement of the Seller or (B) any
agreement or instrument, including, without limitation, any and all
indentures, debentures, loans or other agreements to which the
Seller is a party or by which it or any of its properties (now
owned or hereafter acquired) may be subject or bound, which would
have a material adverse effect on the financial position or results
of operations of the Seller or result in rendering any Debt
evidenced thereby due and payable prior to its maturity or result
in the creation or imposition of any Lien pursuant to the terms of
any such instrument or agreement upon any property (now owned or
hereafter acquired) of the Seller. The Seller has not entered into
any agreement with any Obligor prohibiting, restricting or
conditioning the assignment of any portion of the Receivables.
(f) Location of Chief Executive Office, etc. As of the date
hereof: (i) the Seller's Chief Executive Office is located at the
address for notices set forth on the signature page hereof; (ii)
the Seller has only the Subsidiaries and divisions listed on
Page 130
FORM 10-Q
Exhibit 2.1(m) (continued)
Exhibit L hereto; (iii) the offices where the Seller keeps all of
its Records are listed on Exhibit L hereto; and (iv) the Seller
has, since its incorporation, operated only under the trade names
identified in Exhibit L hereto, and has not changed its name,
merged or consolidated with any other corporation or been the
subject of any proceeding under Title 11, United States Code
(Bankruptcy).
(g) No Termination Event. No event has occurred and is
continuing and no condition exists which constitutes a Termination
Event or a Potential Termination Event.
(h) Accurate and Complete Disclosure. No information
furnished in writing by the Seller to the Buyer pursuant to or in
connection with this Agreement or any transaction contemplated
hereby is false or misleading in any material respect as of the
date as of which such information was furnished (including by
omission of material information necessary to make such information
not misleading).
(i) No Proceedings. There are no proceedings or
investigations pending, or to the knowledge of the Seller,
threatened, before any Official Body (A) asserting the invalidity
of the Purchase Documents, (B) seeking to prevent the consummation
of any of the transactions contemplated by the Purchase Documents,
or (C) seeking any determination or ruling that might materially
and adversely affect (i) the performance by the Seller or the
Servicer of its obligations under the Purchase Documents or (ii)
the validity or enforceability of the Purchase Documents, the
Contracts or any material amount of the Receivables.
(j) Bulk Sales Act. No transaction contemplated hereby
requires compliance with any bulk sales act or similar law.
(k) Litigation. No injunction, decree or other decision has
been issued or made by any Official Body that prevents, and to the
knowledge of the Seller, no threat by any Person has been made to
attempt to obtain any such decision that would have a material
adverse impact on, the conduct by the Seller of a significant
portion of the Seller's business operations or any portion of its
business operations affecting the Receivables, and no litigation,
investigation or proceeding of the type referred to in Section
6.01(j) exists except as set forth on Schedule 3 of the Disclosure
Schedule.
Page 131
FORM 10-Q
Exhibit 2.1(m) (continued)
(l) Margin Regulations. The use of all funds acquired by the
Seller under this Agreement will not conflict with or contravene
any of Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System, as the same may from time to time be
amended, supplemented or otherwise modified.
(m) ERISA. No event or condition is occurring or exists with
respect to any Plan or Multiemployer Plan concerning which the
Seller would be under an obligation to furnish a report to the
Buyer in accordance with Section 6.01(q).
(n) Taxes. The Seller is a newly created entity and as of
the date hereof has not been required to file any income tax
returns.
(o) Creditor Approval. The Seller has obtained from its
creditors, if any, (i) all approvals necessary to sell and assign
the Receivables and (ii) release of any security interests in the
Receivables.
(p) Investment Company. The Seller is not an "investment
company" or a company "controlled by an investment company" within
the meaning of the Investment Company Act of 1940, as amended.
5.02. Representations and Warranties of the Seller With
Respect to Each Sale of Receivables. By selling undivided
ownership interests in Receivables to the Buyer either by
Incremental Purchase or reinvestment Purchase, the Seller
represents and warrants to the Buyer as of the date of such sale of
an Incremental Purchase or reinvestment Purchase (in addition to
its other representations and warranties contained herein or made
pursuant hereto) that:
(a) Purchase Notice. If such sale is a sale of an
Incremental Purchase, all information set forth on the related
Purchase Notice is true and correct as of the date of such
Incremental Purchase.
(b) Assignment. This Agreement vests in the Buyer all the
right, title and interest of the Seller in and to the Purchased
Interest in the Receivables, and the Related Security and
Collections with respect thereto, and constitutes a valid sale of
the Purchased Interest enforceable against all creditors of and
purchasers from the Seller.
(c) No Liens. Each Receivable, together with the related
Contract and all purchase orders and other agreements related to
Page 132
FORM 10-Q
Exhibit 2.1(m) (continued)
such Receivable, is owned by the Seller free and clear of any Lien,
except as provided herein, and when the Buyer makes a purchase of
a Purchased Interest in such Receivable it shall have acquired and
shall continue to have maintained an undivided percentage ownership
interest to the extent of its Buyer's Percentage Interest in such
Receivable and in the Related Security and the Collections with
respect thereto free and clear of any Lien, except as provided
herein. The Seller has not and will not have sold, pledged,
assigned, transferred or subjected to a Lien any of the
Receivables, other than (i) the assignment of a Purchased Interest
therein to the Buyer in accordance with the terms of this
Agreement.
(d) Filings. On or prior to each Purchase and each
recomputation of the Purchased Interest, all financing statements
and other documents required to be recorded or filed in order to
perfect and protect the Purchased Interest against all creditors of
and purchasers from the seller and all other Persons whatsoever
will have been duly filed in each filing office necessary for such
purpose and all filing fees and taxes, if any, payable in
connection with such filings shall have been paid in full.
(e) Credit and Collection Policy. The Seller has complied in
all material respects with the Credit and Collection Policy in
regard to each Receivable and related Contract.
(f) Permitted Lockbox Banks and Lockbox Accounts. The names
and addresses of all Permitted Lockbox Banks, together with the
numbers of all Lockbox Accounts at such Permitted Lockbox Banks and
the addresses of all related Permitted Lockboxes, are specified in
Schedule 4 of the Disclosure Schedule (or such other Permitted
Lockbox Banks, Lockbox Accounts and/or Permitted Lockboxes as have
been notified by the Servicer to the Buyer and have been consented
to by the Buyer in accordance with Section 6.02(f)).
(g) Nature of Receivables. Each Receivable is, or will be,
an account receivable or other obligation representing all or part
of the sales price of merchandise, insurance and, services within
the meaning of Section 3(c)(5)(A) of the Investment Company Act of
1940, as amended from time to time, and a purchase of each
Receivable with the proceeds of Commercial Paper would constitute
a "current transaction" within the meaning of Section 3(a)(3) of
the Securities Act of 1933, as amended from time to time.
(h) Eligible Receivables. Each Receivable included in the
calculation of Net Receivables Balance conforms to the definition
of "Eligible Receivables" set forth in Section 1.01 hereof, without
regard to clause (i) of such definition.
Page 133
FORM 10-Q
Exhibit 2.1(m) (continued)
5.03. General Representations and Warranties of the
Corporation. Cone Mills Corporation, as the initial Servicer and
in its individual capacity, in addition to its other
representations and warranties contained herein or made pursuant
hereto, hereby represents and warrants to the Buyer on and as of
the date hereof and on and as of the date of each Incremental
Purchase and each reinvestment Purchase that:
(a) Organization and Qualification. The Corporation is a
corporation duly organized, validly existing and in good standing
under the Laws of its jurisdiction of incorporation. The
Corporation is duly qualified to do business as a foreign
corporation in good standing in each jurisdiction in which the
ownership of its properties or the nature of its activities
(including transactions giving rise to Receivables), or both,
requires it to be so qualified or, if not so qualified, the failure
to so qualify would not have a material adverse effect on its
financial condition or results of operations.
(b) Authorization. The Corporation has the corporate power
and authority to execute and deliver the Purchase Documents to
which it is a party and to perform its obligations hereunder and
thereunder.
