Exhibit 99.1(a)
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RECEIVABLES SALE AND CONTRIBUTION AGREEMENT
dated as of April 12, 2002
between
VOLT INFORMATION SCIENCES, INC.,
as Seller
and
VOLT FUNDING CORP.,
as Buyer
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RECEIVABLES SALE AND CONTRIBUTION AGREEMENT
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This RECEIVABLES SALE AND CONTRIBUTION AGREEMENT, dated as of April
12, 2002 (as amended, supplemented or otherwise modified from time to time, this
"Agreement"), is made between VOLT INFORMATION SCIENCES, INC., a New York
corporation ("Seller"), and VOLT FUNDING CORP., a Delaware corporation
("Buyer").
Pursuant to that certain Receivables Purchase Agreement, dated as of
April 12, 2002, among Seller, Buyer and Three Rivers Funding Corporation, a
Delaware corporation ("Second Step Purchaser") (said agreement, as amended,
supplemented or otherwise modified from time to time, the "Purchase Agreement"),
Buyer intends to transfer to Second Step Purchaser an undivided percentage
ownership interest in Staffing Solutions Receivables sold or contributed by
Seller to Buyer from time to time pursuant to this Agreement, in order to, among
other things, finance Buyer's purchases of Staffing Solutions Receivables under
this Agreement. Said Staffing Solutions Receivables relate to the Staffing
Solutions Business of Seller and the Subsidiary Originators. Capitalized terms
used but not defined in this Agreement have the meanings assigned to them in the
Purchase Agreement, mutatis mutandis, whether or not then in effect.
NOW, THEREFORE, for good and valuable consideration, the existence,
receipt and sufficiency of which are hereby acknowledged, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
PURCHASE, SALE AND CONTRIBUTION
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SECTION 1.1. Initial Sale/Contribution of Receivables.
(a) Seller hereby sells, assigns, transfers and conveys to Buyer, and
Buyer hereby purchases from Seller, effective as of the date of this Agreement
(or as of such later date as Seller and Buyer may specify in the Seller
Assignment Certificate (as defined in Section 4.1)) (the "Closing Date"), an
undivided percentage ownership interest (as further detailed below) in Seller's
entire right, title and interest in, to and under that certain pool of assets
consisting of any and all Receivables in existence as of the close of business
on the Business Day immediately preceding the Closing Date (such preceding day,
the "Initial Cut-Off Date"), which aggregate pool of Receivables are or shall be
more particularly described on Schedule I attached to the Seller Assignment
Certificate. The undivided percentage ownership interest in said aggregate pool
of Receivables, as sold by Seller and purchased by Buyer on the Closing Date in
accordance with this subsection, is sometimes referred to herein as the
"Initially-Sold Percentage Ownership Interest".
(b) Seller hereby contributes, assigns, transfers and conveys to
Buyer, and Buyer hereby accepts from Seller, effective as of the Closing Date,
an undivided percentage ownership interest (as further detailed below) in
Seller's entire right, title and interest in, to and under the aforesaid
aggregate pool of Receivables in existence as of the close of business on the
Initial Cut-Off Date, as more particularly described on Schedule I attached to
the Seller Assignment Certificate. The undivided percentage ownership interest
in said aggregate pool of Receivables, as contributed by Seller and accepted by
Buyer on the Closing Date in accordance with this subsection, is sometimes
referred to herein as the "Initially-Contributed Percentage Ownership Interest".
(c) The aforesaid aggregate pool of Receivables in existence as of the
close of business on the Initial Cut-Off Date, as referenced in the preceding
subsections of this Section and more particularly described on Schedule I to the
Seller Assignment Certificate, and as to which, effective as of the Closing
Date, Seller has sold and Buyer has purchased the Initially-Sold Percentage
Ownership Interest and Seller has contributed and Buyer has accepted the
Initially-Contributed Percentage Ownership Interest, is sometimes referred to
herein as the "Initially Transferred Receivables". The Initially Transferred
Receivables include, among other things, Receivables that originally had been
(i) generated by Seller, or by a Subsidiary Originator and transferred to
Seller, then (ii) transferred by Seller to Volt Information Sciences Funding,
Inc., a Delaware corporation ("Old Volt Funding"), and then (iii) retransferred
by Old Volt Funding to Seller, free and clear of all Liens, immediately prior to
the transfers effected under this Section. Without limiting the generality of
the foregoing, and for avoidance of doubt, it is acknowledged and agreed that
the Initially Transferred Receivables include any and all proceeds (including
any and all Collections) with respect thereto.
(d) The sale of the Initially-Sold Percentage Ownership Interest and
the contribution of the Initially-Contributed Percentage Ownership Interest, in
the aggregate, constitute the transfer of the entire 100% ownership interest in
and to the Initially Transferred Receivables. Of this, the Initially-Sold
Percentage Ownership Interest shall be calculated in accordance with Section
2.3. The Initially-Contributed Percentage Ownership Interest shall be calculated
as the remainder of 100% minus the Initially-Sold Percentage Ownership Interest.
By virtue of such acquisitions in accordance with this Section, Buyer shall have
acquired, and shall constitute the owner of, 100% of the ownership interest in
and to the Initially Transferred Receivables and, as such, shall be entitled to
receive and retain for its own benefit (as against Seller and any Persons
claiming through Seller) any and all proceeds (including any and all
Collections) with respect to the Initially Transferred Receivables, and to
allocate the same in such manner as Buyer may determine in its sole discretion
(subject, however, to the Purchase Agreement, the Buyer Note (as defined below)
and Article III, below).
(e) For ease of convenience, it is understood and agreed that, if the
Initial Cut-Off Date is not also the last day of an Accounting Period,
information pertaining to the Initially Transferred Receivables, including the
identification thereof on Schedule I to the Seller Assignment Certificate, may
be determined preliminarily by reference to the last day of the most practicable
Accounting Period most recently ended prior to the Initial Cut-Off Date to the
extent use of Initial Cut-Off Date information is not practicable.
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SECTION 1.2. Purchase and Sale of Subsequently Transferred
Receivables. Seller hereby sells, assigns, transfers and conveys to Buyer, and
Buyer hereby purchases from Seller, at the times set forth in Section 1.3,
Seller's entire right, title and interest in, to and under any and all
Receivables generated by Seller, or by a Subsidiary Originator and transferred
to Seller, during the period (the "Subsequent Transfer Period") from (but
excluding) the Initial Cut-Off Date and to (but excluding) the Purchase
Termination Date. The Receivables from time to time sold by Seller and purchased
by Buyer in accordance with this Section are sometimes referred to herein as the
"Subsequently Transferred Receivables". Without limiting the generality of the
foregoing, and for avoidance of doubt, it is acknowledged and agreed that the
Subsequently Transferred Receivables include any and all proceeds (including any
and all Collections) with respect thereto. The "Purchase Termination Date" means
the date on which Seller's obligation under this Agreement to sell Subsequently
Transferred Receivables to Buyer, and Buyer's obligation under this Agreement to
purchase such Receivables, terminates pursuant to Article VIII below.
SECTION 1.3. Timing of Purchases, Etc. The sale by Seller and the
purchase by Buyer of the Initially-Sold Percentage Ownership Interest, and the
contribution by Seller and acceptance by Buyer of the Initially-Contributed
Percentage Ownership Interest, shall occur on the Closing Date. Thereafter,
during the Subsequent Transfer Period the Subsequently Transferred Receivables
shall be sold automatically by Seller to Buyer pursuant to this Agreement
immediately (and without further action by any Person) upon: (a) the creation of
the respective Receivable, in the case of any Receivable generated by Seller;
and (b) the creation of the respective Receivable and its transfer to Seller, in
the case of any Receivable generated by a Subsidiary Originator. In furtherance
of the foregoing, Seller agrees that, during the Subsequent Transfer Period, it
shall cause each Subsidiary Originator to transfer its Receivables to Seller
immediately upon such creation.
SECTION 1.4. Consideration for Purchases. The purchase price to be
paid by Buyer for its purchase from Seller on the Closing Date of the
Initially-Sold Percentage Ownership Interest (the "Initial Purchase Price")
pursuant to Section 1.1 shall be calculated in accordance with Article II and
shall be paid by Buyer by its issuance of the Buyer Note to Seller on the
Closing Date, in accordance with Section 3.2(a), in an initial principal amount
equal to the Initial Purchase Price. On each day when Subsequently Transferred
Receivables are purchased by Buyer from Seller pursuant to Section 1.2, the
purchase price to be paid by Buyer to Seller on such respective day for the
Subsequently Transferred Receivables that are to be sold by Seller on such day
(the "Subsequent Purchase Price"; collectively with the Initial Purchase Price,
the "Purchase Price") shall be calculated in accordance with Article II. On the
terms and subject to the conditions set forth in this Agreement, Buyer agrees to
make the daily or monthly payments to Seller provided for under Article III in
connection with Seller's sale to Buyer, and Buyer's purchase from Seller, of (i)
the Initially-Sold Percentage Ownership Interest in the Initially Transferred
Receivables and (ii) the Subsequently Transferred Receivables, whether as
payment of Purchase Price or payment on account of the Buyer Note.
SECTION 1.5. No Recourse. Except as specifically provided in this
Agreement, the contribution, sale and purchase of Receivables under this
Agreement (whether of the Initially-Sold Percentage Ownership
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Interest or Initially-Contributed Percentage Ownership Interest in the Initially
Transferred Receivables, or of the Subsequently Transferred Receivables) shall
be without recourse to Seller or any other of its Affiliates; it being
understood that Seller nevertheless shall be liable to Buyer for all
representations, warranties, covenants and indemnities made by Seller pursuant
to the terms of this Agreement, all of which obligations have been designed so
as not to constitute recourse to Seller for the credit risk of the Obligors.
SECTION 1.6. No Assumption of Obligations Relating to Receivables or
Contracts. No obligation or liability of Seller (or of any Subsidiary
Originator) under any Initially Transferred Receivable or any Subsequently
Transferred Receivable, or under any Contract relating thereto, shall be assumed
by Buyer hereunder or under the Seller Assignment Certificate or otherwise shall
constitute the obligation or liability of Buyer (or of Second Step Purchaser or
any other Person by virtue of contracting with Buyer) by virtue of this
Agreement or the Seller Assignment Certificate, and any such assumption or
constitution is hereby expressly disclaimed. Without limiting the generality of
the foregoing, neither Buyer nor Second Step Purchaser shall have any obligation
or liability to perform any of the obligations of Seller or of any Subsidiary
Originator under any Receivable, any related Contract or any other related
purchase order or other agreement.
SECTION 1.7. True Sales.
(a) Seller and Buyer intend that the transfer of the Initially
Transferred Receivables, and transfers of Subsequently Transferred Receivables,
under this Agreement shall constitute, and be treated (for state law, tax law,
financial accounting and all other purposes) as, true sales (or absolute
conveyances, in the case of the contribution of the Initially-Contributed
Percentage Ownership Interest) by Seller to Buyer of undivided percentage
ownership interests, in the case of the Initially Transferred Receivables, or of
the entire ownership interest, in the case of the Subsequently Transferred
Receivables, that are absolute and irrevocable and that provide Buyer with the
full benefits of ownership of such Receivables, and neither Seller nor Buyer
intends the transactions contemplated hereunder to be, or for any purpose to be
characterized as, loans or other financial accommodations from Buyer to Seller
secured by those Receivables. The parties acknowledge that Revised UCC Article
9, as in effect in New York, nevertheless may apply to such true sales and
absolute conveyances, pursuant to Section 9-109(a)(3) thereof and the official
comments thereto. Accordingly, the provisions of Section 9-318(a) of Revised UCC
Article 9, as in effect in New York, are intended to apply. The execution and
delivery of this Agreement, and the filing of appropriate financing statements,
are intended to avoid the applicability of Section 9-318(b) of Revised UCC
Article 9, as in effect in New York, in connection with such true sales or
absolute conveyances (insofar as such execution and delivery, and such filings,
would be necessary for "perfection" of such ownership interest for purposes of
that subsection).
