COPIED AS EXECUTED
U.S. $40,000,000
TRADE RECEIVABLES
PURCHASE AND SALE AGREEMENT
Dated as of December 28, 1984, As Amended, and
As Amended and Restated as of December 30, 1994
Among
THE CONTINENTAL INSURANCE COMPANY
BOSTON OLD COLONY INSURANCE COMPANY
THE BUCKEYE UNION INSURANCE COMPANY
CASUALTY INSURANCE COMPANY
COMMERCIAL INSURANCE COMPANY OF NEWARK, N.J.
THE CONTINENTAL INSURANCE COMPANY OF NEW JERSEY
CONTINENTAL LLOYD'S INSURANCE COMPANY
CONTINENTAL REINSURANCE CORPORATION
THE FIDELITY AND CASUALTY COMPANY OF NEW YORK
FIREMEN'S INSURANCE COMPANY OF NEWARK, NEW JERSEY
THE GLENS FALLS INSURANCE COMPANY
KANSAS CITY FIRE AND MARINE INSURANCE COMPANY
THE MAYFLOWER INSURANCE COMPANY, LTD.
NATIONAL-BEN FRANKLIN INSURANCE COMPANY OF ILLINOIS
NIAGARA FIRE INSURANCE COMPANY
PACIFIC INSURANCE COMPANY
WORKERS' COMPENSATION AND INDEMNITY COMPANY OF CALIFORNIA
Collectively as Seller
----------------------
and
CIESCO L.P.
as Investor
-----------
and
CITIBANK, N.A.
and
CITICORP NORTH AMERICA, INC.
Individually and as Agent
-------------------------
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms . . . . . . . . . . . . 3
SECTION 1.02. Other Terms. . . . . . . . . . . . . . . . . . 20
SECTION 1.03. Computation of Time Periods . . . . . . . . . 20
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Designated Obligors . . . . . . . . . . . . . 20
SECTION 2.02. Commitment . . . . . . . . . . . . . . . . . . 20
SECTION 2.03. Making Purchases . . . . . . . . . . . . . . . 21
SECTION 2.04. Termination or Reduction of the
Commitment . . . . . . . . . . . . . . . . . . 21
SECTION 2.05. Fees . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.06. Share . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.07. Settlement Procedures . . . . . . . . . . . . 23
SECTION 2.08. Payments and Computations, Etc . . . . . . . . 26
SECTION 2.09. Dividing or Combining of Shares . . . . . . . 27
SECTION 2.10. Recourse for Yield . . . . . . . . . . . . . . 27
SECTION 2.11. Increased Costs, Etc. . . . . . . . . . . . . 28
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial
Purchase . . . . . . . . . . . . . . . . . . . 29
SECTION 3.02. Conditions Precedent to All
Purchases . . . . . . . . . . . . . . . . . . . 30
SECTION 3.03. Conditions Precedent to Designation
of Designated Obligors and to
Reinvestments of Collections . . . . . . . . . 31
SECTION 3.04. Conditions Precedent to
Effectiveness of Amendment and
Restatement . . . . . . . . . . . . . . . . . . 32
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of
each Owner . . . . . . . . . . . . . . . . . . 35
ARTICLE V
ii
GENERAL COVENANTS OF EACH OWNER
SECTION 5.01. Affirmative Covenants of each Owner . . . . . 38
SECTION 5.02. Reporting Requirements of each Owner . . . . . 40
SECTION 5.03. Negative Covenants of each Owner . . . . . . . 41
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Collection Agent . . . . . . . 42
SECTION 6.02. Duties of Collection Agent. . . . . . . . . . 42
SECTION 6.03. Rights and Duties of the Agent . . . . . . . . 44
SECTION 6.04. Responsibilities of the Seller . . . . . . . . 44
SECTION 6.05. Further Action Evidencing Purchases . . . . . 45
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination . . . . . . . . . . . . 46
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action . . . . . . . . . . . 48
SECTION 8.02. Agent's Reliance, Etc . . . . . . . . . . . . 48
SECTION 8.03. CNA and Affiliates . . . . . . . . . . . . . . 49
SECTION 8.04. Investor's Purchase Decision . . . . . . . . . 49
ARTICLE IX
ASSIGNMENT OF SHARES
SECTION 9.01. Assignment. . . . . . . . . . . . . . . . . . 49
SECTION 9.02. Annotation of Certificate . . . . . . . . . . 50
SECTION 9.03. Payments to Agent . . . . . . . . . . . . . . 50
ARTICLE X
INDEMNIFICATION
SECTION 10.01. Indemnities by the Seller and the
Owners . . . . . . . . . . . . . . . . . . . . 50
SECTION 10.02. Seller to Advise Agent . . . . . . . . . . . 51
SECTION 10.03. Cooperation in Litigation . . . . . . . . . . 52
iii
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments, Etc . . . . . . . . . . . . . . . 52
SECTION 11.02. Notices, Etc . . . . . . . . . . . . . . . . 52
SECTION 11.03. No Waiver; Remedies . . . . . . . . . . . . . 52
SECTION 11.04. Binding Effect; Assignability. . . . . . . 53
SECTION 11.05. Governing Law . . . . . . . . . . . . . . . . 53
SECTION 11.06. Costs, Expenses and Taxes . . . . . . . . . . 53
SECTION 11.07. No Proceedings. . . . . . . . . . . . . . . 54
SECTION 11.08. Security Interest . . . . . . . . . . . . . . 54
SECTION 11.09. Non-Assignment of Contracts . . . . . . . . . 55
SECTION 11.10. Additional Owners . . . . . . . . . . . . . . 55
SECTION 11.11. Execution in Counterparts . . . . . . . . . . 55
SECTION 11.12. Reference to the Documents . . . . . . . . . 56
EXHIBIT A - Form of Assignment
EXHIBIT B-1 - Form of Certificate of Assignment to CNA as
Agent for the Investor
EXHIBIT B-2 - Form of Certificate of Assignment to CNA as
Agent for Citibank
EXHIBIT B-3 - Form of Certificate of Assignment to CNA as
Agent for CNA
EXHIBIT C - Company Agreement
EXHIBIT D - Form of Contract
EXHIBIT E - Form of Investor Report
EXHIBIT F - Form of Designation of Obligors
EXHIBIT G - Form of Cancellation of Designation of
Obligors
EXHIBIT H - Form of Opinion of Martin Haber, Esq.