(c) Execution and Binding Effect. Each of the Purchase
Documents has been duly and validly executed and delivered by the
Corporation and (assuming the due and valid execution and delivery
thereof by the other parties to such documents), constitutes a
legal, valid and binding obligation of the Corporation enforceable
in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization or other
similar Laws of general application relating to or affecting the
enforcement of creditors' rights or by general principles of
equity.
(d) Authorizations and Filings. No authorization, consent,
approval, license, exemption or other action by, and no
registration, qualification, designation, declaration or filing
with, any Official Body is or will be necessary or, in the opinion
of the Corporation, advisable in connection with the execution and
delivery by the Corporation of the Purchase Documents, the
consummation by the Corporation of the transactions herein or
therein contemplated or the performance by the Corporation of or
the compliance by the Corporation with the terms and conditions
hereof or thereof, to ensure the legality, validity or
enforceability hereof or thereof.
Page 134
FORM 10-Q
Exhibit 2.1(m) (continued)
(e) Absence of Conflicts. Neither the execution and delivery
by the Corporation of the Purchase Documents, nor the consummation
by the Corporation of the transactions herein or therein
contemplated, nor the performance by the Corporation of or the
compliance by the Corporation with the terms and conditions hereof
or thereof, will (i) violate any Law or (ii) conflict with or
result in a breach of or a default under (A) the Articles of
Incorporation or By-laws of the Corporation or (B) any agreement or
instrument, including, without limitation, any and all indentures,
debentures, loans or other agreements to which the Corporation is
a party or by which it or any of its properties (now owned or
hereafter acquired) may be subject or bound, which would have a
material adverse effect on the financial position or results of
operations of the Corporation or result in rendering any Debt
evidenced thereby due and payable prior to its maturity or result
in the creation or imposition of any Lien pursuant to the terms of
any such instrument or agreement upon any property (now owned or
hereafter acquired) of the Corporation. The Corporation has not
entered into any agreement with any Obligor prohibiting,
restricting or conditioning the assignment of any portion of the
Receivables.
(f) Location of Chief Executive Office, etc. As of the date
hereof: (i) the Corporation's Chief Executive Office is located at
the address for notices set forth on the signature page hereof;
(ii) the Corporation has only the Subsidiaries and divisions listed
on Exhibit L hereto; (iii) the offices where the Corporation keeps
all of its Records are listed on Exhibit L hereto; and (iv) the
Corporation has, within the last 5 years, operated only under the
trade names identified in Exhibit L hereto, and, within the last 5
years, has not changed its name, merged or consolidated with any
other corporation or been the subject of any proceeding under Title
11, United States Code (Bankruptcy), except as disclosed in Exhibit
L hereto.
(g) No Termination Event. No event has occurred and is
continuing and no condition exists which constitutes a Termination
Event or a Potential Termination Event.
(h) Accurate and Complete Disclosure. No information
furnished in writing by the Corporation to the Buyer pursuant to or
in connection with this Agreement, the Purchase Agreement or any
transaction contemplated hereby or thereby is false or misleading
in any material respect as of the date as of which such information
was furnished (including by omission of material information
necessary to make such information not misleading).
Page 135
FORM 10-Q
Exhibit 2.1(m) (continued)
(i) No Proceedings. There are no proceedings or
investigations pending, or to the knowledge of the Corporation,
threatened, before any Official Body (A) asserting the invalidity
of the Purchase Documents, (B) seeking to prevent the consummation
of any of the transactions contemplated by the Purchase Documents,
or (C) seeking any determination or ruling that might materially
and adversely affect (i) the performance by the Corporation or the
Seller of its obligations under the Purchase Documents or (ii) the
validity or enforceability of the Purchase Documents, the Contracts
or any material amount of the Receivables.
(j) Bulk Sales Act. No transaction contemplated hereby
requires compliance with any bulk sales act or similar law.
(k) Financial Condition. (x) The consolidated balance sheet
of the Corporation and its Consolidated Subsidiaries as at
December 29, 1996 and the related statements of operations and cash
flows of the Corporation and its Consolidated Subsidiaries for the
Fiscal Year then ended, certified by McGladrey & Pullen LLP,
independent accountants, copies of which have been furnished to the
Buyer, fairly present the consolidated financial position of the
Corporation and its Consolidated Subsidiaries as at such date and
the consolidated results of the operations of and changes in
consolidated cash flows of the Corporation and its Consolidated
Subsidiaries for the period ended on such date, all in accordance
with GAAP, and (y) since December 29, 1996 there has been no
material adverse change in any such financial condition or results
of operations or in the Corporation's ability to perform its
obligations under the Purchase Documents, except as set forth on
Schedule 2 of the Disclosure Schedule.
(l) Litigation. No injunction, decree or other decision has
been issued or made by any Official Body that prevents, and to the
knowledge of the Corporation, no threat by any Person has been made
to attempt to obtain any such decision that would have a material
adverse impact on, the conduct by the Corporation of a significant
portion of the Corporation's business operations or any portion of
its business operations affecting the Receivables, and no
litigation, investigation or proceeding of the type referred to in
Section 6.01(j) exists except as set forth on Schedule 3 of the
Disclosure Schedule.
(m) Margin Regulations. The use of all funds acquired by the
Corporation under this Agreement will not conflict with or
contravene any of Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System, as the same may from time
to time be amended, supplemented or otherwise modified.
Page 136
FORM 10-Q
Exhibit 2.1(m) (continued)
(n) ERISA. No event or condition is occurring or exists with
respect to any Plan or Multiemployer Plan concerning which the
Corporation would be under an obligation to furnish a report to the
Buyer in accordance with Section 6.01(q).
(o) Taxes. All United States Federal income tax returns of
the Corporation and its Consolidated Subsidiaries have been
examined and closed through the Fiscal Year ended January 2, 1994.
The Corporation and its Consolidated Subsidiaries have filed all
United States Federal income tax returns and all other material tax
returns which are required to be filed by them and have paid all
taxes due pursuant to such returns or pursuant to any assessment
received by the Corporation or any of its Consolidated
Subsidiaries. The charges, accruals and reserves on the books of
the Corporation and its Consolidated Subsidiaries in respect of
taxes and other governmental charges are, in the opinion of the
Corporation, adequate.
ARTICLE VI
COVENANTS
6.01. Affirmative Covenants. In addition to its other
covenants contained herein or made pursuant hereto, the Seller and
the Corporation as Servicer and the Corporation in its individual
capacity, each covenants to the Buyer as follows:
(a) Notice of Termination Event. Promptly upon becoming
aware of any Termination Event or Potential Termination Event, the
Seller shall give the Buyer notice thereof, together with a written
statement of a Responsible Officer setting forth the details
thereof and any action with respect thereto taken or contemplated
to be taken by the Seller.
(b) Notice of Material Adverse Change. Promptly upon
becoming aware thereof, the Seller or the Corporation shall give
the Buyer notice of any material adverse change in the business,
operations or financial condition of the Seller or the Corporation,
as the case may be, which reasonably could affect adversely the
collectibility of the Receivables or the ability to service such
Receivables; in order to verify compliance with this Section
6.01(b) and otherwise verify compliance with this Agreement, the
Corporation shall mail the following to the Buyer:
(i) as soon as practicable and in any event within 45
days following the close of each fiscal quarter, excluding the
Page 137
FORM 10-Q
Exhibit 2.1(m) (continued)
last fiscal quarter, of each Fiscal Year during the term of
this Agreement, an unaudited consolidated balance sheet of the
Corporation as at the end of such quarter and unaudited
consolidated statements of income and cash flows of the
Corporation for such quarter and for the fiscal year through
such quarter, setting forth in comparative form the
corresponding figures for the corresponding quarter of the
preceding fiscal year, together with notes thereto as are
required to be included therein in accordance with GAAP or
applicable Securities and Exchange Commission requirements,
all in reasonable detail and certified by the chief financial
officer of the Corporation, subject to adjustments of the type
which would occur as a result of a year-end audit, as having
been prepared in accordance with GAAP;
(ii) as soon as practicable and in any event within 90
days after the close of each Fiscal Year during the term of
this Agreement, a consolidated balance sheet of the
Corporation as at the close of such fiscal year and
consolidated statements of income and cash flows of the
Corporation for such fiscal year, setting forth in comparative
form the corresponding figures for the preceding fiscal year,
all in reasonable detail and certified (with respect to the
consolidated financial statements) by independent certified
public accountants of recognized standing selected by the
Corporation and reasonably satisfactory to the Buyer (which
shall include McGladrey & Pullen LLP), whose certificate or
opinion accompanying such financial statements shall not
contain any qualification, exception or scope limitation not
satisfactory to the Buyer; and
(iii) together with the financial statements required in
clauses (i) and (ii) above, a certificate of the chief
financial officer of the Corporation stating that no
Termination Event or Potential Termination Event exists, or if
any Termination Event or Potential Termination Event exists,
stating the nature and status thereof.