(b) It is, further, not the intention of Buyer or Seller that the
transfer of the Initially Transferred Receivables, and transfers of Subsequently
Transferred Receivables, under this Agreement be deemed a grant of a security
interest in such Receivables by Seller to Buyer to secure indebtedness or any
other financial accommodation extended (or characterized as having been
extended) by Buyer to Seller. However, in the event that, notwithstanding the
express intent of the parties as set forth in the preceding sentence and in
subsection (a), it nevertheless
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shall be determined that the transactions contemplated by this Agreement do not
constitute true sales (or absolute conveyances, in the case of the
Initially-Contributed Percentage Ownership Interest) and instead constitute
financing arrangements from Buyer in favor of Seller and that, in connection
therewith, all or any part of the Initially Transferred Receivables or
Subsequently Transferred Receivables constitute, or are determined to be,
property of Seller or of Seller's bankruptcy estate, then (i) this Agreement
also shall constitute and be deemed to be a security agreement under Revised UCC
Article 9, as in effect in New York, for purposes of the attachment of Buyer's
security interest in any and all such Initially Transferred Receivables and
Subsequently Transferred Receivables, and (ii) the transfers by Seller to Buyer
provided for in this Agreement shall constitute and be deemed to be a grant by
Seller to Buyer of, and in furtherance thereof Seller does hereby grant to
Buyer, a first priority security interest in and to Seller's entire right, title
and interest in, to and under any and all such Initially Transferred Receivables
and Subsequently Transferred Receivables (including, without limitation, and for
avoidance of doubt, any and all proceeds thereof), in existence as of the
Initial Cut-Off Date or created thereafter prior to the Purchase Termination
Date, to secure the obligations of Seller and the rights of Buyer under this
Agreement (which obligations in such case shall be deemed to include, among
other things, a loan or other financial accommodation by Buyer to Seller in an
aggregate amount equal to (x) the Initial Purchase Price, in the case of the
Initially-Sold Percentage Ownership Interest purported to be transferred under
Section 1.1, and (y) the Subsequent Purchase Price, in the case of all
Subsequently Transferred Receivables purported to be transferred under Section
1.2). Seller and Buyer shall, to the extent consistent with this Agreement, take
such actions as may be necessary to ensure that, if this Agreement were deemed
to create a security interest in said Initially Transferred Receivables and
Subsequently Transferred Receivables, such security interest would be deemed to
be a perfected first priority security interest (subject to Liens created or
permitted under the Purchase Agreement) in favor of Buyer under applicable Law
and will be maintained as such throughout the term of this Agreement. For
avoidance of doubt, it is understood that the Staffing Solutions Receivables
covered under this Agreement include those in existence as of the Initial
Cut-Off Date, as well as those thereafter arising, created or acquired and that,
insofar as this Agreement is held to secure indebtedness, the collateral also
secures future advances.
(c) Seller hereby authorizes Buyer to file appropriate initial
financing statements, and amendments thereto, to the extent provided in Section
9-509(b) of Revised UCC Article 9, as in effect in New York, in connection with
the transactions referenced in the preceding subsections of this Section.
SECTION 1.8. Transferred Receivables. The Initially Transferred
Receivables and Subsequently Transferred Receivables are sometimes referred to
in this Agreement as the "Transferred Receivables."
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ARTICLE II
CALCULATION OF PURCHASE PRICE
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SECTION 2.1. Calculation of Purchase Price.
(a) On or before each Settlement Date, Buyer shall, or shall cause
Servicer to: (i) submit to Seller a report (each, a "Sale Report"), signed by a
Responsible Officer, dated as of such Settlement Date and in such detail as
Seller reasonably may require, with respect to Buyer's purchases of Subsequently
Transferred Receivables from Seller (and, if applicable, Buyer's purchase of the
Initially-Sold Percentage Ownership Interest and Buyer's acceptance of the
Initially-Contributed Percentage Ownership Interest) made during the immediately
preceding Accounting Period; and (ii) record the net increase or decrease in the
Buyer Note and compute the amount of interest thereon which is then accrued and
unpaid.
(b) The Initial Purchase Price to be paid by Buyer for its purchase
from Seller on the Closing Date of the Initially-Sold Percentage Ownership
Interest pursuant to Section 1.1 shall be determined, subject to Section 1.1(e),
in accordance with the following formula, applied mutatis mutandis:
IPP = AB x ISPOI x PPP;
where:
IPP = the aggregate Initial Purchase Price;
AB = the aggregate Account Balance of the Initially
Transferred Receivables, calculated as the sum of the
Account Balance (as of the close of business on the
Initial Cut-Off Date, subject to Section 1.1(e)) of each
Initially Transferred Receivable;
ISPOI = the Initially-Sold Percentage Ownership Interest; and
PPP = the "Purchase Price Percentage" applicable to the
Initially Transferred Receivables, as determined
pursuant to Section 2.2.
(c) On each day when Subsequently Transferred Receivables are
purchased by Buyer from Seller pursuant to Section 1.2, the Subsequent Purchase
Price to be paid to Seller on such respective day for the Subsequently
Transferred Receivables that are to be sold by Seller on such day shall be
determined in accordance with the following formula:
SPP = AB x PPP;
where:
SPP = the aggregate Subsequent Purchase Price for the
Subsequently Transferred Receivables to be purchased
from Seller on such day;
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AB = the aggregate Account Balance of the Subsequently
Transferred Receivables that are to be purchased from
Seller on such day, calculated as the sum of the Account
Balance (as of the time of the respective Subsequently
Transferred Receivable's sale to Buyer) of each
Subsequently Transferred Receivable to be purchased from
Seller on such day; and
PPP = the "Purchase Price Percentage" applicable to the
Subsequently Transferred Receivables to be purchased on
such day, as determined pursuant to Section 2.2.
SECTION 2.2. Definitions and Calculations Related to Purchase Price
Percentage.
(a) The Purchase Price Percentage for Transferred Receivables to be
sold by Seller on any day during a Settlement Period shall mean the percentage
determined in accordance with the following formula (in the case of the
Initially-Sold Percentage Ownership Interest, subject to Section 1.1(e) and
applied, mutatis mutandis):
PPP = 100% - (LR + PDRR);
where:
PPP = the Purchase Price Percentage in effect during such
Settlement Period;
LR = the Loss Ratio (expressed as a percentage) determined
on the Settlement Date with respect to the immediately
preceding Accounting Period; and
PDRR = the Purchase Discount Reserve Ratio (expressed as a
percentage) in effect during such Settlement Period, as
determined on such day pursuant to subsection (b) below.
The Purchase Price Percentage, the Loss Ratio and the Purchase Discount Reserve
Ratio shall be recomputed by Buyer, or at Buyer's direction by Servicer, on each
date (each, a "Report Date") that is a Business Day that is three (3) Business
Days prior to a Settlement Date, in each case as of the end of the then most
recently ended Accounting Period (the "Cut-Off Date"), and shall become
effective on such Settlement Date.
(b) The "Purchase Discount Reserve Ratio" for Transferred Receivables
to be sold on any day during a Settlement Period shall mean a percentage
determined in accordance with the following formula:
PDRR = (DSO/360 x RR) + PD;
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where:
PDRR = the Purchase Discount Reserve Ratio in effect during
such Settlement Period;
DSO = the Days Sales Outstanding during the Accounting
Period most recently ended prior to the first day of
such Settlement Period;
RR = the Reference Rate in effect on such Report Date; and
PD = a profit discount equal to 0.25%.
SECTION 2.3. Calculation of Initially-Sold Percentage Ownership
Interest. The Initially-Sold Percentage Ownership Interest shall be calculated
as the ratio (expressed as a percentage and rounded to two decimal places), the
numerator of which is the dollar amount that Seller specifies in the Seller
Assignment Certificate for purposes of this calculation, and the denominator of
which is the aggregate Account Balance of all Initially Transferred Receivables,
also as specified in the Seller Assignment Certificate. It is understood and
agreed that, as provided in Section 1.1(a), Seller is selling to Buyer and Buyer
is purchasing from Seller an undivided percentage ownership interest (in the
specific percentage determined under the preceding sentence) in the entire pool
of Initially Transferred Receivables, rather than purchasing a 100% ownership
interest in specific Receivables included within said pool, and that, as
provided in Section 1.1(b), Seller is contributing to Buyer, and Buyer is
acquiring from Seller, the balance of such entire ownership interest in said
entire pool of Initially Transferred Receivables.
ARTICLE III
PAYMENT OF PURCHASE PRICE; SERVICING, ETC.
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SECTION 3.1. Purchase Price Payments.
(a) On the Closing Date, on the terms and subject to the conditions of
this Agreement, Buyer shall pay to Seller the Initial Purchase Price for the
Initially-Sold Percentage Ownership Interest purchased by Buyer on the Closing
Date, pursuant to Section 1.1, by Buyer issuing the Buyer Note to Seller in an
initial principal amount equal to the Initial Purchase Price.
(b) On the Business Day following each day on which any Subsequently
Transferred Receivables are purchased by Buyer pursuant to Section 1.2, on the
terms and subject to the conditions of this Agreement Buyer shall pay to Seller
the Subsequent Purchase Price for the Subsequently Transferred Receivables
purchased by Buyer on such day, by Buyer: (i) making a cash payment to Seller in
the amount of such Subsequent Purchase Price to the extent that Buyer has cash
available to make the payment pursuant to Section 3.3; and (ii) if the
Subsequent Purchase Price to be paid for such Subsequently Transferred
Receivables exceeds the amount of any cash actually paid for the account of
Seller on such day pursuant to the preceding
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clause (i), by automatically increasing the principal amount outstanding under
the Buyer Note by the amount of the excess (unless, at the option of Seller and
as evidenced by notice from Seller to Servicer, such excess shall be considered
to have been contributed to Buyer by Seller as an additional capital
contribution).
(c) Seller agrees that, prior to the Buyer Note Maturity Date (as
defined below), Buyer shall be required to make payments in respect of the
payment obligations evidenced by the Buyer Note only to the extent that Buyer
has cash available under Section 3.3.
SECTION 3.2. The Buyer Note.
(a) Effective as of the Closing Date, Buyer shall issue to Seller a
promissory note, substantially in the form of Exhibit A, payable to Seller (such
promissory note, as the same may be amended, supplemented, endorsed or otherwise
modified from time to time, together with any promissory note issued from time
to time in substitution therefor or renewal thereof in accordance with the Sale
Documents, being herein called the "Buyer Note"). The initial principal amount
of the Buyer Note shall be in an amount equal to the Initial Purchase Price, and
shall be specified in the Seller Assignment Certificate. "Sale Document" shall
mean any of this Agreement, the Buyer Note or any other instrument or agreement
executed and delivered by Seller or Buyer to the other of them in connection
therewith relating to the transactions referenced in Article I.
(b) The Buyer Note shall be payable in full on the date (the "Buyer
Note Maturity Date") that is one year and one day after the Purchase Termination
Date. Except as otherwise provided in the Buyer Note, the Buyer Note shall bear
interest at a rate per annum equal to the rate publicly announced by the
Referral Agent from time to time as the Reference Rate, as determined as of each
applicable Cut-Off Date. The obligations of Buyer under the Buyer Note shall be
subordinated to all obligations of Buyer to Second Step Purchaser under the
Purchase Agreement, and no payments shall be permitted to be made by Buyer under
the Buyer Note until Second Step Purchaser has no remaining enforceable claims
against Buyer (other than inchoate indemnity obligations and, if the Net
Investment is not zero, claims to the Buyer's Allocation of Collections in the
event that any written-off Receivables ultimately are collected (collectively,
the "Contingent Future Claims")); provided that payments (including prepayments)
of principal and interest may be made in accordance with Section 3.3 if, after
giving effect to such payment, no Termination Event or Potential Termination
Event would occur or be continuing. The obligations of Buyer to Seller under the
Buyer Note shall not constitute a claim against Buyer in the event that Buyer
has insufficient funds to satisfy the obligation unless all obligations of Buyer
to Second Step Purchaser under the Purchase Agreement have been paid in full
(except for Contingent Future Claims) and any period during which a trustee or
receiver of Buyer or Buyer's assets could recover any such payments has expired.