EXHIBIT I - List of Offices of Each Owner where Records
are Kept
EXHIBIT J - Form of Assumption Agreement
TRADE RECEIVABLES
PURCHASE AND SALE AGREEMENT
Dated as of December 28, 1984, as amended, and
as amended and restated as of December 30, 1994
THE CONTINENTAL INSURANCE COMPANY, a New Hampshire
corporation, BOSTON OLD COLONY INSURANCE COMPANY, a Massachusetts
corporation, THE BUCKEYE UNION INSURANCE COMPANY, an Ohio
corporation, CASUALTY INSURANCE COMPANY, an Illinois corporation,
COMMERCIAL INSURANCE COMPANY OF NEWARK, N.J., a New Jersey
corporation, THE CONTINENTAL INSURANCE COMPANY OF NEW JERSEY, a
New Jersey corporation, CONTINENTAL LLOYD'S INSURANCE COMPANY, a
Lloyd's organization formed under the Texas Insurance Code
("Continental Lloyd's"), CONTINENTAL REINSURANCE CORPORATION, a
-------------------
California corporation, THE FIDELITY AND CASUALTY COMPANY OF NEW
YORK, a New Hampshire corporation, FIREMEN'S INSURANCE COMPANY OF
NEWARK, NEW JERSEY, a New Jersey corporation, THE GLENS FALLS
INSURANCE COMPANY, a Delaware corporation, KANSAS CITY FIRE AND
MARINE INSURANCE COMPANY, a Missouri corporation, THE MAYFLOWER
INSURANCE COMPANY, LTD., an Indiana corporation, NATIONAL-BEN
FRANKLIN INSURANCE COMPANY OF ILLINOIS, an Illinois corporation,
NIAGARA FIRE INSURANCE COMPANY, a Delaware corporation, PACIFIC
INSURANCE COMPANY, a California corporation and WORKERS'
COMPENSATION AND INDEMNITY COMPANY OF CALIFORNIA, a California
corporation (each such corporation and any other corporation
which has become a party hereto pursuant to Section 11.10,
individually, being hereinafter referred to an "Owner" and,
-----
collectively, as the "Owners" or the "Seller", CIESCO L.P.
------ ------
(formerly known as Commercial Industrial Trade-receivables
Investment Company), a New York limited partnership (the
"Investor"), CITIBANK, N.A. ("Citibank") and CITICORP NORTH
-------- --------
AMERICA, INC. (formerly known as Citicorp Industrial Credit,
Inc.), a Delaware corporation, individually ("CNA") and as agent
---
for the Investor, Citibank and CNA (the "Agent"), agree as
-----
follows:
PRELIMINARY STATEMENTS. (1) Certain terms which are
capitalized and used throughout this Agreement are defined in
Article I of this Agreement.
(2) Each Owner has entered into that certain
Intercompany Pooling Agreement effective January 1, 1982 as
amended by certain addenda thereto (as the same may, from time to
time, be amended, modified or supplemented pursuant to one or
more addenda or otherwise, the "Intercompany Pooling Agreement")
------------------------------
with each other Owner pursuant to which each Owner (other than
Continental) sold, transferred and assigned, and
2
continues to sell, transfer and assign, to Continental certain
accounts receivable, including the Receivables to the extent of
such Owner's right, title and interest therein, and simultaneously
therewith Continental sold, transferred and assigned, and
continues to sell, transfer and assign, to each such Owner a
percentage interest and participation in such accounts receivable
and in certain of its accounts receivable, including Receivables,
to the extent of its right, title and interest therein.
(3) The Seller has, and expects to have, Receivables
arising from sales from time to time of insurance products or
services. The Seller intends to segregate certain Receivables in
a Receivables Pool on an ongoing basis and desires to sell
fractional undivided interests, herein called Shares, in
Receivables in the Receivables Pool herein called Pool
Receivables.
(4) The Investor and Citibank desire to purchase such
Shares from the Seller. CNA may elect to purchase Shares from
the Seller. Subject to certain conditions, the Investor,
Citibank and CNA may assign this Agreement and their rights and
obligations therein or their Shares and related rights and
obligations under this Agreement to an Assignee, and such
Assignee may assign this Agreement and its rights and obligations
therein or its Shares and related rights and obligations under
this Agreement to any other Assignee.
(5) In consideration of the reinvestment in Pool
Receivables by a Shareowner of daily Collections of its Shares
(other than with regard to accrued Collection Agent Fee) and so
long as such reinvestment continues, the Seller will sell to such
Shareowner additional interests in the Pool Receivables as part
of such Shares. It is intended that such daily reinvestment of
Collections be effected, until such reinvestment shall be
terminated pursuant to the provisions of this Agreement, by an
automatic daily adjustment to each Shareowner's Shares, which
adjustment shall reflect the daily transfer to such Shareowner of
interests in new Pool Receivables and the daily adjustment of its
Shares. Such daily reinvestment is intended, so long as it
continues, to permit each Shareowner to maintain its funds,
called herein Capital, fully invested in uncollected Pool
Receivables.
(6) CNA has been requested, and CNA is willing, to act
as Agent.
(7) The Seller, the Investor, Citibank and CNA,
individually and as Agent, entered into a Trade Receivables
Purchase and Sale Agreement dated as of December 28, 1984 (said
Agreement as amended to date being the "Receivables Agreement").
---------------------
The parties hereto have agreed to amend and restate the
Receivables Agreement as set forth herein.
NOW, THEREFORE, the parties agree to amend and restate
the Receivables Agreement in its entirety to read as follows:
3
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this
---------------------
Agreement, the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Adverse Claim" means a lien, security interest,
-------------
charge, or encumbrance, or other right or claim of any
Person, other than a right or claim (i) as against any
insurance policy (but not the related Pool Receivables) for
payment of a loss, asserted by a Person who is a loss payee
under such insurance policy or (ii) as against any insurance
policy (but not the related Pool Receivables) for
contribution for payment of a loss asserted by any Owner by
reason of reinsurance provided for in the Intercompany
Pooling Agreement.
"Affiliate" when used with respect to a Person means
---------
any other Person controlling, controlled by or under common
control with such Person.
"Affiliated Obligor" means any Obligor which is an
------------------
Affiliate of another Obligor.
"Agent's Account" has the meaning assigned to that term
---------------
in Section 2.07(c)(i).