(c) Preservation of Existence; No Changes of Member or
Operating Agreement. The Corporation shall preserve and maintain
its corporate existence and the Seller shall preserve and maintain
its status as a limited liability company and each will maintain
its rights, franchises and privileges in the jurisdiction of its
organization, and qualify and remain qualified in good standing as
a foreign corporation or limited liability company in each
jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualification would
Page 138
FORM 10-Q
Exhibit 2.1(m) (continued)
materially adversely affect (i) the interests of the Buyer
hereunder or (ii) the ability of the Seller, the Servicer or the
Corporation to perform their respective obligations under the
Purchase Documents or under the Servicing Agreement. The
Corporation will not resign as the Member of the Seller and will
not assign its interest in the Seller or any portion thereof to any
other entity without the prior written consent of the Buyer which
consent shall not be unreasonably withheld. Neither the Seller nor
the Corporation shall take any action seeking to amend the
Operating Agreement or any of its rights, interests or obligations
thereunder without the prior written consent of the Buyer which
consent shall not be unreasonably withheld.
(d) Compliance with Laws. The Seller and the Corporation
shall comply in all material respects with all Laws applicable to
it, its business and properties, and all Receivables related to the
Purchased Interest.
(e) Enforceability Obligations. The Seller and the
Corporation shall each take such actions as are reasonable and
within its power to ensure that, with respect to each Receivable,
the obligation of any related Obligor to pay the unpaid balance of
such Receivable in accordance with the terms of the related
Contract remains legal, valid, binding and enforceable against such
Obligor except as otherwise permitted by Section 4.07(b) hereof.
(f) Books and Records. The Servicer shall, to the extent
practicable, maintain and implement administrative and operating
procedures (including, without limitation, the ability to recreate
Records evidencing the 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 identification of all
Related Security and Collections and adjustments to each existing
Receivable).
(g) Fulfillment of Obligations. The Seller and the Servicer
will each duly observe and perform, or cause to be observed or
performed, all material obligations and undertakings on its part to
be observed and performed under or in connection with the
Receivables, will duly observe and perform all material provisions,
covenants and other promises required to be observed by it under
the Contracts related to the Receivables, will do nothing to impair
the rights, title and interest of the Buyer in and to the Purchased
Interest and will pay or cause to be paid when due any taxes,
including without limitation any sales tax, excise tax or other
Page 139
FORM 10-Q
Exhibit 2.1(m) (continued)
similar tax or charge, payable in connection with the Receivables
and their creation and satisfaction.
(h) Obligor List. The Seller shall at all times maintain (or
cause the Servicer to maintain) a current list (which may be stored
on magnetic tapes or disks) of all Obligors under Contracts related
to Receivables, including the name, address, telephone number and
account number of each such Obligor. A list of all Obligors under
Contracts related to Receivables as of the Closing Date including
the name, address, telephone number and account number of such
Obligors shall be provided to the Buyer within five Business Days
of the Closing Date. In addition, the list shall be updated as
provided in Section 2.14(c) and, the Seller shall deliver or cause
to be delivered a copy of such list to the Buyer as soon as
practicable following the Buyer's request.
(i) Copies of Reports, Filings, Opinions, etc. The Seller
and the Corporation shall furnish to the Buyer, as soon as
practicable after the issuance, sending or filing thereof, copies
of all proxy statements, financial statements, reports and other
communications, if any, which the Seller or the Corporation sends
to its security holders, and copies of all regular, periodic and
special reports, if any, which the Seller or the Corporation files
with the Securities and Exchange Commission or with any securities
exchange on Forms 10-K, 10-Q, 8-K or any successor forms thereto.
(j) Litigation. As soon as possible, and in any event within
ten Business Days of the Seller's or the Corporation's knowledge
thereof, the Seller, or the Corporation, as the case may be, shall
give the Buyer notice of (i) any litigation, investigation or
proceeding against such entity which may exist at any time which,
in the reasonable judgment of the Seller or the Corporation, could
have a material adverse effect on the financial condition or
results of operations of the Seller or the Corporation or impair
the ability of the Seller, the Servicer or the Corporation to
perform their respective obligations under this Agreement, under
the Purchase Agreement or under the Servicing Agreement and (ii)
any material adverse development in any such previously disclosed
litigation.
(k) Total Systems Failure. The Servicer shall promptly
notify the Buyer of any total systems failure and shall advise the
Buyer of the estimated time required to remedy such total systems
failure and of the estimated date on which a Monthly Report can be
delivered until a total systems failure is remedied, the Servicer
(i) will furnish to the Buyer such periodic status reports and
other information relating to such total systems failure as the
Page 140
FORM 10-Q
Exhibit 2.1(m) (continued)
Buyer may reasonably request and (ii) will promptly notify the
Buyer if the Servicer believes that such total systems failure
cannot be remedied by the estimated date, which notice shall
include a description of the circumstances which gave rise to such
delay, the action proposed to be taken in response thereto, and a
revised estimate of the date on which a Monthly Report can be
delivered. The Servicer shall promptly notify the Buyer when a
total systems failure has been remedied.
(l) Notice of Relocation. The Seller and the Corporation,
respectively, shall give the Buyer 45 days' prior written notice of
any relocation of its respective Chief Executive Office if, as a
result of such relocation, the applicable provisions of the UCC of
any applicable jurisdiction or other applicable Laws would require
the filing of any amendment of any previously filed financing
statement or continuation statement or of any new financing
statement. The Seller and the Corporation will at all times
maintain its Chief Executive Office within a jurisdiction in the
United States in which Article Nine of the UCC (1972 or later
revision) is in effect as of the date hereof or the date of any
such relocation.
(m) Further Information. The Seller and the Corporation
shall furnish or cause to be furnished to the Buyer such other
information as promptly as practicable, and in such form and
detail, as the Buyer may reasonably request.
(n) Treatment of Purchase. For accounting purposes, the
Seller shall treat each Incremental Purchase and each reinvestment
Purchase made hereunder as a sale of a Purchased Interest in the
underlying Receivables. The Seller shall also maintain its records
and books of account in a manner which clearly reflects each such
sale of a Purchased Interest to the Buyer and the Buyer's
Investment therein.
(o) Fees, Taxes and Expenses. The Seller shall pay all
filing fees, stamp taxes, other taxes (other than taxes imposed
directly on the overall net income of the Buyer) and expenses,
including the fees and expenses set forth in Section 8.01 hereof,
if any, which may be incurred on account of or arise out of this
Agreement and the documents and transactions entered into pursuant
to this Agreement.
(p) Administrative and Operating Procedures. The Servicer
shall maintain and implement administrative and operating
procedures adequate to permit the identification of the Receivables
and all collections and adjustments attributable thereto and shall
Page 141
FORM 10-Q
Exhibit 2.1(m) (continued)
comply in all material respects with the Credit and Collection
Policy in regard to each Receivable and related Contract.
(q) ERISA Events.
(i) Promptly on becoming aware of the occurrence of any
Event of Termination which together with all other Events of
Termination occurring within the prior 12 months involve a
payment of money by or a potential aggregate liability of the
Corporation or any ERISA Affiliate or any combination of such
entities in excess of $5,000,000, the Corporation shall give
the Buyer a written notice specifying the nature thereof, what
action the Corporation or any ERISA Affiliate has taken and,
when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor or the PBGC with
respect thereto.