Prepayments and repayments may be made without any premium or penalty.
(c) Seller agrees that Servicer (or its designee) shall hold the Buyer
Note for the benefit of Seller and shall make all appropriate recordkeeping
entries with respect to the Buyer Note or otherwise to reflect the payments of
principal and interest on, and adjustment to, the Buyer Note. Servicer's Records
shall constitute rebuttable presumptive evidence of the
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principal amount of and accrued interest on the Buyer Note at any time. Seller
hereby irrevocably authorizes Servicer to mark the Buyer Note "CANCELLED" and
return it to Buyer upon the final payment thereof. This subsection shall not
limit Seller's right under the Buyer Note to grant a security interest in (or to
otherwise pledge) the Buyer Note, except insofar as this subsection precludes
the ability to perfect such security interest or pledge by possession of the
Buyer Note.
SECTION 3.3. Application of Collections and Other Funds. Buyer and
Seller acknowledge and agree that, as between Seller and Buyer, Buyer shall have
the right to receive and retain for its own benefit any and all proceeds
(including, without limitation, any and all Collections) with respect to
Transferred Receivables; provided, however, that Buyer shall have no right to
any amounts held in trust by Servicer in accordance with the Purchase Agreement.
If, on any day, Buyer receives any amounts as set forth in the preceding
sentence, or receives any amounts from Second Step Purchaser as Reinvestments
(or as increases in the Net Investment) under the Purchase Agreement, Buyer
shall apply such funds as follows:
(a) first, (i) to pay Buyer's existing expenses, (ii) to set aside
funds for the payment of expenses that are then accrued and (iii)
to set aside a reserve against future expenses (in such amount as
Buyer reasonably may determine consistent with sound practices);
provided that, if the Purchase Agreement is then in effect, such
payments and set asides shall be permitted only to the extent
such existing, accrued or future expenses are permitted to exist
under Section 9.02 of the Purchase Agreement;
(b) second, to pay the Subsequent Purchase Price in accordance with
Section 3.1(b) for Subsequently Transferred Receivables purchased
by Buyer from Seller on the next preceding Business Day;
(c) third, to repay amounts owed by Buyer to Seller under the Buyer
Note;
(d) fourth, to the extent requested by Seller and approved by Buyer
from time to time, to loan amounts to Seller; and
(e) fifth, to the extent approved by Buyer from time to time, to
declare and pay dividends to Seller to the extent permitted by
Law and the Sale Documents.
SECTION 3.4. Servicing of Receivables.
(a) Consistent with the intent of Seller and Buyer that, pursuant to
Article I, Buyer is acquiring the entire 100% ownership interest in and to the
Transferred Receivables (the "Ownership Interest"), as between the parties to
this Agreement Buyer shall have the sole right to service, administer and
collect the Transferred Receivables and to assign any such right and to delegate
any such right to others. Without limiting the generality of Section 10.10,
Seller hereby acknowledges and agrees that Buyer shall assign to Second Step
Purchaser certain or all such
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rights and interests of Buyer hereunder, and Seller hereby agrees to cooperate
fully with Buyer and Second Step Purchaser in the exercise of such rights and
interests.
(b) At Second Step Purchaser's written request (as assignee of Buyer's
rights hereunder), Seller will (A) assemble all of the Records that are
necessary or appropriate to collect the Transferred Receivables, and shall make
the same available to Second Step Purchaser at one or more places selected by
Second Step Purchaser or its designee, and (B) permit, upon not less than two
Business Days' prior written notice, any successor Servicer and its agents,
employees and assignees reasonable access to Seller's respective facilities and
Seller's respective Records for purposes related to the Sale Documents and the
transactions contemplated thereunder.
SECTION 3.5. Monthly Calculations. For ease of computation, Buyer and
Seller agree that the daily payments and adjustments to the balance of the Buyer
Note shall occur automatically and without a requirement for immediate
computation, and that Servicer only shall be required to reconcile the amounts
of the foregoing payments on a monthly basis on each Report Date.
SECTION 3.6. Certain Buyer Obligations under Purchase Agreement.
(a) Seller and Buyer acknowledge and agree that certain events
specified in Section 5.03(c) of the Purchase Agreement would result in there
being deemed collections of Transferred Receivables pursuant to that agreement
and that, in certain cases, as between Seller and Buyer such event may be due to
Seller's failure to have conveyed Transferred Receivables free from any of the
circumstances referenced in subsection (b), below. In the event any such
circumstance shall exist, then Seller shall be liable to Buyer in the amount of
the resulting deemed collection to the extent attributable to such circumstance.
In the discretion of Buyer (which shall be subject to the consent of Second Step
Purchaser, if during the Regulated Period (as defined in Section 6.1)), such
Seller liability shall be satisfied by: (i) requiring Seller to promptly pay
such amount to Buyer, in cash; (ii) offsetting such amount against the
Subsequent Purchase Price otherwise payable to Seller for Subsequently
Transferred Receivables then (or thereafter) to be purchased pursuant to Section
1.2; (iii) offsetting such amount against the principal amount otherwise then or
thereafter payable under the Buyer Note; or (iv) effecting some combination of
the foregoing.
(b) The circumstances under which Seller may have liability under
subsection (a) shall include, and be limited to, the following: (i) there shall
occur any Dilution with regard to any Transferred Receivable; (ii) the Account
Balance of the Initially Transferred Receivables, as detailed in the Seller
Assignment Certificate or on Schedule I attached thereto, shall be untrue or
incorrect (subject to Section 1.1(e)) as of the Closing Date; and (iii) the Sale
Documents shall fail to vest in Buyer, in accordance with this Agreement, the
entire right, title and interest of Seller in, to and under any and all
Transferred Receivables, free and clear of all Liens in favor of Seller or of
any Person claiming through Seller, enforceable against Seller (and against any
Person claiming through Seller) in accordance with the terms of the Sale
Documents, except insofar as limited by (x) applicable bankruptcy, insolvency,
reorganization, moratorium or other
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similar Laws and (y) general principles of equity (whether considered in a suit
at law or in equity).
SECTION 3.7. Payments and Computations, Etc.
(a) All amounts to be paid by Seller to Buyer under this Agreement
shall be paid in accordance with the terms hereof to Buyer no later than Buyer's
close of business (or, if Buyer or Servicer notify Seller that such payment is
needed in connection with a payment then required to be made by Buyer to Second
Step Purchaser, at such earlier time) on the day when due, in Dollars in
immediately available funds, to an account that Buyer shall from time to time
specify in writing. Payments received by Buyer after such time shall be deemed
to have been received on the next Business Day. In the event that any payment
otherwise is scheduled to become due on a day that is not a Business Day, then
payment shall become due on the next Business Day (and such extension shall be
taken into account in calculating interest). Seller shall, to the extent
permitted by Law, pay to Buyer, on demand, interest on all amounts not paid when
due hereunder at a rate 2% per annum above the interest rate on the Buyer Note
in effect on the date the payment was due; provided, however, that the interest
rate shall not at any time exceed the maximum rate permitted by applicable Law.
(b) All amounts to be paid by Buyer to Seller under this Agreement or
the Buyer Note shall be paid in accordance with the terms hereof or thereof to
Seller no later than Seller's close of business on the day when due, in Dollars
in immediately available funds, to an account that Seller shall from time to
time specify in writing. Payments received by Seller after such time shall be
deemed to have been received on the next Business Day. In the event that any
payment otherwise is scheduled to become due on a day that is not a Business
Day, then such payment shall become due on the next Business Day (and such
extension shall be taken into account in calculating interest). Buyer shall, to
the extent permitted by Law, pay to Seller, on demand, interest on all amounts
not paid when due under this Agreement at a rate 2% per annum above the
non-default interest rate on the Buyer Note in effect on the date the payment
was due; provided, however, that the interest rate shall not at any time exceed
the maximum rate permitted by applicable Law. Amounts payable by Buyer under
this subsection shall be subject to the subordination and payment provisions
detailed in Section 3.2(b).
(c) All computations of interest payable under this Agreement or the
Buyer Note 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.
ARTICLE IV
CONDITIONS TO CONTRIBUTION AND PURCHASES
----------------------------------------
SECTION 4.1. Conditions Precedent to Obligations of Buyer. Buyer's
obligation to purchase the Initially-Sold Percentage Ownership Interest, to
accept the contribution from Seller of the Initially-Contributed Percentage
Ownership Interest and to purchase Subsequently Transferred Receivables under
this Agreement shall be subject to the conditions precedent that (i) each of the
conditions precedent to the execution, delivery and
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effectiveness of the Purchase Agreement (other than a condition precedent in the
Purchase Agreement relating to the effectiveness of this Agreement) shall have
been fulfilled to the satisfaction of Buyer, (ii) the representations and
warranties of Seller contained in this Agreement or in any other Sale Document
shall be true and correct in all material respects on and as of the respective
day of such contribution or sale, with the same effect as though made on and as
of such day (except to the extent that such representations and warranties
relate solely to an earlier date), and (iii) Buyer shall have received each of
the following, each in form and substance satisfactory to Buyer:
(a) Seller Assignment Certificate. A Seller Assignment Certificate
from Seller, in the form of Exhibit B, dated the Closing Date and
otherwise duly completed, executed and delivered by Seller to
evidence Buyer's acquisition of the Transferred Receivables in
accordance with this Agreement (as amended, supplemented or
otherwise modified from time to time by Seller with the consent
of Buyer, the "Seller Assignment Certificate");
(b) Resolutions. A copy of the resolutions of the Board of Directors
of Seller approving this Agreement and the other Sale Documents
to be delivered by Seller, and the transactions contemplated
hereby and thereby, and addressing such other matters as may be
required by Buyer, certified by a Responsible Officer of Seller
as of a recent date acceptable to Buyer;
(c) Good Standing Certificates. Good standing certificates for
Seller, issued as of recent dates, issued by the Secretary of
State of: (i) the jurisdiction of Seller's incorporation; and
(ii) each other state, if any, in which Seller maintains its
chief executive office or principal accounting office;
(d) Incumbency Certificate. A certificate of a Responsible Officer of
Seller certifying, as of a recent date reasonably acceptable to
Buyer, the names and true signatures of those Responsible
Officers of Seller who are authorized on Seller's behalf to sign
the Sale Documents to be delivered by Seller (and stipulating
that Buyer, Second Step Purchaser and Servicer may conclusively
rely on such certificate until such time as Buyer shall receive
from Seller, with a copy to Second Step Purchaser and Servicer, a
revised certificate meeting the requirements of this subsection);
(e) Financing Statements, Etc. Evidence satisfactory to Buyer of the
completion of all recordings, registrations and filings as may be
necessary or, in the opinion of Buyer, desirable, to evidence or
perfect the Ownership Interest to be acquired by Buyer hereunder,
including:
(i) acknowledgment copies of proper financing statements on
Form UCC-1 filed on or prior to the Closing Date, naming Seller
as debtor and/or assignor and Buyer as secured party and/or
assignee, or such other similar instruments or documents as may
be necessary or, in the opinion of
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Buyer, advisable, under Revised UCC Article 9, as in effect in
New York, or under any comparable Law of all appropriate
jurisdictions, to evidence or perfect the Ownership Interest; and
(ii) evidence of searches satisfactory to Buyer listing all
effective financing statements which name Seller as debtor and/or
assignor in the jurisdictions in which filings are made pursuant
to subsection (i) above, together with copies of such financing
statements, none of which shall cover any Transferred Receivables
or the related Contracts;
(f) Other Transaction Documents. Original copies, executed by each
party thereto (other than Buyer), in such reasonable number as
shall be specified by Buyer, of this Agreement, each of the other
Sale Documents (other than the Buyer Note) to be executed and
delivered in connection herewith, and the Purchase Agreement
(collectively, with the Buyer Note, the "Transaction Documents");
and
(g) Senior Credit Facility. Evidence (in form and substance
satisfactory to Buyer, whose approval is conditioned upon the
approval of Second Step Purchaser) that the senior credit
facility established by JPMorgan Chase Bank and certain other
lenders in favor of Seller (the "Seller Credit Agreement")
permits the execution and delivery of this Agreement and the
other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby.