"Alternate Base Rate" means a fluctuating interest rate
-------------------
per annum as shall be in effect from time to time, which
rate per annum shall at all times be equal to the higher of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time as
Citibank's base rate; or
(b) 1/2 of one percent above the latest
three-week moving average of secondary market morning
offering rates in the United States for three-month
certificates of deposit of major United States money
market banks, such three-week moving average being
determined weekly by Citibank on the basis of such
rates reported by certificate of deposit dealers to and
published by the Federal Reserve Bank of New York or,
if such publication shall be suspended or terminated,
on the basis of quotations for such rates received by
Citibank from three New York certificate of deposit
dealers of recognized standing, in either case adjusted
to the nearest 1/4 of one percent or, if there is no
nearest 1/4 of one percent, to the next higher 1/4 of
one percent; provided,
--------
4
however, that such fluctuating interest rate shall in
-------
no event be higher than the maximum rate permitted by
applicable law.
"Assignee" means Citibank, CNA, the Investor or any of
--------
their respective Affiliates, or Persons managed by Citibank,
CNA or any of their respective Affiliates, or any other
Person (other than a Person which is engaged primarily, or
is a member of a group (consisting of such Person and all of
its Affiliates) which is engaged primarily, in the business
of underwriting or selling insurance) as the assignee of a
Share pursuant to or as contemplated by Article IX.
"Assignment" means an assignment, in substantially the
----------
form of Exhibit A, by which a Share or Shares may be
assigned.
"Assumption Agreement" means an Assumption Agreement in
--------------------
substantially the form of Exhibit J hereto.
"Average Commission Balance" means an amount owing to
--------------------------
or by an insurance agent relating to the difference between
the then outstanding amount of commissions due and payable
by such insurance agent to an Owner or to such insurance
agent by an Owner in respect of any insurance products or
services provided by each Owner.
"Average Maturity" means, on any day, that period
----------------
(expressed in days) equal to the average maturity of the
Pool Receivables as shall be calculated by the Collection
Agent as set forth in the most recent Investor Report
delivered to the Agent in accordance with the provisions
thereof; provided, however, if the Agent shall disagree with
-------- -------
any such calculation, the Agent may in good faith
re-calculate the Average Maturity for such day.
"Business Day" means any day of the year on which banks
------------
are not required or authorized to close in New York City
and, if the applicable Business Day relates to any Share for
which the Investor Rate is determined by reference to the
Eurodollar Rate, on which dealings are carried on in the
London interbank market.
"Capital" of any Share means the original amount of the
-------
Purchase of such Share by the Investor, Citibank or CNA, as
the case may be, pursuant to Sections 2.02 and 2.03 reduced
from time to time by the portion of Collections distributed
pursuant to Section 2.07(d)(A)(y), or otherwise received and
distributed, on account of such Capital; provided that such
--------
Capital of such Share shall not be reduced by any
distribution of any portion of Collections if at any time
such distribution is rescinded or must otherwise be returned
for any reason.
5
"Certificate" means a certificate of the Seller: in
-----------
substantially the form of Exhibit B-1 as to an assignment by
the Seller to the Agent for the account of the Investor; in
substantially the form of Exhibit B-2 as to an assignment by
the Seller to the Agent for the account of Citibank; and in
substantially the form of Exhibit B-3 as to an assignment by
the Seller to the Agent for the account of CNA in its
individual capacity; in each case, evidencing each Share
owned by the Investor, Citibank or CNA, respectively.
"Citibank Rate" for any Fixed Period for any Share
-------------
means an interest rate per annum equal to 1.375% per annum
above the Eurodollar Rate; provided, however, that in the
-------- -------
case of any Fixed Period of one to (and including) 13 days
or if required pursuant to Section 2.11(c) or (d), the
"Citibank Rate" for such Fixed Period for such Share shall
-------------
be an interest rate per annum equal to the Alternate Base
Rate in effect on the first day of such Fixed Period;
provided further, however, that the Agent and the Seller may
-------- ------- -------
agree in writing from time to time upon a different
"Citibank Rate".
-------------
"Collection Agent" means at any time the Person then
----------------
authorized pursuant to Article VI to service, administer and
collect on behalf of the Agent Pool Receivables.
"Collection Agent Fee" has the meaning assigned to that
--------------------
term in Section 2.05(c).
"Collection Agent Fee Reserve" for any Share at any
----------------------------
time means the sum of (i) the Liquidation Collection Agent
Fee for such Share at such time plus (ii) the unpaid
Collection Agent Fee relating to such Share accrued to such
time.
"Collection Delay Period" for any Share means 10 days,
-----------------------
or such other number of days as the Agent may reasonably
select upon three Business Days' notice to the Seller.
"Collections" means, with respect to any Receivable,
-----------
all cash collections and other cash proceeds of such
Receivable, including, without limitation, all cash proceeds
of Related Security with respect to such Receivable, and any
Collection of such Receivable deemed to have been received
pursuant to Section 2.07(b); provided, however, that except
-------- -------
as otherwise provided in Section 2.07(b), the Collection
Agent and the Seller shall not be deemed to have received
any Collection of such Receivable previously received by an
insurance agent until such insurance agent shall have paid
such amounts over to the Collection Agent or the Seller.
"Commitment" means, as the context requires, either (i)
----------
$40,000,000, as such amount may be reduced pursuant to
Section 2.04, or as such amount may be
6
increased or decreased upon the agreement in writing of the
parties to
this Agreement, or (ii) the obligation of Citibank to make
Purchases from time to time aggregating, together with
Purchases by the Investor and CNA, up to $40,000,000 or such
reduced amount pursuant to Section 2.04 or such increased or
decreased amount as agreed to by each of the parties hereto.
"Commitment Termination Date" means the earlier of (i)
---------------------------
one of the following dates (as applicable): (A) with
respect to any Purchase by Citibank or any Share owned by
Citibank, December 29, 1995, provided that during the 10-day
--------
period immediately preceding such date (or any extension of
such date in accordance with this proviso), the Seller and
the Agent may agree in writing to extend (effective on the
day immediately preceding such date) the Commitment
Termination Date by up to an additional 360 days, and (B)
with respect to Purchases by the Investor or CNA (any of
which, as provided in this Agreement, are at the sole
discretion of the Investor or CNA, as the case may be), any
Share owned by the Investor or CNA or any other case not
governed by subclause (A) above, December 30, 1997 and (ii)
the date of termination of the Commitment pursuant to
Section 2.04 or 7.01.
"Company" means The Continental Corporation, a New York
-------
corporation and the beneficial owner of all of the
outstanding shares of stock of each Owner.