(ii) Promptly upon receipt thereof, the Corporation shall
furnish to the Buyer copies of (i) all notices received by the
Corporation or any ERISA Affiliate of the PBGC's intent to
terminate any Plan or to have a trustee appointed to
administer any Plan; (ii) all notices received by the
Corporation or any ERISA Affiliate from the sponsor of a
Multiemployer Plan pursuant to Section 4202 of ERISA involving
a withdrawal liability in excess of $5,000,000; and (iii) all
funding waiver requests filed by the Corporation or any ERISA
Affiliate with the Internal Revenue Service with respect to
any Plan, the accrued benefits of which exceed the present
value of the plan assets as of the date the waiver request is
filed by more than $5,000,000, and all communications received
by the Corporation or any ERISA Affiliate from the Internal
Revenue Service with respect to any such funding waiver
request.
(r) Collections. The Servicer shall instruct all Obligors to
cause all Collections to be mailed to a Permitted Lockbox excluding
Collections of Defaulted Receivables or Receivables which are the
subject of a Dispute or are collected directly by the Seller or the
Servicer to assure payment in accordance with the Credit and
Collections Policy, provided such Collections are mailed to the
Seller or an agent of the Seller and deposited in a Lockbox Bank
within two Business Days of receipt.
(s) Insurance. The Corporation shall, and shall cause each
of its Consolidated Subsidiaries to maintain insurance with
financially sound and reputable insurers on all property, in such
amount and covering such risks, as are adequate and reasonable for
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FORM 10-Q
Exhibit 2.1(m) (continued)
the businesses in which the Corporation and its Consolidated
Subsidiaries are engaged.
(t) Ratings. The Corporation shall give the Buyer prompt
notice of any change in the ratings of the Corporation's commercial
paper or long term debt securities by S&P or Moody's.
(u) Separate Existence. The Seller and the Corporation each
agree to maintain its separate legal identity. In addition, the
Seller shall:
(i) Maintain in full effect its existence, rights and
franchises as a limited liability company under the laws of
the state of its formation and will obtain and preserve its
qualification or authorization to do business in each
jurisdiction in which such qualification or authorization is
or shall be necessary to protect the validity and
enforceability of this Agreement and each other instrument or
agreement necessary or appropriate to proper administration
hereof and permit and effectuate the transactions contemplated
hereby.
(ii) Maintain its own deposit account or accounts,
separate from those of any of its Affiliates, with commercial
banking institutions. The funds of the Seller will not be
diverted to any other Person or for other than the use of the
Seller and, except as may be expressly permitted by this
Agreement, the funds of the Seller shall not be commingled
with those of any of its Affiliates.
(iii) To the extent that the Seller contracts or does
business with vendors or service providers where the goods and
services provided are partially for the benefit of any other
Person, the costs incurred in so doing shall be fairly
allocated to or among the Seller and such entities for whose
benefit the goods and services are provided, and the Seller
and each such entity shall bear its fair share of such costs.
All material transactions between the Seller and any of its
Affiliates shall be only on an arm's-length basis.
(iv) Maintain a principal executive and administrative
office through which its business is conducted and a telephone
number separate from those of its member or members and
Affiliates.
Page 143
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Exhibit 2.1(m) (continued)
(v) Conduct its affairs strictly in accordance with its
Operating Agreement and observe all necessary, appropriate and
customary formalities of a limited liability company,
including, but not limited to keeping separate and accurate
minutes of any acts taken by the Seller, maintaining accurate
and separate books, records and accounts, including, but not
limited to, intercompany transaction accounts.
(vi) Ensure that decisions with respect to its business
and daily operations shall be independently made by the Seller
(although the officer making any particular decision may also
be an employee, officer or director of an Affiliate of the
Seller) and shall not be dictated by an Affiliate of the
Seller.
(vii) Act solely in its own name and through its member
or members and agents, and no Affiliate of the Seller shall be
appointed to act as its agent, except as expressly
contemplated by this Agreement and the Operating Agreement.
The Seller shall use its own stationery.
(viii) Ensure that no Affiliate of the Seller shall
advance funds to the Seller, other than (i) capital
contributions from the Corporation, made in the Corporation's
sole discretion to enable the Seller to pay the purchase price
of Receivables or (ii) as is otherwise provided herein or in
the Purchase Agreement, and no Affiliate of the Seller will
otherwise supply funds to, or guaranty debts of, the Seller;
provided, however, that an Affiliate of the Seller may provide
funds to the Seller in connection with the capitalization of
the Seller.
(ix) Other than organizational expenses and as expressly
provided herein, pay all expenses, indebtedness and other
obligations incurred by it.
(x) Not enter into any guaranty, or otherwise become
liable, with respect to any obligation of any of its
Affiliates.
(xi) Ensure that any financial reports required of the
Seller shall comply with generally accepted accounting
principles and shall be issued separately from, but may be
consolidated with, any reports prepared for any of its
Affiliates.
(xii) Ensure that at all times it is adequately
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FORM 10-Q
Exhibit 2.1(m) (continued)
capitalized to engage in the transactions contemplated in the
Operating Agreement, the Purchase Agreement and in the Seller's
Certificate attached as Exhibit C to the Purchase Agreement.
(v) Support of Obligations. The Corporation shall take
whatever actions are necessary to cause the Seller to fulfill all
of its obligations to the Buyer hereunder.
(w) Confirming Resolution. The Board of Directors of the
Corporation shall, not later than 45 days after the Closing Date,
adopt a resolution confirming the Corporation's right and power to
act as the sole member of the Seller and the authorization of the
officers of the Corporation to execute documents on behalf of the
Corporation as member of the Seller.
6.02. Negative Covenants. The Seller and the Corporation, as
Servicer and in its individual capacity, each covenants that it
will not, without the prior written consent of the Buyer which the
Buyer agrees will not be unreasonably withheld:
(a) Statement for and Treatment of the Sales. Prepare any
financial statements for financial accounting or reporting purposes
which shall account for the transactions contemplated hereby in any
manner other than as a sale of the Purchased Interest to the Buyer.
(b) No Rescissions or Modifications. Rescind or cancel any
Receivable or related Contract or modify any terms, or provisions
thereof or grant any Dilution Factors to an Obligor, except in
accordance with the Credit and Collection Policy or otherwise with
the prior written consent of the Buyer.
(c) No Liens. Cause any of the Receivables or related
Contracts, or any inventory or goods the sale of which may give
rise to a Receivable, or any Permitted Lockbox or Lockbox Account
or any right to receive any payments received therein or deposited
thereto, to be sold, pledged, assigned or transferred or to be
subject to a Lien, other than the sale and assignment of the
Purchased Interest therein to the Buyer and the Liens created in
connection with the transactions contemplated by this Agreement;
provided, that the Seller or the Corporation may cause inventory,
the sale of which may give rise to a Receivable, to be subject to
a Lien if (i) the security agreement, related financing statements
and any other related documents specifically exclude from such Lien
the proceeds of such inventory and (ii) the Buyer has reviewed such
security agreement, financing statements and related documents and
found such documents to be reasonably satisfactory to exclude from
such Lien the proceeds of any such inventory.
Page 145
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Exhibit 2.1(m) (continued)
(d) Consolidations, Mergers and Sales of Assets. (i)
Consolidate or merge with or into any other Person or (ii) sell,
lease or otherwise transfer all or substantially all of its assets
to any other Person; provided that the Seller or the Corporation
may merge with another Person if (A) the Seller or the Corporation,
respectively, is the entity surviving such merger and (B)
immediately after and giving effect to such merger, no Termination
Event or Potential Termination Event shall have occurred and be
continuing.
(e) No Changes. Make any change in the character of its
business or in the Credit and Collection Policy, which change
would, in either case, impair the collectibility of any Receivable,
or make any material change in the Credit and Collection Policy
which would impair the collectibility of any Receivable or would
have a material adverse effect on the Seller or the Corporation
without prior written notification to and consent of the Buyer, or
change its name, identity or structure in any manner which would
make any financing statement or continuation statement filed in
connection with this Agreement or the transactions contemplated
hereby seriously misleading within the meaning of Section 9-402(7)
of the UCC of any applicable jurisdiction or other applicable Laws
unless it shall have given the Buyer at least 45 days' prior
written notice thereof and unless prior thereto it shall have
caused such financing statement or continuation statement to be
amended or a new financing statement to be filed such that such
financing statement or continuation statement would not be
seriously misleading.