SECTION 4.2. Conditions Precedent to Obligations of Seller. Seller's
obligation to sell the Initially-Sold Percentage Ownership Interest, to
contribute the Initially-Contributed Percentage Ownership Interest and to sell
Subsequently Transferred Receivables under this Agreement shall be subject to
the conditions precedent that (i) the representations and warranties of Buyer
contained in this Agreement or in any other Sale Document shall be true and
correct in all material respects on and as of the respective day of such
contribution or sale, with the same effect as though made on and as of such day
(except to the extent that such representations and warranties relate solely to
an earlier date), and (ii) Seller shall have received each of the following,
each (unless otherwise indicated) dated the Initial Contribution Date and each
in form and substance satisfactory to Seller:
(a) Resolutions. A copy of the resolutions of the Board of Directors
of Buyer approving this Agreement and the other Sale Documents to
be delivered by Buyer, and the transactions contemplated hereby
and thereby, and addressing such other matters as may be required
by Seller, certified by a Responsible Officer of Buyer as of a
recent date acceptable to Seller;
(b) Good Standing Certificates. Good standing certificate for Buyer,
issued as of a recent date by the Secretary of State of: (i) the
jurisdiction of Buyer's incorporation; and (ii) each other state,
if any, in which Buyer maintains in chief executive office or
principal accounting office;
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(c) Incumbency Certificate. A certificate of a Responsible Officer of
Buyer certifying, as of a recent date reasonably acceptable to
Seller, the names and true signatures of those Responsible
Officers of Buyer who are authorized on Buyer's behalf to sign
the Sale Documents to be delivered by Buyer (and stipulating that
Seller may conclusively rely on such certificate until such time
as Seller shall receive from Buyer a revised certificate meeting
the requirements of this subsection);
(d) Other Transaction Documents. Original copies, executed by each
party thereto (other than Seller), in such reasonable number as
shall be specified by Seller, of this Agreement, each of the
other Sale Documents (other than the Buyer Note) to be executed
and delivered in connection herewith, and the Purchase Agreement
(collectively, with the Buyer Note, the "Transaction Documents");
(e) Buyer Note. The Buyer Note, executed and delivered by Buyer; and
(f) Senior Credit Facility. Evidence (in form and substance
satisfactory to Seller) that the Seller Credit Agreement permits
the execution and delivery of this Agreement and the other
Transaction Documents and the consummation of the transactions
contemplated hereby and thereby.
SECTION 4.3. Certification as to Representations and Warranties.
(a) Seller (by its contribution of the Initially-Contributed
Percentage Ownership Interest to Buyer, and Seller's acceptance of the Initial
Purchase Price respecting the Initially-Sold Percentage Ownership Interest sold
to Buyer, and thereafter by Seller's acceptance of the Subsequent Purchase Price
respecting its sale of any Subsequently Transferred Receivables to Buyer) shall
be deemed to have certified on such respective day of contribution or acceptance
that Seller's representations and warranties contained in Section 5.1 are true
and correct in all material respects on and as of such day, with the same effect
as though made on and as of such day (except to the extent that such
representations and warranties relate solely to an earlier date).
(b) Buyer (by its acceptance of the Initially-Contributed Percentage
Ownership Interest from Seller, and Buyer's payment of the Initial Purchase
Price respecting the Initially-Sold Percentage Ownership Interest purchased from
Seller, and thereafter by Buyer's payment of the Subsequent Purchase Price
respecting its purchase of any Subsequently Transferred Receivables) shall be
deemed to have certified on such respective day of acceptance or payment that
Buyer's representations and warranties contained in Section 5.2 are true and
correct in all material respects on and as of such day, with the same effect as
though made on and as of such day (except to the extent that such
representations and warranties relate solely to an earlier date).
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SECTION 4.4. Conveyance Effective. Upon (x) the contribution by Seller
and acceptance by Buyer of the Initially-Contributed Percentage Ownership
Interest and the payment by Buyer of the Initial Purchase Price (by its
issuance, and Seller's acceptance, of the Buyer Note pursuant to Section 3.2(a))
for the Initially-Sold Percentage Ownership Interest, and (y) the payment by
Buyer of the Subsequent Purchase Price (whether by payment in cash or by an
increase in the principal amount outstanding under the Buyer Note pursuant to
Section 3.1) for any Subsequently Transferred Receivable, title to such
respective Transferred Receivable shall vest in Buyer, whether or not the
conditions precedent under this Agreement to such purchase or contribution were
in fact satisfied; provided, however, that neither party hereto shall be deemed
to have waived any claim it may have under this Agreement for the failure by the
other party hereto in fact to satisfy any such condition precedent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
SECTION 5.1. Representations and Warranties of Seller. In order to
induce Buyer to enter into this Agreement and to consummate the transactions
contemplated hereby, Seller hereby makes the representations and warranties set
forth in this Section at the times and to the extent set forth in Section
4.3(a):
(a) Organization and Qualification. Seller is a corporation duly
incorporated, validly existing and in good standing under the Laws of its
jurisdiction of incorporation. Seller is duly qualified to do business as a
foreign corporation in good standing in each other jurisdiction in which the
ownership of its properties or the nature of its activities (including
transactions giving rise to Transferred 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 business, operations, properties or financial
condition.
(b) Authorization. Seller has the corporate power and authority to
execute and deliver the Sale Documents, to convey the Transferred Receivables to
Buyer as contemplated by this Agreement, and to perform its obligations
hereunder and thereunder.
(c) Execution and Binding Effect. Each of the Sale Documents to which
Seller is a party has been duly and validly executed and delivered by Seller and
constitutes a legal, valid and binding obligation of Seller that is enforceable
against Seller in accordance with its terms, except insofar as limited by (x)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws and (y) general principles of equity (whether considered in a suit at law
or in equity). This Agreement, together with the Seller Assignment Certificate
when executed and delivered, constitutes a legal, valid and binding assignment
by Seller of the Transferred Receivables purported to be conveyed hereby or
thereby, that is enforceable against Seller in accordance with the terms hereof
and thereof, except insofar as limited by (x) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar Laws and (y) general principles of
equity (whether considered in a suit at law or in equity), which will vest
absolutely and unconditionally in Buyer, in accordance with this Agreement, the
Ownership Interest in the Transferred Receivables purported to be assigned
hereby, subject to no Liens whatsoever except as may arise under this Agreement
or the Purchase Agreement or otherwise be permitted under
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the Purchase Agreement. Upon the filing of the financing statements required
under Section 4.1(e)(i), the Ownership Interest to be acquired by Buyer in the
Transferred Receivables will be perfected under Revised UCC Article 9, as in
effect in New York or any other applicable jurisdiction, prior to and
enforceable against all creditors of and purchasers from Seller and all other
Persons whatsoever who may claim through Seller except insofar as limited by (x)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws and (y) general principles of equity (whether considered in a suit at law
or in equity).
(d) Authorizations and Filings. No authorization, consent, approval,
license, exemption or other action by, and no registration, qualification,
designation, declaration or filing with, any Official Body is or will be
necessary or, in the opinion of Seller, advisable in connection with Seller's
execution and delivery of this Agreement or the other Sale Documents, Seller's
consummation of the transactions herein or therein contemplated or Seller's
performance of or the compliance with the terms and conditions hereof or
thereof, to ensure the legality, validity or enforceability hereof or thereof,
or to ensure that Buyer will have its Ownership Interest in and to the
Transferred Receivables purported to be conveyed hereby or thereby perfected and
prior to all other Liens (including competing ownership interests) as
contemplated by this Agreement, other than the filing of financing statements
under the Uniform Commercial Code in the jurisdictions required under Section
4.1(e)(i).
(e) Absence of Conflicts. Neither Seller's execution and delivery of
this Agreement or the other Sale Documents, nor its consummation of the
transactions herein or therein contemplated, nor its performance of or the
compliance with the terms and conditions hereof or thereof, will (i) violate any
Law applicable to it or (ii) conflict with or result in a breach of or a default
under (A) the certificate of incorporation or by-laws of Seller or (B) any
material agreement or instrument, including, without limitation, any and all
material indentures, debentures, loans or other agreements, to which Seller is a
party or to or by which it or any of its properties (now owned or hereafter
acquired) may be subject or bound.
(f) Location of Chief Executive Office, Etc. As of the Closing Date,
Seller's Chief Executive Office is located at 560 Lexington Avenue, New York,
New York 10022. As of the Closing Date, Seller (i) has only the Affiliates
identified on Exhibit D to the Purchase Agreement, and (ii) 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) within the past
ten (10) years.
(g) No Termination Event. Except as disclosed to Buyer and Second Step
Purchaser from time to time during the Regulated Period in accordance with
Section 6.2(c), no event has occurred and is continuing and no condition exists
which constitutes a Termination Event or a Potential Termination Event.
(h) Accurate and Complete Disclosure. No information, whether written
or oral, furnished by Seller to Buyer, Servicer or Second Step Purchaser
pursuant to or in connection with this Agreement, the Purchase Agreement or any
transaction contemplated hereby or thereby contains any untrue statement of a
material fact or omits to state material facts necessary to make the statements
made not misleading, in each case on the date the statement
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was made and in light of the circumstances under which the statements were made
or the information was furnished.
(i) No Proceedings. There are no proceedings or investigations pending
(or, to Seller's knowledge, threatened) before any Official Body (A) asserting
the invalidity of the Sale Documents, (B) seeking to prevent the consummation of
any of the transactions contemplated by the Sale Documents, or (C) seeking any
determination or ruling that could materially and adversely affect (i) the
performance by Seller or Servicer of its obligations under this Agreement or the
Purchase Agreement, or (ii) the validity or enforceability of any Sale Document,
the Contracts or any material amount of the Transferred Receivables.
(j) Bulk Sales Act. No transaction contemplated hereby requires
compliance with any bulk sales act or similar Law.
(k) Financial Condition. The consolidated balance sheets of Seller and
its consolidated subsidiaries as at November 4, 2001 and their related
consolidated statements of income and shareholders' equity for their fiscal year
then ended, certified by Seller's independent public accountants, copies of
which have been furnished to Buyer, fairly present the consolidated financial
position of Seller and its consolidated subsidiaries as at such date and the
consolidated results of their operations of Seller for the period ended on such
date, all in accordance with GAAP. As of the Closing Date, there has been no
material adverse change in the consolidated financial condition, business or
operations of Seller and its consolidated subsidiaries, or in Seller's ability
to perform its obligations under this Agreement or the Purchase Agreement, since
the end of the fiscal year referenced in the preceding sentence.
(l) Litigation. No injunction, decree or other decision has been
issued or made by any Official Body that prevents, and, to Seller's knowledge,
no threat by any Person has been made to attempt to obtain any such decision
that would prevent, Seller from conducting a significant part of its business
operations, and no litigation, investigation or proceeding of the type referred
to in Section 5.1(i) exists.
(m) Margin Regulations. No use of funds acquired by Seller under this
Agreement will conflict with or contravene any of Regulations T, U and X of the
Board of Governors of the Federal Reserve System, as the same may from time to
time be amended, supplemented or otherwise modified, if and to the extent
applicable thereto.