"Company Agreement" means that certain Agreement, dated
-----------------
as of the date hereof, of the Company, attached as Exhibit C
hereto, as such Agreement may, from time to time, be
amended, modified, or supplemented.
"Concentration Limit" for any Obligor means at any time
-------------------
3% (or such other percentage agreed to by the Agent) of the
aggregate Capital of all Shares at such time; provided,
--------
however, that the Concentration Limit (and the Receivables
-------
or Outstanding Balance of Receivables with reference thereto
or in connection therewith) shall be calculated as if such
Obligor and each of its Affiliated Obligors are, as to all
of their respective Pool Receivables, one Obligor.
"Continental" means The Continental Insurance Company,
-----------
a New Hampshire corporation, and any corporation which may
succeed to the business and assets of such corporation by
merger or consolidation or acquisition of assets.
"Contract" means an invoice or other statement of
--------
account, an example of which is set forth in Exhibit D
hereto.
"Credit and Collection Policy" means those credit and
----------------------------
collection policies and practices existing on December 30,
1994 which are being followed by the Seller with
7
respect to Contracts and Receivables related thereto, including
those policies and practices maintained by the Seller's computer
system, with such changes to such credit and collection
policies and practices as are not prohibited by Section
5.03(c).
"Debt" means (i) indebtedness for borrowed money or for
----
the deferred purchase price of property or services, (ii)
obligations as lessee under leases which shall have been or
should be, in accordance with generally accepted accounting
principles, recorded as capital leases, (iii) obligations
under direct or indirect guaranties (other than obligations
arising under insurance policies and bonds issued by any
Owner in the ordinary course of its business) in respect of,
and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against
loss in respect of, indebtedness or obligations of others of
the kinds referred to in clause (i) or (ii) above (other
than obligations arising under insurance policies and bonds
issued by any Owner in the ordinary course of its business),
and (iv) liabilities in respect of unfunded benefit
liabilities, within the meaning of Section 4001(a)(18) of
ERISA, under plans covered by Title IV of ERISA.
"Default Ratio" on any day means the percentage
-------------
obtained by dividing the Outstanding Balance of Pool
Receivables which shall have become Defaulted Receivables
during the period of 30 consecutive days ending on the day
immediately prior to such day by the Net Receivables Pool
Balance on such day.
"Defaulted Receivable" means a Receivable:
--------------------
(i) as to which any payment, or part thereof,
remains unpaid for 241 days or more from the original
due date for such payment; or
(ii) which, consistent with the Credit and
Collection Policy, is deemed to be uncollectible
through normal collection procedures and has been or
will be referred to an independent collection agent or
an attorney for further collection proceedings; or
(iii) as to which the Obligor thereof has
taken any action, or suffered any event to occur, of
the type described in Section 7.01(f); or
(iv) which, consistent with the Credit and
Collection Policy, would be written off the Seller's
books as uncollectible.
"Delinquency Ratio" on any day means the percentage
-----------------
obtained by dividing the Outstanding Balance of Pool
Receivables which are on such day Delinquent Receivables by
the Net Receivables Pool Balance on such day.
8
"Delinquent Receivable" means a Receivable that is not
---------------------
a Defaulted Receivable and:
(i) as to which any payment, or part thereof,
remains unpaid for 181 days or more from the original
due date for such payment; or
(ii) which the insurance agent responsible for the
collection thereof has been unable to collect and an
Owner has undertaken to collect directly from the
Obligor; or
(iii) which, consistent with the Credit and
Collection Policy, would be classified as delinquent by
the Seller.
"Designated Obligor" means, at any time, an Obligor (i)
------------------
which is a United States resident and not an Affiliate of
any of the parties hereto and (ii) which shall at such time
have been so designated by the Seller and approved by the
Agent in accordance with Section 2.01 and whose designation
as a Designated Obligor shall not at such time have been
cancelled by either the Seller or the Agent pursuant to
Section 2.01.
"Dilution Ratio" means, for any calendar month, the
--------------
ratio (expressed as a percentage) computed as of the last
day of such calendar month by dividing (i) the aggregate
amount of policy cancellations, policy endorsements, deemed
collections and other reductions of the Receivables Pool the
effect of which is to reduce the Outstanding Balance of any
Pool Receivable (other than any dilution resulting solely
from any write off of any Pool Receivable by the Collection
Agent and not from any of the factors specified above)
provided to Obligors during such calendar month in respect
of the principal balance of Pool Receivables by (ii) the
aggregate Outstanding Balance of all Pool Receivables
acquired by the Seller during the prior calendar month.
"Eligible Receivable" means a Receivable:
-------------------
(i) the Obligor of which, at the later of the
time of creation of such Receivable or the time such
Obligor became a Designated Obligor, (A) is not an
affiliate or a division of any Owner and (B) is not a
government agency, department, instrumentality or
political subdivision of any kind whatsoever;
9
(ii) which, according to the Contract related
thereto, is required to be paid in full within 45 days
of the end of the effective month of the insurance
coverage provided by the insurance policy related
thereto;
(iii) which is an account receivable
representing all or part of the sales price of the
insurance products and services sold to an Obligor;
(iv) which is an "account" within the meaning of
Section 9-106 of the UCC of the State of New York;
(v) which is denominated and payable only in
United States dollars in the United States;
(vi) which arises as a result of the issuance of a
legal, valid and binding insurance policy to an Obligor
and which is enforceable against such Obligor in
accordance with its terms and is not subject to any
dispute, offset, counterclaim or defense whatsoever
(except the discharge in bankruptcy of such Obligor);
(vii) which, together with the Contract
related thereto, does not contravene in any material
respect any laws, rules or regulations applicable
thereto (including, without limitation, laws, rules and
regulations relating to truth in lending, fair credit
billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and
privacy) and with respect to which the issuer of such
Contract is not in violation of any such law, rule or
regulation in any material respect;
(viii) which, at the later of the time of
creation of such Receivable or the time the Obligor
thereof became a Designated Obligor, (A) satisfies all
applicable requirements of the Credit and Collection
Policy, (B) complies with such other criteria and
requirements (other than those relating to the
collectibility of such Receivable) as the Agent may
from time to time reasonably specify to the Seller
prior to the time the Obligor thereof became a
Designated Obligor and (C) complies, on and after the
30th day following notice by the Agent to the Seller of
any other criteria or requirements, with such other
criteria or requirements (other than those relating to
the collectibility of such Receivable) as the Agent
shall have reasonably specified in such notice; and
(ix) the assignment of which pursuant hereto is
not prohibited by, and is effective under, applicable law.