(f) Change in Payments or Deposits of Payments. Add or
terminate any Person as a Permitted Lockbox Bank from those Persons
listed in Schedule 4 of the Disclosure Schedule, make, or permit
any change in the location of any Permitted Lockbox or the location
or account number of any Lockbox Account, or make any change in the
instructions, to its Obligors regarding payments to be made to the
Seller or payments to be made to any Permitted Lockbox.
(g) ERISA Matters. Permit any event or condition which is
described in any of clauses (i) through (vi), clause (viii) or
clause (x) of the definition of Event of Termination to occur or
exist with respect to any Plan or Multiemployer Plan if such event
or condition, together with all other events or conditions
described in the definition of Event of Termination occurring
within the prior 12 months involve the payment of money by or an
incurrence of liability of the Corporation or any ERISA Affiliate
in an amount in excess of $10,000,000.
Page 146
FORM 10-Q
Exhibit 2.1(m) (continued)
ARTICLE VII
TERMINATION
7.01. Termination Events. A "Termination Event" shall mean
the occurrence and continuance of one or more of the following
events or conditions:
(a) either the Seller or Servicer, as the case may be, shall
fail to remit or fail to cause to be remitted to the Buyer on any
day any Collections or other amounts required to be remitted to the
Buyer on such day; or
(b) the Seller shall fail to deposit, or pay or fail to cause
to be deposited or paid when due any other amount due hereunder; or
(c) any representation, warranty, certification or statement
made by the Seller or the Corporation under this Agreement or in
any agreement, certificate, report, appendix, schedule or document
furnished by the Seller or the Corporation to the Buyer pursuant to
or in connection with this Agreement shall prove to have been false
or misleading in any respect material to this Agreement or the
transactions contemplated hereby as of the time made or deemed
made (including by omission of material information necessary to
make such representation, warranty, certification or statement not
misleading); or
(d) the Seller or the Corporation shall fail to obtain the
prior consent of the Buyer to any action or provision as to which
such consent is required by the terms of this Agreement; or
(e) the Seller, the Servicer (if not the Buyer) or the
Corporation shall default or fail in the performance or observance
of any other covenant, agreement or duty applicable to it contained
herein and such default or failure shall continue for seven
Business Days after either (i) any Responsible officer of the
Seller, the Servicer or the Corporation becomes aware thereof or
(ii) notice thereof to such Person by the Buyer; or
(f) the Corporation or any of its Consolidated Subsidiaries
shall fail to pay any Debt in excess of $5,000,000 of the
Corporation or any of its Consolidated Subsidiaries, as the case
may be, or any interest or premium on such Debt, in either case,
when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the
agreement or instrument relating to such Debt; or any other default
Page 147
FORM 10-Q
Exhibit 2.1(m) (continued)
under any agreement or instrument relating to any such Debt or any
other event, shall occur and shall continue after the applicable
grace period, if any, specified in such agreement or instrument if
the effect of such default or event is to accelerate, or to permit
the acceleration of, the maturity of such Debt; or any such Debt
shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled required prepayment) prior to
the stated maturity thereof; or
(g) the average of the Default Ratio, computed for each of
the three immediately preceding months, shall exceed 5.5%; or the
average of the Charge-Off Ratio, computed for each of the three
immediately preceding months, shall exceed .75%; or the average of
the Dilution Ratio, computed for each of the three immediately
preceding months, shall exceed 4.5%; or
(h) a Permitted Lockbox Bank shall default or fail in the
performance or observance of any agreement or duty applicable to it
in respect of the Permitted Lockbox or the Lockbox Servicing
Instructions executed by the Seller or the Servicer or the Seller
or Servicer shall default or fail in the performance or observance
of any covenant, agreement or duty set forth in Section 4.09 hereof
and such default or failure shall continue for two Business Days
after notice thereof to such Permitted Lockbox Bank and within such
period another Permitted Lockbox with another Permitted Lockbox
Bank is not established by the Servicer, if so requested by the
Buyer; or
(i) there shall be pending any litigation, investigation or
proceeding, or any material adverse development in any such
litigation shall have occurred, which the Seller or the Corporation
is required to disclose pursuant to Section 6.01(j) hereof, which
in the opinion of the Buyer is likely to materially adversely
affect the financial position or results of operations of the
Seller or any Affiliate thereof or impair the ability of the Seller
or the Servicer to perform its respective obligations under this
Agreement or under the Servicing Agreement; or
(j) there shall have occurred any event which materially
adversely affects the collectibility of a material amount of the
Receivables or there shall have occurred any other event which
materially adversely affects the ability of the Servicer to collect
Receivables or the ability of the Servicer to perform hereunder or
the warranty in Section 5.03(k)(z) hereof shall not be true at any
time; or
(k) an Event of Bankruptcy shall occur with respect to the
Seller or the Corporation; or
Page 148
FORM 10-Q
Exhibit 2.1(m) (continued)
(l) the Buyer's Percentage Interest shall at any time exceed
100% (but for the limitation set forth in the first sentence of the
second paragraph of the definition of such term) and shall
continue to exceed 100% for five calendar days; or
(m) 60 days following the date on which (i) the Securities
and Exchange Commission, any banking regulatory authority or any
other Official Body having jurisdiction over J.P. Morgan & Co.
Incorporated ("JPM") or any of its subsidiaries, shall require the
consolidation of the assets and liabilities of the Buyer on the
balance sheet of JPM or any of its subsidiaries (including, without
limitation, Morgan Guaranty Trust Company of New York) or shall
require that capital be maintained with respect thereto under any
capital requirements as if such assets were owned by JPM or any of
its subsidiaries, (ii) the independent auditors for JPM shall have
advised JPM or any of its subsidiaries in writing that in their
opinion such consolidation is required by GAAP or applicable Law,
rule or regulations, (iii) any Affected Party shall determine that
any arrangement or transaction contemplated by this Agreement, the
Purchase Agreement, the Credit Agreement, the Security Agreement or
the Letter of Credit Reimbursement Agreement will impose an adverse
regulatory impact on such Affected Party, including without
limitation, any Transaction Cost described in Section 8.02 hereof;
or (iv) the Buyer shall determine that the Buyer may be required to
register as an investment company under the Investment Company Act
of 1940, as amended;
(n) the unsecured long-term debt rating of the Corporation
shall be downgraded below BB or Ba2 by S&P or Moody's,
respectively;
(o) 100% of the Seller's capital stock is not owned by the
Corporation; or
(p) the occurrence of a Servicing Default.
7.02. Consequences of a Termination Event.
(a) If a Termination Event specified in Section 7.01 hereof
shall occur and be continuing, the Buyer may, by notice to the
Seller and the Servicer (a "Notice of Termination"), terminate its
obligation to purchase any interest in any Receivables (including
by reinvestment) hereunder and declare all outstanding Tranche
Periods to be ended; provided that, in the case of a Termination
Event under Section 7.01(k) hereof, such obligation of the Buyer
hereunder shall be automatically terminated without any action on
the part of the Buyer and all outstanding Tranche Periods shall be
Page 149
FORM 10-Q
Exhibit 2.1(m) (continued)
ended. Any such termination shall reduce the Maximum Net
Investment in effect from time to time thereafter to the amount of
the aggregate Net Investment at such time and the Buyer may,
pursuant to Section 2.06(d) hereof and in any case other than a
termination due to a Termination Event described in Section 7.01(m)
hereof, declare the Tranche Rates applicable to the Net Investment
to be the Base Rate plus 1% per annum. The Buyer shall give S&P
and Moody's prompt notice of the Buyer's delivery of a Notice of
Termination to the Seller and the Servicer; provided, however, that
failure to give such notice shall not affect the effectiveness of,
or the rights of the Buyer resulting from the delivery of,such
Notice of Termination.