(n) Eligible Receivables. On the Closing Date, in the case of the
Initially Transferred Receivables, and on the date of each purchase of
Subsequently Transferred Receivables, each such Transferred Receivable then
being conveyed from Seller to Buyer is an Eligible Receivable, unless otherwise
so identified to Buyer (and, if during the Regulated Period, Second Step
Purchaser) by Seller (or by Servicer). On the date of each Sale Report that
identifies a Transferred Receivable as an Eligible Receivable, such Transferred
Receivable is an Eligible Receivable unless otherwise so identified to Buyer
(and, if during the Regulated Period, Second Step Purchaser) by Seller (or by
Servicer).
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(o) No Liens. Immediately prior to the transfer of each Transferred
Receivable from Seller to Buyer pursuant to this Agreement (and Second Step
Purchaser's purchase, contemporaneously with such transfer to Buyer, of a
Participation Interest in the related Purchased Receivable pursuant to the
Purchase Agreement), Seller owned such Transferred Receivable, together with the
related Contract and all purchase orders and other agreements related to such
Receivable, free and clear of any Lien (other than Permitted Liens).
SECTION 5.2. Representations and Warranties of Buyer. In order to
induce Seller to enter into this Agreement and to consummate the transactions
contemplated hereby, Buyer hereby makes the representations and warranties set
forth in this Section at the times and to the extent set forth in Section
4.3(b):
(a) Organization and Qualification. Buyer is a corporation duly
incorporated, validly existing and in good standing under the Laws of its
jurisdiction of incorporation. Buyer is duly qualified to do business as a
foreign corporation in good standing in each other jurisdiction in which the
ownership of its properties or the nature of its activities, or both, requires
it to be so qualified or, if not so qualified, the failure to so qualify would
not have a material adverse effect on its business, operations, properties or
financial condition.
(b) Authorization. Buyer has the corporate power and authority to
execute and deliver the Sale Documents, to accept Seller's conveyance of the
Transferred Receivables as contemplated by this Agreement, and to perform its
obligations hereunder and thereunder.
(c) Execution and Binding Effect. Each of the Sale Documents to which
Buyer is a party has been duly and validly executed and delivered by Buyer and
constitutes a legal, valid and binding obligation of Buyer that is enforceable
against Buyer in accordance with its terms, except insofar as limited by (x)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
Laws and (y) general principles of equity (whether considered in a suit at law
or in equity).
(d) Authorizations and Filings. No authorization, consent, approval,
license, exemption or other action by, and no registration, qualification,
designation, declaration or filing with, any Official Body is or will be
necessary or, in the opinion of Buyer, advisable in connection with Buyer's
execution and delivery of this Agreement or the other Sale Documents, Buyer's
consummation of the transactions herein or therein contemplated or Buyer's
performance of or the compliance with the terms and conditions hereof or
thereof, to ensure the legality, validity or enforceability hereof or thereof,
or to ensure that Buyer will have its Ownership Interest in and to the
Transferred Receivables purported to be conveyed hereby or thereby perfected and
prior to all other Liens (including competing ownership interests) as
contemplated by this Agreement, other than the filing of financing statements
under the Uniform Commercial Code in the jurisdictions required under Section
4.1(e)(i).
(e) Absence of Conflicts. Neither Buyer's execution and delivery of
this Agreement or the other Sale Documents, nor its consummation of the
transactions herein or therein contemplated, nor its performance of or the
compliance with the terms and conditions hereof or thereof, will (i) violate any
Law applicable to it or (ii) conflict with or result in a breach
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of or a default under (A) the certificate of incorporation or by-laws of Buyer
or (B) any material agreement or instrument, including, without limitation, any
and all material indentures, debentures, loans or other agreements, to which
Buyer is a party or to or by which it or any of its properties (now owned or
hereafter acquired) may be subject or bound.
(f) No Proceedings. There are no proceedings or investigations pending
(or, to Buyer's knowledge, threatened) before any Official Body (A) asserting
the invalidity of the Sale Documents, (B) seeking to prevent the consummation of
any of the transactions contemplated by the Sale Documents, or (C) seeking any
determination or ruling that could materially and adversely affect (i) the
performance by Buyer or Servicer of its obligations under this Agreement or the
Purchase Agreement, or (ii) the validity or enforceability of any Sale Document,
the Contracts or any material amount of the Transferred Receivables.
(g) Bulk Sales Act. No transaction contemplated hereby requires
compliance with any bulk sales act or similar Law.
(h) Litigation. No injunction, decree or other decision has been
issued or made by any Official Body that prevents, and, to Buyer's knowledge, no
threat by any Person has been made to attempt to obtain any such decision that
would prevent, Buyer from conducting a significant part of its business
operations, and no litigation, investigation or proceeding of the type referred
to in Section 5.2(f) exists.
ARTICLE VI
GENERAL COVENANTS OF SELLER
---------------------------
SECTION 6.1. Affirmative Covenants. From and after the Closing Date
and until the first day, following the Purchase Termination Date, on which all
obligations of Seller shall have been fully paid and performed and Second Step
Purchaser's Net Investment in the Participation Interest shall have been reduced
to zero and all other amounts accrued and owing to Second Step Purchaser by
Buyer under the Purchase Agreement have been paid in full (the "Regulated
Period"), unless each of Second Step Purchaser and Buyer shall otherwise give
its prior written consent, Seller hereby agrees that it will perform the
covenants and agreements set forth in this Section:
(a) Preservation of Corporate Existence. Seller shall preserve and
maintain its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified in good
standing as a foreign corporation in each other jurisdiction where the failure
to preserve and maintain such existence, rights, franchises, privileges and
qualification could materially adversely affect (i) the interests of Buyer
hereunder or of Second Step Purchaser under the Purchase Agreement or (ii) the
ability of Seller or Servicer to perform their respective obligations hereunder
or under the Purchase Agreement.
(b) Compliance With Laws. Seller shall comply in all material respects
with all Laws applicable to Seller, its business and properties, and the
Transferred Receivables.
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(c) Enforceability of Obligations. Seller shall ensure that, with
respect to each Transferred Receivable, the obligation of any related Obligor to
pay the Account Balance of such Receivable in accordance with the terms of the
related Contract remains legal, valid, binding and enforceable against such
Obligor, except (i) as otherwise permitted by Section 6.3(d) or by the Purchase
Agreement, (ii) as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar Laws, and (iii) as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(d) Receivables Reviews. Seller shall, subject to the next sentence,
permit Buyer and Second Step Purchaser and their respective agents or
representatives, at the reasonable expense of Seller, (i) to examine and make
copies of and abstracts from, and to conduct accounting reviews of, all Records
in the possession or under the control of Seller relating to the Transferred
Receivables, and (ii) to visit the offices and properties of Seller for the
purpose of examining the materials described in clause (i) above, and to discuss
matters relating to any such Transferred Receivables of Seller or Seller's
performance hereunder with any of the Responsible Officers of Seller or, with
the prior consent of a Responsible Officer of Seller, with employees of Seller
having knowledge of such matters (the examinations set forth in the foregoing
clauses (i) and (ii) being herein called a "Seller Receivables Review"). Buyer
and Second Step Purchaser shall be entitled to conduct Seller Receivables
Reviews whenever either of them, in its reasonable judgment, deems it
appropriate; provided that, unless a Termination Event or Potential Termination
Event has occurred and is then continuing: (x) Buyer or Second Step Purchaser
(or its respective agent or representative) shall give Seller at least five
Business Days' prior written notice of any Seller Receivables Review; (y) each
of Buyer and Second Step Purchaser shall have the right to request a Seller
Receivables Review not more than twice in any calendar year; and (z) to the
extent reasonably practicable, Buyer and Second Step Purchaser shall coordinate
such reviews to minimize the disruption and expense to Seller.
(e) Books and Records. Seller shall maintain and implement
administrative and operating procedures (including the ability to recreate
Records evidencing the Transferred 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 such Transferred Receivables (including, without limitation, Records
adequate to permit the identification of all Collections and adjustments to each
existing Transferred Receivable) at its Chief Executive Office, except that any
Records may be stored at other locations to the extent temporary location
elsewhere is necessary in connection with litigation, repossession, other
collection activities or other usual business purposes.
(f) Fulfillment of Obligations. Seller will duly observe and perform,
or cause to be observed or performed, all obligations and undertakings on its
part to be observed and performed under or in connection with the Transferred
Receivables, including its obligations as Servicer, and, except as otherwise
permitted under this Agreement or the Purchase Agreement, will do nothing to
impair the rights, title and interest of Buyer in and to the Ownership Interest
or of Second Step Purchaser in and to its Participation Interest.
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(g) Customer List. Unless Servicer has done so: (i) Seller shall at
all times maintain a current list (which may be stored on magnetic tapes or
disks) of all Obligors under Contracts related to Transferred Receivables,
including the name, address, telephone number and account number of each such
Obligor; and (ii) Seller shall deliver or cause to be delivered a copy of such
list to Buyer as soon as practicable following Buyer's request.
(h) Copies of Reports, Filings, Opinions, etc. Unless Servicer has
done so, Seller shall forward to Buyer copies of: (i) all press releases, proxy
statements, financial statements, reports and other communications which Seller
sends to its security holders generally or sends in the ordinary course to any
nationally recognized statistical rating agency; (ii) all regular, periodic and
special reports which Seller files with the Securities and Exchange Commission
or with any securities exchange or commission; and (iii) all reports and notices
with respect to any Reportable Event defined in Article IV of ERISA which Seller
files under ERISA with the Internal Revenue Service or the Pension Benefit
Guaranty Corporation or the Department of Labor, or which Seller receives
therefrom.
(i) Total Systems Failure. Unless Servicer has done so, Seller shall
promptly notify Buyer of any total systems failure and advise Buyer of the
estimated time required to remedy such total systems failure and of the
estimated date on which a Sale Report can be delivered. Until a total systems
failure is remedied, Seller (unless Servicer has done so) shall (i) furnish to
Buyer such periodic status reports and other information relating to such total
systems failure as Buyer may reasonably request and (ii) promptly notify Buyer
if Seller 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 Sale Report can be
delivered. Unless Servicer has done so, Seller shall promptly notify Buyer when
a total systems failure has been remedied.
(j) Treatment of Purchase. For accounting purposes, Seller shall treat
the conveyance of the Initially-Sold Percentage Ownership Interest and of all
Subsequently Transferred Receivables made under this Agreement and the Seller
Assignment Certificate as a sale thereof. Seller shall also maintain its Records
and books of account in a manner which clearly reflects the contribution or
sale, as the case may be, of all Transferred Receivables to Buyer and Buyer's
Ownership Interest therein. Further, Seller shall prepare its annual and
quarterly financial statements in accordance with GAAP (subject, in the case of
quarterly financial statements, to year-end audit adjustment and the absence of
notes other than as provided in the next sentence). Any annual, quarterly and
other financial statement of Seller that is made publicly available and which is
consolidated to include Buyer will contain footnotes stating that (i) Buyer is a
separate entity, (ii) Seller has sold or contributed the Transferred Receivables
to Buyer and (iii) the assets of Buyer will not be available to Seller or (to
the extent applicable) Seller's other subsidiaries, to satisfy their liabilities
to their respective creditors, unless Buyer's liabilities to Buyer's own
creditors have been paid in full.
(k) Credit and Collection Policies. Seller will comply in all material
respects with the Credit and Collection Policy in regard to each Transferred
Receivable of Seller and the Contract related to each such Receivable.
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(l) Certificates of Title.
(i) If any amount payable under or in connection with any
Transferred Receivable shall be or become evidenced by any promissory
note, chattel paper or other instrument, such note, chattel paper or
instrument shall be duly endorsed in a manner satisfactory to Buyer
and delivered to Buyer or its agent.
(ii) Seller shall deliver to Buyer any certificate of title or
other evidence of ownership issued by the United States or any state
or any political subdivision thereof relating to any chattel held as
security for any amount payable under or in connection with any
Transferred Receivable, with evidence of perfection of the security
interest in such property noted thereon, if such notation is required
under the Law of the jurisdiction in which such property is located in
order to perfect a security interest in such property.