10
"Equity Investor" means CNA Financial Corporation, a
---------------
Delaware corporation.
"ERISA" means the U.S. Employee Retirement Income
-----
Security Act of 1974, as amended from time to time.
"Eurodollar Rate" for any Fixed Period for any Share
---------------
means an interest rate per annum equal to the rate per annum
obtained by dividing (a) the rate per annum at which
deposits in U.S. dollars are offered by the principal office
of Citibank in London, England to prime banks in the London
interbank market at 11:00 a.m. (London time) two Business
Days before the first day of such Fixed Period in an amount
substantially equal to the Capital of such Share for a
period equal to such Fixed Period by (b) a percentage equal
to 100% minus the Eurodollar Rate Reserve Percentage for
such Fixed Period.
"Eurodollar Rate Reserve Percentage" for any Fixed
----------------------------------
Period means the reserve percentage applicable two Business
Days before the first day of such Fixed Period under
regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor)
for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other
marginal reserve requirement) for a member bank of the
Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including
Eurocurrency Liabilities (as defined in Regulation D of the
Board of Governors of the Federal Reserve System, as in
effect from time to time) (or with respect to any other
category of liabilities that includes deposits by reference
to which the Eurodollar Rate is determined) having a term
equal to such Fixed Period.
"Event of Termination" has the meaning assigned to that
--------------------
term in Section 7.01.
"Fixed Period" means with respect to any Share:
------------
(a) initially the period commencing on the date
of the Purchase of such Share and ending such number of
days, as the Seller shall select and the Agent shall
approve pursuant to Section 2.02, up to 270 days from
such date; and
(b) thereafter each period commencing on the last
day of the immediately preceding Fixed Period for such
Share and ending such number of days (not to exceed 270
days) as the Seller shall select and the Agent shall
approve on notice by the Seller received by the Agent
(including notice by telephone, confirmed in writing)
not later than 11:00 A.M. (New York City
11
time) on such last day, except that if the Agent shall not
------
have received such notice or the Agent and the Seller shall
not have so mutually agreed before 11:00 A.M. (New York
City time) on such last day, such period shall be one
day;
provided, however, that: (i) any Fixed Period in respect of
-------- -------
which Yield is computed by reference to the Citibank Rate
shall be a period of from one to and including 13 days, or a
period of 1, 2, 3 or 6 months, as the Seller may select as
provided above; (ii) any such Fixed Period (other than of
one day) which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding
Business Day; provided, in the case of any Fixed Period
--------
referencing the Eurodollar Rate, that, if such extension
would cause the last day of such Fixed Period to occur in
the next following calendar month, the last day of such
Fixed Period shall on the next preceding Business Day; (iii)
in the case of any Fixed Period of one day for any Share,
(a) if such Fixed Period is such Share's initial Fixed
Period, such Fixed Period shall be the day of the related
Purchase; (b) any subsequently occurring Fixed Period which
is one day shall, if the immediately preceding Fixed Period
is more than one day, be the last day of such immediately
preceding Fixed Period, and, if the immediately preceding
Fixed Period is one day, be the day next following such
immediately preceding Fixed Period; and (c) if such Fixed
Period occurs on a day immediately preceding a day which is
not a Business Day, such Fixed Period shall be extended to
the next succeeding Business Day; and (iv) in the case of
any Fixed Period for any Share which commences before the
Termination Date for such Share and would otherwise end on a
date occurring after such Termination Date, such Fixed
Period shall end on such Termination Date and the duration
of each Fixed Period which commences on or after the
Termination Date for such Share shall be of such duration as
shall be selected by the Agent.
"Indemnified Party" has the meaning assigned to that
-----------------
term in Section 2.11(a).
"Installment Receivable" has the meaning assigned to it
----------------------
in the definition of "Receivable".
"Intercompany Pooling Agreement" has the meaning
------------------------------
assigned to that term in Preliminary Statement (2).
"Investor Investment Fee" has the meaning assigned to
-----------------------
that term in Section 2.05(a).
"Investor Rate" for any Fixed Period for any Share
-------------
means:
12
(a) the rate equivalent to the rate (or if more
than one rate, the weighted average of the rates) at
which commercial paper notes of the Investor or any
Assignee having a term equal to such Fixed Period and
to be issued to fund the Purchase or maintenance of
such Share by the Investor or such Assignee may be sold
by any placement agent or commercial paper dealer
selected by the Investor or such Assignee, as agreed
between each such agent or dealer and the Investor or
such Assignee and notified by the Investor or such
Assignee to the Agent and the Collection Agent;
provided, however, if the rate (or rates) as agreed
-------- -------
between any such agent or dealer and the Investor or
such Assignee with regard to any Fixed Period for any
Share is a discount rate (or rates), the "Investor
--------
Rate" for such Fixed Period shall be the rate (or if
----
more than one rate, the weighted average of the rates)
resulting from converting such discount rate (or rates)
to an interest-bearing equivalent rate per annum, or
(b) if the Investor or such Assignee funds its
purchase or maintenance of such Share for such Fixed
Period other than by issuing commercial paper, a rate
equal to the Citibank Rate for such Fixed Period or
such other rate as the Agent and the Seller shall agree
to in writing;
provided, however, that, if the Investor or such Assignee so
-------- -------
requests and the Seller consents thereto, the "Investor
--------
Rate" for any Fixed Period of one day shall be the Citibank
----
Rate for such Fixed Period.
"Investor Report" means a report, in substantially the
---------------
form of Exhibit E or in such other form reasonably requested
by the Agent, furnished on behalf of the Seller by the
Collection Agent to the Agent for each holder of a
Certificate pursuant to Section 2.07(e).
"Liquidation Collection Agent Fee" means for any Share
--------------------------------
at any time an amount equal to the product of
(i) the Capital of such Share at such time, times
(ii) the percentage per annum at such time of the
Collection Agent Fee payable to the Collection Agent,
times
(iii) a fraction having the number of days in
the period equal to the sum of the Average Maturity
plus the Collection Delay Period (each as in effect as
of such time), as numerator, and 360 as denominator.
13
"Liquidation Day" for any Share means either (i) each
---------------
day during any Settlement Period for such Share on which the
conditions set forth in Section 3.03 are not satisfied (or
waived by the Agent), provided that such conditions are also
--------
not satisfied (or waived by the Agent) on each succeeding
day during such Settlement Period, or (ii) each day which
occurs on or after the Termination Date for such Share.