(b) Upon any termination of the Buyer's obligations pursuant
to this Section 7.02, the Buyer shall have, in addition to all
rights and remedies under this Agreement or otherwise, all other
rights and remedies provided under the UCC of the applicable
jurisdiction and under other applicable Laws, which rights shall be
cumulative.
(c) The parties hereto acknowledge that this Agreement is,
and is intended to be, a contract to extend financial
accommodations to the Seller within the meaning of Section
365(e)(2)(B) of the Federal Bankruptcy Code (11 U.S.C.
362(e)(2)(B)) (or any amended or successor provision thereof or any
amended or successor code).
ARTICLE VIII
MISCELLANEOUS
8.01. Expenses. The Seller agrees, upon receipt of a written
invoice, to pay or cause to be paid, and to save the, Buyer and the
Referral Agent harmless against liability for the payment of, all
reasonable out-of-pocket expenses (including, without limitation,
attorneys', accountant's and other third parties' fees and
expenses, any filing fees and expenses incurred by officers or
employees of tho Buyer, but excluding salaries and similar overhead
costs of the Buyer and the Referral Agent which are incurred
notwithstanding the execution and performance of this Agreement)
incurred by or on behalf of the Buyer and the Referral Agent (i) in
connection with the negotiation, execution, delivery and
preparation of the Purchase Documents and the transactions
contemplated by or undertaken pursuant to or in connection herewith
or therewith (including, without limitation, the perfection or
protection of the Purchased Interest in the Receivables) and (ii)
from time to time (a) relating to any requested amendments, waivers
Page 150
FORM 10-Q
Exhibit 2.1(m) (continued)
or consents under the Purchase Documents, (b) arising in connection
with the Buyer's or its agent's enforcement or preservation of
rights (including, without limitation, the perfection and
protection of the Purchased Interest in the Receivables) under the
Purchase Documents, or (c) arising in connection with any audit,
dispute, disagreement, litigation or preparation for litigation
involving the Purchase Documents, which, including all amounts
payable under Section 8.02 hereof, shall be referred to in this
Agreement as "Transaction Costs".
8.02. Indemnity for Taxes, Reserves and Expenses.
(a) If after the date hereof, the adoption of any Law or bank
regulatory guideline or any amendment or change in the
interpretation of any existing or future Law or bank regulatory
guideline by any Official Body charged with the administration,
interpretation or application thereof, or the compliance with any
directive of any Official Body (in the case of any bank regulatory
guideline, whether or not having the force of Law):
(i) shall subject any Affected Party and any permitted
assigns and participants (collectively, the "Indemnified
Parties") to any tax, duty or other charge with respect to the
Purchase Documents, the Purchased Interest, the Receivables or
payments of amounts due thereunder, or shall change the basis
of taxation of payments to any Indemnified Party of amounts
payable in respect of the Purchase Documents, the Purchased
Interest, the Receivables or payments of amounts due
thereunder or its obligation to advance funds in respect of
the Purchase Documents, the Purchased Interest or the
Receivables (except for changes in the rate of general
corporate, franchise, net income or other income tax imposed
on such Indemnified Party by the jurisdiction in which such
Indemnified Party's principal executive office is located); or
(ii) shall impose, modify or deem applicable,any
reserve, special deposit or similar requirement (including,
without limitation, any such requirement imposed by the Board
of Governors of the Federal Reserve System) against assets of,
deposits with or for the account of, or credit extended by,
any Indemnified Party or shall impose on any Indemnified Party
or on the United States market for certificates of deposit or
the London interbank market any other condition affecting the
Purchase Documents, the Purchased Interest, the Receivables or
payments of amounts due thereunder or its obligation to
advance funds in respect of the Purchase Documents, the
Purchased Interest or the Receivables; or
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FORM 10-Q
Exhibit 2.1(m) (continued)
(iii) imposes upon any Indemnified Party any other
expense (including, without limitation, reasonable attorneys'
fees and expenses, and expenses of litigation or preparation
therefor in contesting any of the foregoing) with respect to
the Purchase Documents, the Purchased Interest, the
Receivables or payments of amounts due thereunder or its
obligation to advance funds in respect of the Purchase
Documents, the Purchased Interest or the Receivables;
and the result of any of the foregoing is to increase the cost to
such Indemnified Party with respect to the Purchase Documents, the
Purchased Interest, the Receivables, the obligations thereunder,
the funding of any purchases thereunder, the Credit Agreement or
the Letter of Credit Reimbursement Agreement, by an amount deemed
by such Indemnified Party to be material, then, within 10 days
after demand by the Buyer, the Seller shall pay to the Buyer such
additional amount or amounts as will compensate such Indemnified
Party for such increased cost.
(b) if any Indemnified Party shall have determined that,
after the date hereof, the adoption of any applicable Law or bank
regulatory guideline regarding capital adequacy, or any change
therein, or any change in the interpretation thereof by any
Official Body, or any directive regarding capital adequacy (in the
case of any bank regulatory guideline, whether or not having the
force of law) of any such Official Body, has or would have the
effect of reducing the rate of return on capital of such
Indemnified Party (or its parent) as a consequence of such
Indemnified Party's obligations hereunder or with respect hereto to
a level below that which such Indemnified Party (or its parent)
could have achieved but for such adoption, change, request or
directive (taking into consideration its policies with respect to
capital adequacy) by an amount deemed by such Indemnified Party to
be material, then from time to time, within 10 days after demand by
the Buyer, the Seller shall pay to such Indemnified Party such
additional amount or amounts as will compensate such Indemnified
Party (or its parent) for such reduction.
(c) The Buyer will promptly notify the Seller of any event of
which it has knowledge, occurring after the date hereof, which will
entitle an Indemnified Party to compensation pursuant to this
Section 8.02. A notice by the Buyer claiming compensation under
this Section and setting forth the additional amount or amounts to
be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, the Buyer may use any
reasonable averaging and attributing methods.
Page 152
FORM 10-Q
Exhibit 2.1(m) (continued)
8.03. Indemnity.
(a) The Seller and the Corporation each respectively with
respect to any action taken or failure to take action or any breach
or event or other cause relating to it, but not jointly, agree to
indemnify, defend and save harmless the Buyer, its directors,
officers, shareholders, employees, agents and each legal entity, if
any, who controls the Buyer, other than for the indemnitee's own
gross negligence or willful misconduct, forthwith on demand, from
and against any and all losses, claims, damages, liabilities, costs
and expenses (including, without limitation, all reasonable
attorneys' fees and expenses, expenses incurred by their respective
credit recovery groups (or any successors thereto) and expenses of
settlement, litigation or preparation therefor) which the Buyer may
incur or which may be asserted against the Buyer by any Person
(including, without limitation, any Obligor or any other Person
whether on its own behalf or derivatively on behalf of the Seller
or the Corporation) arising from or incurred in connection with (i)
any breach of a representation, warranty or covenant by the Seller
or the Corporation (in any of its capacities hereunder) made or
deemed made hereunder or in connection herewith or the transactions
contemplated hereby, or any statement made by any Responsible
Officer of the Seller or the Corporation in connection herewith or
the transactions contemplated hereby which shall have been
incorrect in any material respect when made, or (ii) any action
taken or, if the Seller or the Corporation is otherwise obligated
to take action, failed to be taken, by the Seller or the
Corporation with respect to the Purchased Interest or any of its
respective obligations hereunder including, without limitation, the
failure to comply with an applicable law, rule or regulation, (iii)
any failure to vest and maintain vested in the Buyer an undivided
ownership interest in the Receivables included in the Purchased
Interest, free and clear of any Lien or other adverse claim,
whether existing at the time of Purchase of such Receivables or at
any time thereafter, (iv) any failure to pay when due any taxes,
including without limitation any sales tax, excise tax or other
similar tax or charge payable in connection with the Receivables
and their creation or satisfaction, (v) any products liability
claim arising out of or relating to the Purchased Interest in the
Receivables or related Contracts, or (vi) any dispute, suit,
actions, claim, proceeding or governmental investigation, pending
or threatened, whether based on statute, regulation of order, on
tort, on contract or otherwise, before any Official Body which
arises out of or relates to the obligations of such Person under or
with respect to the Contracts.