(iii) If the Contract relating to any Transferred Receivable
requires the related Obligor to maintain insurance upon the chattel
security relating to such Contract, Seller shall deliver to Buyer all
documents or certificates relating to such insurance.
(iv) Seller shall deliver to Buyer any other document required by
the terms of the related Contracts as a condition to the enforcement
thereof.
(m) Separate Corporate Existence of Buyer. Seller hereby acknowledges
that Buyer is entering into the transactions contemplated by this Agreement and
the Purchase Agreement, and Second Step Purchaser is entering into the
transactions contemplated by the Purchase Agreement, in reliance upon, among
other things, Buyer's identity as a legal entity separate from Seller and its
other Affiliates (each of Seller and its other Affiliates, a "Seller Entity").
Therefore, during the Regulated Period Seller will, and will cause each other
Seller Entity to, take all reasonable steps to maintain Buyer's identity as a
separate legal entity and to make it manifest to third Persons that Buyer is an
entity with assets and liabilities distinct from those of Seller and the other
Seller Entities, and that Buyer is not a division of Seller or any other Seller
Entity. Without limiting the foregoing and in addition to and consistent with
the other covenants contained in this Agreement and those contained in the
Purchase Agreement, at all times during the Regulated Period Seller shall:
(i) cooperate with Buyer to ensure that any and all full-time
employees of Buyer identify themselves as such and not as employees of
any Seller Entity (including, without limitation, by means of
providing appropriate employees with business or identification cards
identifying such employees as Buyer's employees);
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(ii) to the extent any employee, consultant or agent of Buyer is
also an employee, consultant or agent of any Seller Entity, allocate
the compensation of such employee, consultant or agent between Buyer
and such Seller Entity on a basis which reflects the services rendered
to Buyer and such Seller Entity;
(iii) allocate all overhead expenses (including, without
limitation, telephone and other utility charges) for items shared
between Buyer and any Seller Entity on a reasonable basis consistent
with GAAP;
(iv) ensure that at least one member of Buyer's Board of
Directors (an "Independent Director") is not (A) a director, officer
or employee of any Seller Entity, (B) a person related to any officer
or director of any Seller Entity, (C) a holder (directly or
indirectly) of more than 5% of any voting securities of any Seller
Entity, or (D) a person related to a holder (directly or indirectly)
of more than 5% of any voting securities of any Seller Entity;
(v) cooperate with Buyer to ensure that all corporate actions of
Buyer are duly authorized by vote of Buyer's Board of Directors in
accordance with Buyer's certificate of incorporation and by-laws;
(vi) cooperate with Buyer to ensure that Buyer's books and
Records are maintained separate from those of any Seller Entity and
that such Records are maintained by Buyer in a location clearly
identified (by signage or otherwise) as allocated solely to Buyer;
(vii) cooperate with Buyer to ensure that Buyer prepares its
financial statements separately from those of Seller or any other
Seller Entities, and ensure that any publicly available consolidated
financial statements of Seller that include Buyer have a footnote
clearly stating that Buyer is a separate corporate entity and that
Buyer's assets will be available first to satisfy the claims of
Buyer's own creditors;
(viii) except as specifically otherwise provided in this
Agreement or in the Purchase Agreement, not commingle funds or other
assets of Seller or any other Seller Entity with those of Buyer and
not maintain bank accounts or other depository accounts of Seller or
any other Seller Entity to which Buyer is an account party, into which
Buyer makes deposits or from which Buyer has the power to make
withdrawals;
(ix) ensure that Buyer is obligated to reimburse any Seller
Entity which pays any of Buyer's operating expenses; and
(x) not permit Buyer to be named as an insured on the insurance
policy covering the property of any Seller Entity except and
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only to the extent that such policy also covers property of Buyer, or
enter into an agreement with the holder of such policy whereby, in the
event of a loss in connection with such property, proceeds are paid to
Buyer.
(n) Payment Instructions to Obligors. Seller will direct all Obligors
(or their paying agent) to submit all payments on account of Transferred
Receivables either (i) to one of the Permitted Lockboxes maintained at the
Permitted Lockbox Banks for deposit in a Lockbox Account or (ii) directly to one
of the Lockbox Accounts.
(o) Segregation of Collections. Seller shall use reasonable efforts to
minimize the deposit of any funds other than Collections into any of the Lockbox
Accounts. To the extent that any such funds nevertheless are deposited into any
of the Lockbox Accounts, Seller shall promptly identify any such funds, or shall
cause the funds to be so identified, to Buyer, Servicer and Second Step
Purchaser (following which notice, Buyer shall be obligated to promptly return,
or cause the return of, all such extraneous funds to Seller).
(p) Identification of Eligible Receivables. Seller will establish and
maintain such procedures as are necessary for determining, no less frequently
than each Business Day on which any Subsequently Transferred Receivable to be
sold by Seller to Buyer on such day in accordance with Section 1.2, whether a
particular Subsequently Transferred Receivable to be sold on any such respective
day qualifies as an Eligible Receivable, and for identifying, on any such
Business Day, all Subsequently Transferred Receivables to be sold to Buyer on
that date in accordance with Section 1.2 that are not Eligible Receivables.
Seller will notify Buyer (i) in the case of the Initially Transferred
Receivables, on or prior to the Closing Date, and (ii) in the case of each
Subsequently Transferred Receivable, on or prior to the date of conveyance of
such Receivable from Seller to Buyer under Section 1.2, in the event such
Transferred Receivable will not, to Seller's knowledge, be an Eligible
Receivable as of the date of such conveyance.
(q) Ownership of Buyer Stock. Seller will own the outstanding capital
stock of Buyer free of any Liens, other than (i) Liens granted to the lenders
and bank agents under, and in connection with, the Seller Credit Agreement and
(ii) Permitted Liens.
SECTION 6.2. Reporting Requirements. During the Regulated Period,
Seller agrees that (unless Servicer has done so) Seller will, unless Buyer and
Second Step Purchaser shall otherwise consent in writing, furnish to Buyer and
Second Step Purchaser:
(a) Financial Statements. as soon as practicable and in any event
within 60 days after the end of each of the first three fiscal quarters of each
fiscal year of Seller, copies of the unaudited consolidated balance sheets of
Seller and its consolidated subsidiaries as at the end of such respective fiscal
quarter and the unaudited consolidated statements of income and cash flows of
Seller and its consolidated subsidiaries, in each case for such respective
fiscal quarter and for the period from the beginning of the fiscal year through
the end of such fiscal quarter, prepared in accordance with GAAP consistently
applied throughout the periods reflected therein (subject to year-end
adjustments and the omission of footnotes, except as required under Section
6.1(j)) and certified by a Financial Officer of Seller;
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(b) Annual Financial Statements. as soon as practicable and in any
event within 100 days after the end of each fiscal year of Seller, a copy of the
audited consolidated balance sheet of Seller and its consolidated subsidiaries
as at the end of such fiscal year and the statements of income and cash flows of
Seller and its consolidated subsidiaries for such fiscal year, setting forth in
each case in comparative form the corresponding figures for the preceding fiscal
year and prepared in accordance with GAAP consistently applied throughout the
periods reflected therein, certified by independent certified public accountants
of recognized standing selected by Seller and satisfactory to Buyer;
(c) Notice of Termination Event. promptly after a Responsible Officer
of Seller becomes aware of any Termination Event or Potential Termination Event,
written 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 Seller;
(d) Material Adverse Effect. promptly after a Responsible Officer of
Seller has knowledge thereof, written notice that describes in reasonable detail
any event or occurrence that, individually or in the aggregate for all such
events or occurrences, has had, or reasonably could be expected to have, a
material adverse effect on Seller's business, operations, properties or
financial condition;
(e) Proceedings. as soon as possible, and in any event within three
(3) Business Days after a Responsible Officer of Seller has knowledge thereof,
written notice of (i) any litigation, investigation or proceeding of the type
described in Section 5.1(i) not previously disclosed to Buyer and (ii) any
judgment, settlement or other final disposition with respect to any such
previously disclosed litigation, investigation or proceeding; and
(f) Other. promptly, from time to time, (i) such other information,
documents, records or reports respecting the Transferred Receivables or (ii)
such other publicly available information respecting the operations or financial
condition of Seller, in each case as Buyer or Second Step Purchaser may from
time to time reasonably request in order to protect the interests of Buyer or
Second Step Purchaser under or as contemplated by this Agreement.
SECTION 6.3. Negative Covenants. During the Regulated Period, unless
Buyer and Second Step Purchaser shall otherwise give prior written consent,
Seller hereby agrees that it will perform the covenants and agreements set forth
in this Section 6.3:
(a) Statementing for and Treatment of Transferred Receivables. Seller
will not 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 or contribution of the Transferred Receivables to
Buyer.
(b) Sales, Etc., of Receivables. Except as contemplated by this
Agreement or the Purchase Agreement, prior to the Purchase Termination Date
Seller will not sell or contribute, or otherwise transfer, convey or assign,
with or without recourse, any Receivables, or permit any of its subsidiaries
(other than Buyer) to do so.
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(c) No Liens. Seller will not cause any of the Transferred Receivables
to be sold, pledged, assigned or transferred or to be subject to a Lien, other
than the sale or contribution of the Transferred Receivables to Buyer in
accordance with this Agreement, and the Liens created in connection with the
transactions contemplated by this Agreement and the Purchase Agreement, and
other Permitted Liens.
(d) Extension or Amendment of Receivables; Change in Credit and
Collection Policy or Contracts. Except as permitted under the Purchase Agreement
to Seller (in its individual capacity or as the initial Servicer), Seller (in
its individual capacity as the seller or contributor of the Transferred
Receivables) will not, without the prior written consent of Buyer and Second
Step Purchaser (which consent will not be unreasonably withheld): (i) extend,
amend or otherwise modify the terms of any such Receivable or related Contract
in a manner that reasonably could be expected to have a material adverse effect
on Seller's business, operations, properties or financial condition; or (ii)
change the terms and provisions of the Credit and Collection Policy in any
material respect unless (x) with respect to collection procedures, the change is
made with prior written notice to Second Step Purchaser and Buyer and no
material adverse effect on Seller's business, operations, properties or
financial condition or the collectibility of a material amount of Transferred
Receivables would result and (y) with respect to accounting policies relating to
Transferred Receivables that have become Defaulted Receivables, the change is
made in accordance with GAAP.
(e) Change in Payment Instructions to Obligors. Seller will not add
any bank as a Permitted Lockbox Bank, terminate any bank listed on Schedule 1 as
a Permitted Lockbox Bank, change any Lockbox Account listed on Schedule 1, or
make any change in its instructions to Obligors regarding payments to be made to
Seller or payments to be made to any Permitted Lockbox Bank, unless Buyer and
Second Step Purchaser shall have received ten (10) Business Days' prior notice
of such addition, termination or change and, with respect to the addition of any
Permitted Lockbox Bank, a Lockbox Servicing Agreement executed by such Permitted
Lockbox Bank shall have been delivered to Buyer and Second Step Purchaser and
become effective.
(f) Certain Mergers and Dispositions. Prior to the Purchase
Termination Date, Seller will not merge with or into, or consolidate with or
into, any other Person unless (i) Seller shall be the surviving entity of such
merger or consolidation and (ii) both immediately prior to and immediately after
giving effect to such merger or consolidation no Termination Event or Potential
Termination Event shall occur or be continuing. Seller will not transfer,
convey, assign or otherwise dispose of, or discontinue, any material part of its
Staffing Solutions Business or materially alter the manner in which such
business is conducted.
(g) Change in Name. Seller will not change its name, identity or
corporate structure in any manner which could make any financing statement or
continuation statement filed in connection with this Agreement or the
transactions contemplated hereby seriously misleading within the meaning of
Revised UCC Article 9, as in effect in New York, or other applicable Laws,
unless Seller shall have given Buyer and Second Step Purchaser at least sixty
(60) days' prior written notice thereof.