"Liquidation Fee" means, for each Share for any Fixed
---------------
Period which commences before the Termination Date (computed
without regard to the last proviso of the definition of
-------
"Fixed Period") during which any Liquidation Day or
Termination Date for such Share occurs, the amount, if any,
by which (i) the additional Yield (calculated without taking
into account any Liquidation Fee) which would have accrued
on the reductions of Capital of such Share during such Fixed
Period (as so computed) if such reductions had remained as
Capital, exceeds (ii) the income, if any, received by the
owner of such Share from such owner's investing the proceeds
of such reductions of Capital.
"Liquidation Yield" means, for any Share at any date,
-----------------
an amount equal to the product of (i) the Capital of such
Share as at such date and (ii) the product of (a) the
Citibank Rate for such Share for a Fixed Period deemed to
commence at such time for a period of 30 days and (b) a
fraction having as its numerator the number of days in the
period equal to the sum of the Average Maturity plus the
Collection Delay Period (each as in effect at such date) and
360 as its denominator.
"Loss Percentage" for any Share means on any day during
---------------
any Fixed Period for such Share the greater of (i) the sum
of five times the current month's Loss-to-Liquidation Ratio
plus the Dilution Ratio or (ii) 17.5% (to be lowered to a
level to the satisfaction of the Agent subject to actual
loss and dilution statistics).
14
"Loss Reserve" means, for any Share at any date, an
------------
amount equal to
LP x C
where:
LP = the Loss Percentage for such Share at the
close of business of the Collection Agent on
such date.
C = the Capital of such Share at the close of
business of the Collection Agent on such
date.
"Loss-to-Liquidation Ratio" means the ratio (expressed
-------------------------
as a percentage) computed as of the last day of each
calendar month by dividing (i) an amount equal to the
aggregate Outstanding Balance of all Pool Receivables
written off by the Seller, or that should have been written
off by Seller, during such month by (ii) the aggregate
amount of Collections (other than any deemed Collections)
received during such month with respect to Pool Receivables.
"Moody's" means Moody's Investors Services, Inc.
-------
"Net Receivables Pool Balance" means at any time the
----------------------------
Outstanding Balance of the Eligible Receivables in the
Receivables Pool at such time reduced by the sum of (i) the
aggregate Outstanding Balance of the Defaulted Receivables
in the Receivables Pool at such time and (ii) the aggregate
amount by which the then Outstanding Balance of all Pool
Receivables (other than Defaulted Receivables) of each
Obligor exceeds the product of (A) the Concentration Limit
for such Obligor at such time multiplied by (B) the
Outstanding Balance of the Eligible Receivables in the
Receivables Pool at such time.
"Obligor" means a Person obligated to make payments for
-------
purchase of insurance products or services.
"Outstanding Balance" of any Receivable at any time
-------------------
means the then outstanding balance thereof, provided that
--------
the "Outstanding Balance" of an Installment Receivable shall
-------------------
include for purposes of Section 2.07(b) all future
installments that would have been due under the Contract
relating thereto if it were not cancelled or otherwise
terminated, and "Outstanding Balance" of the Receivables
Pool at any time means the then outstanding aggregate
balance of all Pool Receivables.
15
"Owner" has the meaning assigned to such term in the
-----
paragraph preceding the Preliminary Statements.
"Person" means an individual, partnership, corporation
------
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity.
"Plan Termination Event" means (i) the occurrence of a
----------------------
reportable event described in Section 4043 of ERISA and the
regulations issued thereunder with respect to a Plan (other
than a reportable event not subject to the provision for a
30-day notice to the Pension Benefit Guaranty Corporation
under such regulations) or an event described in Section
4068(f) of ERISA, or (ii) the withdrawal of an Owner or any
of its ERISA Affiliates from a Plan during a plan year in
which it was a "substantial employer" as defined in Section
4001(a)(2) of ERISA or the incurrence of liability by an
Owner or any of its ERISA Affiliates under Section 4064 of
ERISA upon the termination of a Plan, or (iii) the filing of
a notice of intent to terminate a Plan or the treatment of a
Plan amendment as a termination under Section 4041 of ERISA,
or (iv) the institution of proceedings to terminate a Plan
by the Pension Benefit Guaranty Corporation, or (v) the
occurrence of any other event or condition which might
constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to
administer, any Plan; provided, however, that any such event
-------- -------
described above in clauses (i) through (v) could reasonably
be expected to result in a material liability to the Pension
Benefit Guaranty Corporation or to a Plan. "ERISA
-----
Affiliate" means any trade or business (whether or not
---------
incorporated) which is a member of a group of which an Owner
is a member and which is under common control within the
meaning of the regulations under Section 414 of the Internal
Revenue Code of 1986, as amended. "Plan" means an employee
----
benefit plan (other than a Multiemployer Plan) maintained
for employees of an Owner or any ERISA Affiliate and covered
by Title IV of ERISA. "Multiemployer Plan" means a
------------------
"multiemployer plan" as defined in Section 4001(a)(3) of
ERISA.
"Pool Receivable" means a Receivable in the Receivables
---------------
Pool.
"Program Fee" has the meaning assigned to that term in
-----------
Section 2.05(a).
"Provisional Liquidation Day" means any day which could
---------------------------
be a Liquidation Day but for the proviso in clause (i) of
the definition of "Liquidation Day".
"Purchase" means a purchase by the Investor, Citibank
--------
or CNA of a Share from the Seller pursuant to or as
contemplated by Article II.
16
"Receivable" means the indebtedness (less commissions
----------
payable thereon) of any Obligor to an Owner under a Contract
arising out of a sale of insurance products or services
which is (or was at any time on or after December 28, 1984)
a Statutory Overdue, which indebtedness includes (i) the
right to payment of any interest or finance charges and
other obligations of such Obligor with respect thereto and
(ii) in respect of such indebtedness which, according to the
Contract relating thereto, is payable in several
installments (an "Installment Receivable"), all installments
----------------------
under the Contract relating thereto (other than installments
released from the Receivables Pool pursuant to Section
2.07(g)) whether or not such Installment Receivable remains
a Statutory Overdue after it becomes a Pool Receivable.
Average Commission Balances and Returned Premiums shall not
be included in this definition.