(b) Promptly upon receipt by any indemnified party under this
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FORM 10-Q
Exhibit 2.1(m) (continued)
Section 8.03 of notice of the commencement of any suit, action,
claim, proceeding or governmental investigation against such
indemnified party, such indemnified party shall, if a claim in
respect thereof is to be made against the Seller or the Corporation
hereunder, notify the Seller or the Corporation in writing of the
commencement thereof. The Seller or the Corporation may
participate in and assume the defense of any such suit, action,
claim proceeding or investigation at its expense, and no settlement
thereof shall be made without the approval of the Seller or the
Corporation, as the case may be, and the indemnified party.
Neither the approval of the Seller nor the Corporation will be
unreasonably withheld or delayed. After notice from the Seller or
the Corporation to the indemnified party of its intention to assume
the defense thereof with counsel reasonably satisfactory to the
Buyer, and so long as the Seller or the Corporation so assumes the
defense thereof in a manner reasonably satisfactory to the Buyer,
neither the Seller nor the Corporation shall be liable for any
legal expenses of counsel unless there shall be a conflict between
the interests of the Seller and/or the Corporation and the
indemnified party.
8.04. Holidays. Except as may be provided in this Agreement
to the contrary, if any payment due hereunder shall be due on a day
which is not a Business Day, such payment shall instead be due the
next succeeding Business Day.
8.05. Records. All amounts calculated or due hereunder shall
be determined from the records of the Buyer, which determinations
shall be conclusive absent manifest error.
8.06. Amendments and Waivers. The Buyer, the Seller, the
Servicer and the Corporation may from time to time enter into
agreements amending, modifying or supplementing this Agreement, and
the Buyer, in its sole discretion, may from time to time grant
waivers of the provisions of this Agreement or consents to a
departure from the due performance of the obligations of the
Seller, the Servicer or the Corporation under this Agreement. Any
such agreement, waiver or consent must be in writing and shall be
effective only to the extent specifically set forth in such
writing. An waiver of any provision hereof, and any consent to a
departure by the Seller, the Servicer or the Corporation from any
of the terms of this Agreement, shall be effective only in the
specific instance and for the specific purpose for which given and
if such amendment, waiver or departure would have a material
adverse effect on the rights or obligations of the Agent, the
Collateral Agent or the LOC Bank, such amendment, departure or
waiver shall not be effective until consented to by the Affected
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FORM 10-Q
Exhibit 2.1(m) (continued)
Party. The Buyer shall deliver to S&P and Moody's copies of all
agreements, waivers and consents relating to this Agreement;
provided, however, that failure to deliver any such agreement,
waiver or consent shall not affect the effectiveness of any such
instrument.
8.07. Term of Agreement. This Agreement shall terminate
following the Expiration Date when the Net Investment has been
reduced to zero and all Discount and all other Aggregate Unpaids
have been indefeasibly paid in full; provided, however, that (i)
the rights and remedies of the Buyer with respect to any
representation and warranty made or deemed to be made by the
Seller, the Servicer or the Corporation pursuant to this Agreement,
(ii) the indemnification and payment provisions set forth in
Sections 4.11, 8.01, 8.02 and 8.03 hereof and (iii) the agreement
set forth in Section 8.20 hereof shall be continuing and shall
survive any termination of this Agreement.
8.08. No Implied Waiver; Cumulative Remedies. No course of
dealing and no delay or failure of the Buyer in exercising any
right, power or privilege under the Purchase Documents shall affect
any other or future exercise thereof or the exercise of any other
right, power or privilege; nor shall any single or partial exercise
of any such right, power or privilege or any abandonment or
discontinuance of steps to enforce such a right, power or privilege
preclude any further exercise thereof or of any other right, power
or privilege. The rights and remedies of the Buyer under the
Purchase Documents are cumulative and not exclusive of any rights
or remedies which the Buyer would otherwise have.
8.09. No Discharge. The respective obligations of the
Seller, the Servicer and the Corporation under the Purchase
Documents shall be absolute and unconditional and shall remain in
full force and effect without regard to, and shall not be released,
discharged or in any way affected by (a) any exercise or non-
exercise of any right, remedy, power or privilege under or in
respect of the Purchase Documents or applicable Law, including,
without limitation, any failure to set-off or release in whole of
in part by the Buyer of any balance of any deposit account or
credit on its books in favor of the Seller, the Servicer, the
Corporation, as the case may be, or any waiver, consent, extension,
indulgence or other action or inaction in respect of any thereof,
or (b) any other act or thing or omission or delay to do any other
act or thing which would operate as a discharge of the Seller, the
Servicer or the Corporation as a matter of Law.
8.10. Notices. All notices under Section 7.02 hereof shall
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FORM 10-Q
Exhibit 2.1(m) (continued)
be given to the Seller, the Servicer and the Corporation by
telephone or facsimile, confirmed by first-class mail, first-class
express mail or courier, in all cases with charges prepaid. All
other notices, requests, demands, directions and other
communications (collectively "Notices") under the provisions of
this Agreement shall be in writing (including telexed or facsimile
communication) unless otherwise expressly permitted hereunder and
shall be sent by first-class mail, first-class express mail, or by
telex or facsimile with confirmation in writing mailed first-class
mail, in all cases with charges prepaid. Any such properly given
notice shall be effective when received. All notices shall be sent
to the applicable party at the office stated on the signature page
hereof or in accordance with the last unrevoked written direction
from such party to the other parties hereto.
8.11. Severability. The provisions of this Agreement are
intended to be severable. If any provision of this Agreement shall
be held invalid or unenforceable in whole or in part in any
jurisdiction, such provision shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability
without in any manner affecting the validity or enforceability of
such provision in any other jurisdiction or the remaining
provisions hereof in any jurisdiction.
8.12. Governing Law; Submission to Jurisdiction. THIS
AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. The Seller, the Servicer and the
Corporation hereby submit to the nonexclusive jurisdiction of the
courts of the State of New York and the courts of the United States
located in the State of New York for the purpose of adjudicating
any claim or controversy arising in connection with any of the
Purchase Documents or any of the transactions contemplated thereby,
and for such purpose, to the extent it may lawfully do so, waives
any objection which it may now or hereafter have to such
jurisdiction or to venue therein and any claim of inconvenient
forum with respect thereto. Nothing in this Section 8.12 shall
affect the right of the Buyer to bring any action or proceeding
against the Seller, the Servicer or the Corporation or the property
of the Seller, the Servicer or the Corporation in the courts of
other jurisdictions.
8.13. Prior Understandings. This Agreement sets forth the
entire understanding of the parties relating to the subject matter
hereof, and supersedes all prior understandings and agreements,
whether written or oral.
8.14. Survival. All representations and warranties of the
Page 156
FORM 10-Q
Exhibit 2.1(m) (continued)
Seller, the Servicer and the Corporation contained herein or made
in connection herewith shall survive the making thereof, and shall
not be waived by the execution and delivery of this Agreement, any
investigation by the Buyer, the purchase, repurchase or payment of
any Purchased Interest in any Receivable, or any other event or
condition whatsoever (other than a written waiver complying with
Section 8.06 hereof). The covenants and agreements contained in or
given pursuant to this Agreement (including, without limitation,
those contained in Articles IV and VI hereof) shall continue in
full force and effect until the termination of the obligation to
make Purchases hereunder, the reduction of the Net Investment to
zero and the payment in full of all Discount and all other
Aggregate Unpaids.
8.15. Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on
separate counterparts each of which, when so executed, shall be
deemed an original, but all such counterparts shall constitute but
one and the same instrument.