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(h) Amendments to Sale Documents. Seller will not amend, supplement or
otherwise modify any Sale Document to which it is a party unless Buyer and
Second Step Purchaser shall have given prior written consent to each such
amendment, supplement or other modification.
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN RESPECT OF
-----------------------------------------------
TRANSFERRED RECEIVABLES
-----------------------
SECTION 7.1. Rights of Buyer.
(a) Subject to Section 7.3 and to the limitations set forth in the
Purchase Agreement, Seller hereby authorizes Buyer and Second Step Purchaser,
and their respective designees (including Servicer), to take any and all steps
in Seller's name and on behalf of Seller that Buyer or Second Step Purchaser or
such respective designee determines to be reasonably necessary or appropriate to
collect all amounts due under any and all Transferred Receivables, including
endorsing the name of Seller on checks and other instruments representing
Collections and enforcing Seller's rights under such Transferred Receivables.
(b) Buyer shall have no obligation to account to Seller for any
Transferred Receivables. Buyer shall have no obligation to account to Seller
for, or to return, Collections, including without limitation any interest or
other finance charge collected pursuant thereto, pertaining to such Transferred
Receivables, irrespective of whether such Collections (including, without
limitation, such interest and finance charges) are in excess of the Purchase
Price for such Transferred Receivables.
(c) As between Seller and Buyer, Buyer shall have the unrestricted
right to further assign, transfer, deliver, hypothecate, subdivide or otherwise
deal with the Transferred Receivables, and Buyer's entire right, title and
interest in, to and under this Agreement, in each case on whatever terms Buyer
shall determine, subject, however, to this Agreement, the Buyer Note and the
Purchase Agreement.
(d) Buyer shall have the sole right to retain any gains or profits
created by buying, selling or holding the Transferred Receivables and, as
between Seller and Buyer, Buyer shall have the sole risk of and responsibility
for losses or damages created by such buying, selling or holding.
SECTION 7.2. Responsibilities of Seller. Anything herein to the
contrary notwithstanding, Seller hereby agrees that during the Regulated Period
and except as otherwise provided in this Agreement or the Purchase Agreement:
(a) Seller shall deliver directly to any of the Lockbox Accounts,
within two Business Days after receipt thereof, any Collections that it
receives, in the form so received, and agrees that all such Collections shall be
deemed to be received in trust for Buyer and shall be maintained and segregated
separate and apart from all other funds and moneys of Seller until delivery of
Collections to Buyer;
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(b) Seller shall perform all of its obligations hereunder and under
the Contracts to the same extent as if the Transferred Receivables had not been
sold or contributed hereunder, and the exercise by Buyer or its designee or
assignee of Buyer's rights hereunder or in connection herewith shall not relieve
Seller from any of its obligations under the Sale Documents and the Contracts
related to the Transferred Receivables; and
(c) Buyer shall have, and Seller hereby grants to Buyer, an
irrevocable power of attorney, with full power of substitution and coupled with
an interest, to take in the name of Seller all steps which Buyer, in its
reasonable discretion, may deem necessary or advisable to endorse, negotiate or
otherwise realize on any writing or other right of any kind held or transmitted
by Seller or transmitted or received by Buyer (whether or not from Seller) in
connection with any Transferred Receivable.
SECTION 7.3. Further Action Evidencing Contribution and Purchases.
Seller agrees that from time to time, at its expense, it will promptly, upon the
reasonable request by Buyer or Second Step Purchaser or their respective
designees (including Servicer) consistent with this Agreement and the Purchase
Agreement, execute and deliver all such further instruments and documents, and
take all such further actions, as may be specified in any such request in order
to perfect, protect or more fully evidence the sale or contribution by Seller to
Buyer of the Transferred Receivables, or to enable Buyer or Second Step
Purchaser (as the assignee of Buyer) to exercise or enforce any of its rights
under this Agreement or any other Sale Document. Without limiting the generality
of the foregoing, upon the request of Buyer or Second Step Purchaser consistent
with the foregoing, during the Regulated Period Seller will:
(a) authorize and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other
instruments or notices, as Buyer or Second Step Purchaser may
reasonably determine to be necessary or appropriate in
furtherance of the foregoing; and
(b) mark the master data processing records evidencing Transferred
Receivables with the following legend:
"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD OR CONTRIBUTED
TO VOLT FUNDING CORP., A DELAWARE CORPORATION ("BUYER"), PURSUANT
TO A CERTAIN RECEIVABLES SALE AND CONTRIBUTION AGREEMENT, DATED
AS OF APRIL 12, 2002, BETWEEN VOLT INFORMATION SCIENCES, INC., A
NEW YORK CORPORATION, AND BUYER; AND SUCH RECEIVABLES HAVE BEEN
TRANSFERRED TO THREE RIVERS FUNDING CORPORATION PURSUANT TO A
RECEIVABLES PURCHASE AGREEMENT, DATED AS OF THE SAME DATE, AMONG
BUYER, AS TRANSFEROR, VOLT INFORMATION SCIENCES, INC.,
INDIVIDUALLY AND AS THE INITIAL SERVICER, AND THREE RIVERS
FUNDING CORPORATION, AS SECOND STEP PURCHASER."
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Seller hereby authorizes Buyer or its designee to file one or more financing or
continuation statements, and amendments thereto and assignments thereof,
relative to all or any of the Transferred Receivables, in each case whether now
existing or hereafter generated or acquired by Seller. Except for material
performance obligations of Seller to any Obligor hereunder or under any of the
Contracts, and subject to the terms of the Purchase Agreement, if (i) Seller
fails to perform any of its agreements or obligations under this Agreement and
does not remedy the failure within the applicable cure period, if any, and (ii)
Buyer in good faith reasonably believes that the performance of such agreements
and obligations is necessary or appropriate to protect its interests under this
Agreement, then Buyer or its designee may (but shall not be required to)
perform, or cause performance of, such agreement or obligation and the
reasonable expenses of Buyer or its designee or assignee incurred in connection
with such performance shall be payable by Seller as provided in Section 9.1.
ARTICLE VIII
TERMINATION
-----------
SECTION 8.1. Termination by Seller. So long as no Termination Event
under the Purchase Agreement has occurred and is then continuing, Seller may
terminate its agreement to sell Subsequently Transferred Receivables hereunder
to Buyer by giving Buyer (and, if during the Regulated Period, Second Step
Purchaser) not less than thirty days' prior written notice of its election to
discontinue selling Staffing Solutions Receivables to Buyer; provided, that such
notice shall specify the effective date of termination. Such termination also
shall terminate Buyer's agreement hereunder to purchase such Receivables.
SECTION 8.2. Automatic Termination.
(a) Unless otherwise agreed to by Seller and Buyer (and, if during the
Regulated Period, Second Step Purchaser) in writing, the agreement of Seller to
sell Subsequently Transferred Receivables hereunder, and the agreement of Buyer
to purchase such Receivables from Seller hereunder, shall terminate
automatically on the date on which Second Step Purchaser's obligation under the
Purchase Agreement to purchase its Participation Interest and to make
Reinvestments shall terminate in accordance with the Purchase Agreement, whether
such termination occurs automatically or at the election of Second Step
Purchaser.
(b) Without limiting the generality of subsection (a) of this Section,
Seller's obligation under this Agreement to sell Subsequently Transferred
Receivables to Buyer, and Buyer's obligation under this Agreement to purchase
Subsequently Transferred Receivables from Seller, shall be terminated
automatically, without any action on the part of Seller or Buyer or otherwise,
if an Event of Bankruptcy shall occur with respect to Seller or Buyer.
SECTION 8.3. Certain Provisions Survive. The representations,
warranties, covenants and indemnitees of Seller to Buyer, and of Buyer to
Seller, shall survive the termination of Seller's obligation hereunder to sell
and Buyer's obligation hereunder to purchase Receivables.
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ARTICLE IX
INDEMNIFICATION
---------------
SECTION 9.1. Indemnities by Seller.
(a) Seller agrees to indemnify, defend and save harmless Buyer and
Second Step Purchaser and their respective directors, officers, shareholders,
employees and agents (each, an "Indemnified Party"), forthwith on demand, from
and against any and all losses, claims, damages, liabilities, costs and expenses
(including, without limitation, all attorneys' fees and expenses, expenses
incurred by their respective credit recovery groups (or any successors thereto)
and expenses of settlement, litigation or preparation therefor) which Buyer or
Second Step Purchaser may incur or which may be asserted against Buyer or Second
Step Purchaser by any Person (including, without limitation, any Obligor or any
other Person whether on its own behalf or derivatively on behalf of Seller) (all
of the foregoing being collectively referred to as "Losses"), arising from or
incurred in connection with (x) any breach of a representation, warranty or
covenant by Seller made or deemed made hereunder or under the Purchase Agreement
or in connection herewith or therewith or the transactions contemplated herewith
or therewith, or (y) any suit, action, claim, proceeding or governmental
investigation, pending or threatened, whether based on statute, regulation or
order, on tort, on contract or otherwise, before any Official Body, which arises
out of or relates to the Transaction Documents, the Ownership Interest or the
Participation Interest in the Transferred Receivables or related Contracts, or
the use of the proceeds of the Transferred Receivables pursuant hereto or to the
Purchase Agreement or the transactions contemplated hereby or thereby (all
Losses, after giving effect to the limitations set forth in this subsection and
in subsections (b) and (c) below, being hereinafter referred to as "Indemnified
Amounts"), excluding, however, (i) Losses to the extent resulting from the gross
negligence or willful misconduct on the part of such Indemnified Party, (ii)
recourse (except as otherwise provided in this Agreement) for Defaulted
Receivables, (iii) any Losses with respect to any tax, reserve, capital charge
or expense related thereto (indemnification with respect to such Losses being
provided as and to the extent provided in the Purchase Agreement), and (iv)
Losses, to the extent that such Losses resulted from an act or omission of
Servicer (if Servicer is not Seller or another Seller Entity).
(b) Without limitation of the generality of subsection (a), Seller
shall pay on demand to each Indemnified Party any and all amounts necessary to
indemnify such Indemnified Party from and against any and all Indemnified
Amounts relating to or resulting from any of the following:
(i) any Transferred Receivable did not, at the time of its
sale or contribution from Seller to Buyer pursuant to this
Agreement, satisfy the criteria for inclusion as an Eligible
Receivable, mutatis mutandis, in accordance with this Agreement
and the Purchase Agreement;
(ii) reliance on any representation or warranty made or
deemed made by Seller (or any of its respective Responsible
Officers) or any `statement made by any Responsible Officer of
Seller under or in
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connection with this Agreement which shall have been incorrect in
any material respect when made;
(iii) the failure by Seller to comply with any applicable
Law, rule or regulation;
(iv) the failure to vest in Buyer, in accordance with this
Agreement, the Ownership Interest in the Transferred Receivables
and Collections in respect thereof, free and clear of any Lien;
(v) the failure of the Purchase Agreement to vest in Second
Step Purchaser the Participation Interest in the Transferred
Receivables and Collections in respect thereof, free and clear of
any Lien, in accordance with the terms of the Purchase Agreement,
as the result of any action or omission by Seller;
(vi) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents
under the Uniform Commercial Code of any applicable jurisdiction
or under any other applicable Law with respect to the sale or
contribution of the Transferred Receivables by Seller to Buyer;
(vii) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the
payment of any Transferred Receivable (including, without
limitation, a defense based on such Receivable or the related
Contract not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or
any other claim resulting from the sale of the merchandise or
service related to such Receivable or the furnishing or failure
to furnish such merchandise or services;
(viii) any failure of Seller to perform its duties or
obligations in accordance with the provisions of this Agreement;
(ix) any products liability claim arising out of or in
connection with merchandise, insurance or services which are the
subject of any Contract; or
(x) any failure by Buyer to make any payment to Second Step
Purchaser required by Section 11.03 of the Purchase Agreement, as
the result of any action or omission by Seller.