"Receivables Pool" means at any time the aggregation of
----------------
each then outstanding Receivable existing at any time the
Obligor thereof is a Designated Obligor or arising at any
time when the Obligor thereof was a Designated Obligor,
excluding, however, (i) all Residual Risk Receivables and
(ii) Installment Receivables released from the Receivables
Pool pursuant to Section 2.07(g).
"Reinvestment Termination Date" for all Shares means
-----------------------------
that Business Day which the Seller designates, or that
Business Day on which the conditions precedent in Section
3.03 are not satisfied which the Agent designates, as the
Reinvestment Termination Date for such Shares by notice to
the Agent (if the Seller so designates) or to the Seller (if
the Agent so designates) at least one Business Day prior to
such Business Day.
"Related Security" means with respect to any
----------------
Receivable:
(i) all security interests or liens and property
subject thereto from time to time purporting to secure
payment of such Receivable, whether pursuant to the
Contract related to such Receivable or otherwise; and
(ii) all guarantees, insurance and other
agreements or arrangements of whatever character from
time to time supporting or securing payment of such
Receivable whether pursuant to the Contract related to
such Receivable or otherwise.
"Residual Risk Receivable" means a Receivable in
------------------------
respect of which the Obligor is in an assigned or residual
(or similar) risk category, including, without limitation,
(i) a Receivable arising under a specific Contract with an
Obligor which an Owner is required to insure under or in
connection with an assigned risk plan established by the
Department of Insurance or other governmental agency of a
state
17
pursuant to such state's insurance law, (ii) a Receivable
arising out of or in connection with an Owner's membership in
an insurance pool (other than pursuant to the Intercompany Pool
Agreement), whether or not the Owner, with respect to such
Receivable, acts as servicing carrier or issues a separate
insurance policy or (iii) a Receivable arising in connection with
an Owner's obligation to assume a share of property insurance
liability under a Fair Access to Insurance Requirements plan or
similar plan established by the Department of Insurance of a
state under the federal Urban Property Protection and
Reinsurance Act (12 USC Secs. 1749bbb et seq.) pursuant to such
state's insurance law.
"Returned Premium" means the amount of any premium or
----------------
portion thereof taken by an insurance agent which has not
yet been recorded on the books of an Owner.
"S&P" means Standard & Poor's, a division of McGraw-
---
Hill, Inc.
"Seller" has the meaning assigned to such term in the
------
paragraph preceding the Preliminary Statements; the parties
hereto agree that at any time and from time to time the
Owners may designate a single Owner to act for and on behalf
of the Seller for all purposes under this Agreement;
Continental is hereby so designated (any redesignation shall
be effective for purposes hereof by notice from each of the
Owners to the Agent designating another Owner to act for and
on behalf of the Seller hereunder).
"Settlement Period" for any Share means each period
-----------------
commencing on the first day of each Fixed Period for such
Share and ending on the last day of such Fixed Period, and,
on and after the Termination Date for such Share, such
period (including, without limitation, a daily period) as
shall be selected from time to time by the Agent or, in
absence of any such selection, each period of thirty days
from the last day of the immediately preceding Settlement
Period; provided, however, that the Agent may, by notice to
-------- -------
the Collection Agent, from time to time prior to the
Termination Date for such Share, select such period (which
may be a daily period) as is specified in such notice, which
period shall become effective on the fourth Business Day
subsequent to the giving of such notice.
"Share" means, at any time, a fractional undivided
-----
ownership interest at such time in (i) all then outstanding
Pool Receivables arising prior to the time of the most
recent computation or recomputation of such fractional
undivided interest pursuant to Section 2.06, (ii) all
Related Security with respect to such Pool Receivables, and
(iii) all Collections with respect to, and other proceeds
of, such Pool Receivables. With
18
respect to each computation made pursuant to Section 2.06, such
fractional undivided interest for such Share shall be computed
as
C + YR + CAFR + LR
------------------
NRPB
where:
C = the Capital of such Share at the time of such
computation.
YR = the Yield Reserve of such Share at the time
of such computation.
CAFR = the Collection Agent Fee Reserve of such
Share at the time of such computation.
LR = the Loss Reserve of such Share at the time of
such computation.
NRPB = the Net Receivables Pool Balance at the time
of such computation.
Each Share shall be determined from time to time pursuant to
the provisions of Section 2.06.
"Shareowner" means, for each Share, upon its Purchase,
----------
Citibank, the Investor or CNA as the purchaser thereof;
provided, however, that upon any assignment thereof pursuant
-------- -------
to Article IX, the Assignee thereof shall be the Shareowner
thereof.
"Standby Commitment Fee" has the meaning assigned to
----------------------
that term in Section 2.05(a).
"Statutory Overdue" means indebtedness of an Obligor
-----------------
(i) as to which any obligation to pay premium on the related
policy or contract of insurance or surety bond has been due
and unpaid to an Owner for more than 90 days after (x) in
the case of any such obligation to make the first premium
payment under the related policy, contract or bond (or the
down payment of the first premium payment if the first
premium payment is to be made in installments), the
effective date of the related policy, contract or bond and
(y) in the case of any other such obligation, the date on
which such obligation is due and (ii) which, under the
Credit and Collection Policy, is a "statutory overdue
receivable".
"Structuring Fee" has the meaning assigned to that term
---------------
in Section 2.05(b).
19
"Termination Date" for any Share means the earlier of
----------------
the Reinvestment Termination Date for such Share or the
Commitment Termination Date.
"UCC" means the Uniform Commercial Code as from time to
---
time in effect in the specified jurisdiction.
"Yield" means:
-----
(i) for each Share for any Fixed Period on the
first day of which the owner thereof is the Investor or
is an Assignee which will be funding such Share for
such Fixed Period through the issuance of commercial
paper, the product of
IR x C x ED + LF
---
360
(ii) for each Share for any Fixed Period on the
first day of which the owner thereof is an Assignee
which will not be funding such Share for such Fixed
Period through the issuance of commercial paper, the
product of
CR x C x ED + LF
---
360
where:
CR = the Citibank Rate for such Share for such
Fixed Period.
C = the Capital of such Share during such Fixed
Period.
IR = the Investor Rate for such Share for such
Fixed Period.
ED = the actual number of days elapsed during such
Fixed Period.
LF = the Liquidation Fee, if any, for such Share
for such Fixed Period;
provided, however, that no provision of this Agreement
-------- -------
or the Certificates shall require the payment or permit
the collection of Yield in excess of the maximum
permitted by applicable law; and provided, further,
-------- -------
that Yield for any Share shall not be considered paid
by any distribution if at any time such distribution is
rescinded or must otherwise be returned for any reason.