8.16. Set-Off. In case a Termination Event shall occur and
be continuing, the Buyer and, to the fullest extent permitted by
Law, the holder of any assignment of the Buyer's rights hereunder
pursuant to the Security Agreement, shall each have the right, in
addition to all other rights and remedies available to it, without
notice to the Seller, to set-off against and to appropriate and
apply to any amount owing by the Seller hereunder which has become
due and payable, any debt owing to, and any other funds held in any
manner for the account of, the Seller by the Buyer or by any holder
of any assignment, including, without limitation, all funds in all
deposit accounts (whether time or demand, general or special,
provisionally credited or finally credited, or otherwise) now or
hereafter maintained by the Seller with the Buyer or the Collateral
Agent under the Security Agreement. Such right shall exist whether
or not such debt owing to, or funds held for the account of, the
Seller is or are matured other than by operation of this Section
8.16 and regardless of the existence or adequacy of any collateral,
guaranty or any other security, right or remedy available to the
Buyer or any holder. Nothing in this Agreement shall be deemed a
waiver or prohibition or restriction of the Buyer's or any holder's
rights of set-off or other rights under applicable Law.
8.17. Successors and Assigns. This Agreement shall be
binding on the parties hereto and their respective successors and
assigns; provided, however, that neither the Seller nor the
Servicer nor the Corporation may assign any of its rights or
delegate any of its duties hereunder without the prior written
Page 157
FORM 10-Q
Exhibit 2.1(m) (continued)
consent of the Buyer. No provision of this Agreement shall in any
manner restrict the ability of the Buyer to assign, participate,
grant security interests in, or otherwise transfer any portion of
the Purchased Interest. The Seller and the Corporation hereby
agree and consent to the complete assignment by the Buyer of all of
its rights under, interest in, title to and obligations under the
Purchase Documents to the Collateral Agent.
8.18. Waiver of Confidentiality. Subject to the requirements
of applicable Laws, the Buyer agrees to use reasonable precautions
to keep confidential, in accordance with its customary procedures
for handling confidential information, any non-public information
supplied to it by the Seller or the Corporation pursuant to this
Agreement which is identified by such Seller as being confidential
at the time the same is delivered to the Buyer. Notwithstanding
the foregoing subject to applicable laws, the Seller and the
Corporation hereby consent to the disclosure of any non-public
information supplied by it to any of the Affected Parties.
8.19. Payments Set Aside. To the extent that the Seller, the
Corporation or any Obligor makes a payment to the Buyer or the
Buyer exercises its rights of set-off and such payment or set-off
or any part thereof is subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged
by, or is required to be refunded, rescinded, returned, repaid or
otherwise restored to the Seller, the Corporation or such Obligor,
a trustee, a receiver or any other Person under any Law, including,
without limitation, any bankruptcy law, any state or federal law,
common law or equitable cause, the obligation or part thereof
originally intended to be satisfied shall, to the extent of any
such restoration, be reinstated, revived and continued in full
force and effect as if such payment had not been made or such set-
off had not occurred. The provisions of this Section 8.19 shall
survive the termination of this Agreement.
8.20. No Petition. The Seller, the Corporation and the
Servicer agree that, prior to the date which is one year and one
day after the date upon which all obligations of the Seller to the
Buyer hereunder are paid in full and all outstanding Commercial
Paper and other indebtedness of the Buyer are paid in full, neither
will institute against, or join any other Person in instituting
against, the Buyer any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding or other similar proceeding
under the laws of the United States or any state of the United
States.
8.21. No Recourse. The obligations of the Buyer under this
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FORM 10-Q
Exhibit 2.1(m) (continued)
Agreement are solely the corporate obligations of the Buyer. No
recourse shall be had for the payment of any amount owing in
respect of this Agreement or for the payment of any fee hereunder
or for any other obligation or claim arising out of or based upon
this Agreement against Merrill Lynch Money Markets Inc.("Merrill"),
Goldman Sachs Money Markets, L.P. ("Goldman", and collectively with
Merrill, the "Dealers"), any Affected Party or the Referral Agent,
any Affiliate of any of the foregoing, or any stockholder,
employee, officer, director, incorporator or beneficial owner of
any of the foregoing. For purposes of this paragraph, the term
"Dealers" shall mean and include Merrill, Goldman and all
Affiliates thereof and any stockholder, employee, officer,
director, incorporator or beneficial owner of any of them;
provided, however, that the Buyer shall not be considered to be an
Affiliate of either Dealer, the Referral Agent or any other
Affected Party for the purposes of this Section.
Page 159
FORM 10-Q
Exhibit 2.1(m) (continued)
IN WITNESS WHEREOF, the parties hereto, by the
authorized signatories, have executed and delivered this Agreement
as of the date first above written.
DELAWARE FUNDING CORPORATION
By: Morgan Guaranty Trust Company of New
York, as attorney-in-fact for
Delaware Funding Corporation
By:/s/ Richard A. Burke
Authorized Signatory
Title: Vice President
Address for Notices: Delaware Funding Corporation
c/o J H Holdings Corporation Ropes
& Gray
One International Place
Boston, MA 02110-2464
Attention: David Donaldson
Tel. No.: (617) 951-7000
Fax: (617) 951-7050
With a copy to
the Referral Agent: Morgan Guaranty Trust Company of New
York
500 Stanton Christiana Road
Newark, Delaware 19713-2107
Attention: Structured Finance
Group
Tel. No.: (302) 634-5486
Fax: (302) 634-5490
Address for Funds Transfer: Morgan Guaranty Trust Company of New
York
Commercial Paper Account
Morgan Guaranty Trust Company of New
York,
as Collateral Agent and Assignee -
Account No. 230-46-104
Morgan Guaranty Trust Company of New
York
500 Stanton Christiana Road
Newark, Delaware 19713-2107
[Receivables Purchase Agreement Signature Page]
Page 160
FORM 10-Q
Exhibit 2.1(m) (continued)
CONE RECEIVABLES LLC
By: Cone Mills Corporation,
its sole Member
By:/s/ Neil W. Koonce
Authorized Signatory
Title: Vice President
Address for Notices: David E. Bray, Treasurer
3101 North Elm Street
Third Floor
Greensboro, NC 27415-6540
With a copy to: Leesa C. Sluder
Director
Treasury Services
Cone Mills Corporation
3101 North Elm Street
Greensboro, NC 27415-6540
Address for Funds Transfer: MORGAN GUARANTY TRUST COMPANY,
NEW YORK
Account No. 013-05-858
CONE MILLS CORPORATION
By:/s/ David E. Bray
Authorized Signatory
Title: Treasurer
Address for Notices: David E. Bray, Treasurer
3101 North Elm Street
Greensboro, NC 27415-6540
With a copy to: Leesa C. Sluder
Director
Treasury Services
Cone Mills Corporation
3101 North Elm Street
Greensboro, NC 27415-6540
[Receivables Purchase Agreement Signature Page]
Page 161
FORM 10-Q
Exhibit 2.1(m) (continued)
ADDENDUM TO RECEIVABLES PURCHASE AGREEMENT
AS FILED WITH FORM 10-Q DATED MARCH 30, 1997
The following exhibits and schedules to the Receivables
Purchase Agreement have been omitted from the filed document
pursuant to Regulation S-K(17 CFR 229), Item 601(b)(2):
Exhibits
Exhibit A (Not used)
Exhibit B Description of Qualifying Receivables
Exhibit C Form of Purchase Notice for Incremental Purchase
Exhibit D Form of Tranche Selection Notice
Exhibit E Form of Report Showing Discount
Exhibit F (Not used)
Exhibit G Form of Monthly Report
Exhibit H Form of Lockbox Transfer Letter
Exhibit I (Not used)
Exhibit J (Not used)
Exhibit K (Not used)
Exhibit L Information regarding Chief Executive Office, Etc.
pursuant to Section 5.03(f)
Schedules
Schedule 1 Credit and Collections Policy
Schedule 2 Information regarding Material Adverse Changes
pursuant to Section 5.03(k)
Schedule 3 Information regarding Litigation, etc. pursuant to
Sections 5.01(k) and 5.03(l)
Schedule 4 Permitted Lockbox Banks, Lockbox Account Numbers
and Permitted Lockboxes
Schedule 5 Persons that may not be Successor Servicers
The Registrant does hereby agree to furnish supplementally a
copy of any omitted exhibit or schedule to the Commission upon
request.
CONE MILLS CORPORATION
By: /s/ Terry L. Weatherford
Title: Secretary
Page 162