(c) Promptly upon receipt by any Indemnified Party hereunder of notice
of the commencement of any suit, action, claim, proceeding or governmental
investigation (an "Action"), such Indemnified Party shall, if a claim in respect
thereof is to be made against Seller hereunder, notify Seller in writing of the
commencement thereof Seller may participate in the
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defense of any such Action at its expense, and no settlement thereof shall be
made without the approval of Seller and the Indemnified Party. The approval of
Seller will not be unreasonably withheld or delayed. In case any Action shall be
brought against any Indemnified Party, Seller shall be entitled to participate
in and, to the extent that it shall wish, to assume the defense thereof, with
counsel satisfactory to the Indemnified Party, and after notice from Seller to
such Indemnified Party of its election so to assume the defense thereof, Seller
shall not be liable to such Indemnified Party for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the defense
thereof other than reasonable costs of investigation. In any such Action, any
Indemnified Party shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Party
unless (i) Seller and such Indemnified Party shall have mutually agreed in
writing to the retention of such counsel or (ii) the named parties to any such
Action (including any impleaded parties) include both Seller and such
Indemnified Party and representation of both parties by the same counsel would
be in appropriate due to actual or potential differing interests between them.
It is understood that Seller shall not, in conjunction with any Action or
related Actions in the same jurisdiction, be liable for the fees and expenses of
more that one separate firm in addition to any local counsel for all such
Indemnified Parties, unless (i) Seller and such Indemnified Parties shall have
mutually agreed in writing to the retention of separate counsel or (ii) the
named parties to any such Action (including any impleaded parties) include such
Indemnified Parties and representation of such Indemnified Parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them, and that all such fees and expenses shall be reimbursed as they
are incurred.
(d) The indemnity contained in this Section 9.1 shall survive the
termination of this Agreement.
ARTICLE X
MISCELLANEOUS
-------------
SECTION 10.1. Amendments, Waivers, Etc.
(a) The provisions of this Agreement may from time to time be amended,
supplemented or otherwise modified, in each case if such amendment, supplement
or modification is in writing and signed by Buyer and Seller (and, if during the
Regulated Period, consented to in writing by Second Step Purchaser). The
provisions of this Agreement may from time to time be waived, but only in a
writing signed by the party against whom such waiver is to be enforced (and, if
during the Regulated Period, consented to in writing by Second Step Purchaser);
and then any such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
(b) No failure or delay on the part of Buyer, any Indemnified Party or
any other third party beneficiary referred to in Section 10.10(a) in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such power or right preclude any other or
further exercise thereof or the exercise of any other power or right. No notice
to or demand on Seller in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by Buyer or Second Step
Purchaser under
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this Agreement shall, except as may otherwise be stated in the waiver or
approval, be applicable to subsequent transactions. No waiver or approval under
this Agreement shall require any similar or dissimilar waiver or approval
thereafter to be granted hereunder.
SECTION 10.2. Notices, Etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by
certified mail, postage prepaid, by facsimile or by overnight courier, to the
intended party at the address or facsimile number of such party set forth under
its name on the signature pages hereof or at such other address or facsimile
number as shall be designated by the party in a written notice to the other
parties hereto given in accordance with this section (and, if during the
Regulated Period, to Second Step Purchaser at the address or facsimile number
set forth under its name on the signature pages of the Purchase Agreement). All
notices and communications provided for hereunder shall be effective, (a) if
personally delivered, when received, (b) if sent by certified mail, three
Business Days (four Business Days, if deposited on a day that is not a Business
Day) after having been deposited in the mail, postage prepaid and properly
addressed, (c) if transmitted by facsimile, when sent, receipt confirmed by
telephone or electronic means and (d) if sent by overnight courier, two Business
Days after having been given to the courier unless sooner received by the
addressee.
SECTION 10.3. Cumulative Remedies. The remedies herein provided are
cumulative and not exclusive of any remedies provided by Law. Without limiting
the foregoing, Seller hereby authorizes Buyer, at any time and from time to
time, to the fullest extent permitted by Law, to set-off, against any
obligations of Seller to Buyer that are then due and payable or that are not
then due and payable from Seller to Buyer but have then accrued, any and all
indebtedness or other obligations at any time owing to Seller by Buyer or that
are not then due and payable from Buyer to Seller but have then accrued.
SECTION 10.4. Binding Effect, Assignability, Survival of Provisions.
This Agreement shall be binding upon and inure to the benefit of each of Buyer
and Seller and its respective successors and permitted assigns (including, in
the case of Buyer, Second Step Purchaser). Seller may not assign any of its
rights hereunder or any interest herein without the prior written consent of
Buyer. This Agreement shall create and constitute the continuing obligations of
the parties hereto in accordance with its terms, and shall remain in full force
and effect until the first date following the Purchase Termination Date, but not
later than the date on which the Purchase Agreement is terminated pursuant to
Section 2.03(c) of the Purchase Agreement, on which all obligations shall have
been finally and fully paid and performed or such other time as the parties
hereto shall agree. The rights and remedies with respect to any breach of any
representation or warranty made by Seller or Buyer pursuant to Article V, and
the indemnification and payment provisions of Article IX and Section 10.6, shall
be continuing and shall survive any termination of this Agreement.
SECTION 10.5. Governing Law. This Agreement and the Seller Assignment
Certificate shall be governed by and construed in accordance with the laws of
the State of New York, without regard to its conflicts of laws rules (other than
Section 5-1401 of New York's General Obligations Law), except to the extent that
the perfection of the interests of Buyer in the
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Transferred Receivables are governed by the laws of a jurisdiction other than
the State of New York.
SECTION 10.6. Costs, Expenses and Taxes. In addition to the
obligations of Seller under Article IX, Seller agrees to pay on demand:
(a) all reasonable out-of-pocket and other costs and expenses in
connection with the enforcement of this Agreement or the other
Sale Documents by Buyer (or by Second Step Purchaser as its
assignee) against Seller; and
(b) all stamp and other taxes and fees payable or determined to be
payable in connection with the execution and delivery, and the
filing and recording, of this Agreement or the other Sale
Documents, and agrees to indemnify each Indemnified Party against
any liabilities with respect to or resulting from any delay in
paying or omission to pay such taxes and fees.
SECTION 10.7. Waiver of Jury Trial. EACH PARTY HERETO WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS
UNDER OR RELATING TO THIS AGREEMENT OR ANY OTHER SALE DOCUMENT OR ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE
DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), ACTIONS OF
EITHER OF THE PARTIES HERETO OR ANY OTHER RELATIONSHIP EXISTING IN CONNECTION
WITH THE SALE DOCUMENTS, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 10.8. Integration. This Agreement and the other Sale Documents
contain a final and complete integration of all prior expressions by the parties
hereto with respect to the subject matter hereof and thereof and shall together
constitute the entire agreement between the parties hereto with respect to the
subject matter hereof and thereof, superseding all prior oral or written
understandings.
SECTION 10.9. Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which together shall constitute one and the same agreement.
SECTION 10.10. Acknowledgment and Consent.
(a) Seller acknowledges that, contemporaneously herewith, Buyer is
selling, transferring, assigning, setting over and otherwise conveying to Second
Step Purchaser all of Buyer's right, title and interest in, to and under the
Transferred Receivables, this Agreement and other Sale Documents pursuant to
Section 2.01 of the Purchase Agreement. Seller hereby consents to the sale,
transfer, assignment, set over and conveyance to Second Step Purchaser by
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Buyer of all right, title and interest of Buyer in, to and under this Agreement
and the other Sale Documents, and all of Buyer's rights, remedies, powers and
privileges, and all claims of Buyer against Seller, under or with respect to
this Agreement and the other Sale Documents (whether arising pursuant to the
terms of this Agreement or otherwise available at law or in equity), including
(i) the right of Buyer, at any time, to enforce this Agreement against Seller
and the obligations of Seller hereunder, (ii) the right to appoint a successor
to Seller, as Servicer, at the times and upon the conditions set forth in the
Purchaser Agreement, and (iii) the right, at any time, to give or withhold any
and all consents, requests, notices, directions, approvals, demands, extensions
or waivers under or with respect to this Agreement, any other Sale Document or
the obligations in respect of Seller thereunder to the same extent as Buyer may
do. Each of the parties hereto acknowledges and agrees that Second Step
Purchaser is an intended, express third party beneficiary of the rights of Buyer
arising hereunder and under the other Sale Documents to which Seller is a party.
(b) Seller hereby agrees to execute all agreements, instruments and
documents, and to take all other action, that Buyer or Second Step Purchaser
reasonably determines is necessary or appropriate to evidence its consent
described in subsection (a). To the extent that Buyer, individually or through
Servicer, has granted or grants powers of attorney to Second Step Purchaser
under the Purchase Agreement, Seller hereby grants a corresponding power of
attorney on the same terms to Buyer. Seller hereby acknowledges and agrees that
Buyer, in all of its capacities, shall assign to Second Step Purchaser the
powers of attorney and other rights and interests granted by Seller to Buyer
hereunder and agrees to cooperate fully with Second Step Purchaser in the
exercise of the rights.
SECTION 10.11. No Partnership or Joint Venture. Nothing contained in
this Agreement shall be deemed or construed by the parties hereto or by any
third person to create the relationship of principal and agent or of partnership
or of joint venture.
SECTION 10.12. No Proceedings. Seller hereby agrees that it will not
institute against Buyer, or join any other Person in instituting against Buyer,
any insolvency proceeding (such as any proceeding of the type referred to in the
definition of Event of Bankruptcy) so long as any Net Investment of Second Step
Purchaser in the Participation Interest shall be outstanding or there shall not
have elapsed one year plus one day since the last day on which any such Net
Investment of Second Step Purchaser in the Participation Interest shall have
been outstanding. The foregoing shall not limit the right of Seller to file any
claim in or otherwise take any action with respect to any insolvency proceeding
that was instituted against Buyer or Second Step Purchaser by any Person other
than Seller or any other Affiliates of Seller (provided that no such action may
be taken by Seller until such proceeding has continued undismissed, unstayed and
in effect for a period of ten (10) days).
SECTION 10.13. Severability of Provisions. 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.
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SECTION 10.14. Recourse to Buyer. Except to the extent (if at all)
expressly provided otherwise in a Sale Document, the obligations of Buyer under
the Sale Documents to which it is a party are solely the obligations of Buyer.
No recourse shall be had for payment of any fee payable by or other obligation
of or claim against Buyer that arises out of any Sale Document to which Buyer is
a party against any director, officer or employee of Buyer. The provisions of
this section shall survive the termination of this Agreement.
SECTION 10.15. Interpretation and Construction. Unless the context of
this Agreement or any other Sale Document otherwise clearly requires: (a)
references herein or therein to the plural include the singular, the singular
the plural and the part the whole; (b) the words "hereof", "herein", "hereunder"
and similar terms in the particular agreement refer to such agreement as a whole
and not to any particular provision thereof; (c) section and other headings
(including tables of contents) contained herein or therein are for reference
purposes only and shall not control or affect the construction or interpretation
hereof or thereof in any respect; (d) section, subsection, schedule and appendix
references are to those of the particular agreement unless otherwise specified;
and (e) the masculine, feminine or neuter gender referenced in any such
agreement shall each be deemed to include the others whenever the context so
indicates. This Agreement and each other Sale Document shall be construed as a
whole and in accordance with its fair meaning.
[The Remainder of this page intentionally has been left blank.]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
Address for Notices: VOLT INFORMATION SCIENCES, INC.,
560 Lexington Ave., 15th Floor as Seller
New York, NY 10022
Attn: Chief Financial Officer By:
--------------------------------
Telephone: (212) 704-2400 Name:
Telecopy: (212) 704-2417 Title:
Address for Notices: VOLT FUNDING CORP.,
560 Lexington Ave., 15th Floor as Buyer
New York, NY 10022
Attn: Chief Financial Officer By:
--------------------------------
Telephone: (212) 704-2450 Name:
Telecopy: (212) 704-2470 Title:
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