20
"Yield Reserve" for any Share at any time means the sum
-------------
of (i) the Liquidation Yield at such time for such Share,
and (ii) the accrued and unpaid Yield for such Share.
SECTION 1.02. Other Terms. All accounting terms not
------------
specifically defined herein shall be construed in accordance with
generally accepted accounting principles. All terms used in
Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such
Article 9.
SECTION 1.03. Computation of Time Periods. Unless
----------------------------
otherwise stated in this Agreement, in the computation of a
period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and
"until" each means "to but excluding".
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Designated Obligors. At least three
-------------------
Business Days prior to the initial Purchase, by notice in
substantially the form of Exhibit F delivered to and approved by
the Agent, the Seller initially designated Obligors as Designated
Obligors and indicated whether, to the best of its knowledge, any
of such Obligors are Affiliated Obligors. After that initial
designation, the Seller may at any time and from time to time,
subject to satisfaction at such time of the conditions precedent
set forth in Section 3.03, designate, by notice in substantially
the form of Exhibit F delivered to and approved by the Agent,
additional Obligors as Designated Obligors, and the Seller shall
promptly notify the Agent when the Seller obtains knowledge that
any Designated Obligor is an Affiliated Obligor. The Seller or
the Agent may, at any time, cancel any designation of an Obligor
as a Designated Obligor by written notice in substantially the
form of Exhibit G delivered to the other three days prior to the
date such cancellation becomes effective.
SECTION 2.02. Commitment. (a) Citibank shall, on the
----------
terms and conditions hereinafter set forth, purchase from the
Seller, and the Investor and CNA each severally agrees on the
terms and conditions hereinafter set forth to purchase from the
Seller if and only if CNA or the Investor, as the case may be,
determines in its sole discretion to purchase from the Seller,
undivided interests in Pool Receivables by making Purchases of
Shares from time to time during the period from December 28, 1984
to the Commitment Termination Date; provided, however, that
-------- -------
Citibank shall not be obligated to make any Purchase of any Share
if, after giving effect to such Purchase, the aggregate Capital
of Shares owned by all Shareowners would exceed the Commitment.
21
(b) Each Shareowner shall, on the terms and conditions
hereinafter set forth, with the proceeds of its allocable share
of Collections with respect to each Share owned by it, purchase,
pursuant to Section 2.07(a)(i), additional undivided interests in
the then existing and, if any, new Pool Receivables of such Share
by making an appropriate readjustment of such Share.
SECTION 2.03. Making Purchases. (a) Each Purchase
----------------
shall be made on at least three Business Days' notice from the
Seller to the Agent. Each such notice of a Purchase shall
specify (i) the amount of such Purchase, (ii) the date of such
Purchase, (iii) Citibank or the Investor or CNA as making such
Purchase, and (iv) if Citibank or CNA is to make such Purchase
and the Agent approves the duration of the initial Fixed Period
for such Purchase, the duration of such initial Fixed Period. If
such notice specifies either the Investor or CNA as making such
Purchase, the Investor or CNA specified in such notice shall
promptly notify the Agent, which shall promptly notify the
Seller, whether the Investor or CNA specified in such notice has
determined to make such Purchase. If such notice specifies the
Investor as making such Purchase, the Agent shall, if the
Investor has determined to make such Purchase, promptly notify
the Investor of the amount and date of such Purchase and the
Seller shall, prior to 10:00 A.M. (New York City time) on the
date of such Purchase, if the Investor has determined to make
such Purchase and the Agent approves the duration of the initial
Fixed Period for such Purchase, notify the Investor of the
duration of such initial Fixed Period. On the date of each
Purchase, Citibank or the Investor or CNA, as the case may be,
shall, upon satisfaction of the applicable conditions set forth
in Article III, make available to the Agent at its address
referred to in Section 11.02 the amount of its Purchase in same
day funds, and after receipt by the Agent of such funds, the
Agent will make such funds immediately available to the Seller at
Citibank's address referred to in Section 11.02.
(b) The Investor shall, on the date of each Purchase
of each Share by the Investor and on the first day of each
successive Fixed Period for such Share so long as it is owned by
the Investor, and each other Shareowner of each Share shall, on
the first day of each Fixed Period (other than the initial Fixed
Period) for such Share, notify the Agent of the Investor Rate for
such Fixed Period and the Agent shall promptly notify the Seller
thereof.
SECTION 2.04. Termination or Reduction of the
-------------------------------
Commitment. The Seller may, upon at least five Business Days'
----------
notice to the Agent, terminate in whole or reduce in part the
unused portion of the Commitment; provided, however, that each
-------- -------
partial reduction shall be in an amount equal to $1,000,000 or an
integral multiple thereof.
SECTION 2.05. Fees. (a) The Seller shall pay (i) to
----
the Agent a program fee (the "Program Fee") on the amount of the
-----------
average daily used portion of the
22
Commitment, from December 28, 1984 until the later of the Commitment
Termination Date or the date on which all Capital of all Shares is
reduced to zero, at the rate of 3/4 of 1% per annum, (ii) to Citibank
a fee (the "Standby Commitment Fee") on the amount of the average
----------------------
daily unused portion of the Commitment, from December 28, 1984 until
the later of the Commitment Termination Date or the date on which
all Capital of all Shares is reduced to zero, at the rate of 1/4
of 1% per annum, and (iii) to the Investor a fee (the "Investor
--------
Investment Fee") on the amount of the entire Commitment (whether
--------------
used or unused), from December 28, 1984 until the later of the
Commitment Termination Date or the date on which all Capital of
all Shares is reduced to zero, at the rate of 1/100 of 1% per
annum. Each of the Program Fee and the Standby Commitment Fee is
payable in arrears monthly on the last day of each month during
the terms of this Agreement and on the later of the Commitment
Termination Date or the date on which all Capital of all Shares
is reduced to zero. The Investor Investment Fee is payable in
arrears annually on the last day of each year and on the later of
the Commitment Termination Date or the date on which all Capital
of all Shares is reduced to zero.
(b) The Seller shall also pay to the Agent a
structuring fee (the "Structuring Fee") equal to 1/4 of 1% of the
---------------
amount of the entire Commitment (whether used or unused) payable
on the date of execution of this Agreement.
(c) Each Shareowner shall pay to the Collection Agent
a collection fee (the "Collection Agent Fee") of 1/4 of 1% per
--------------------
annum on the average daily amount of Capital of such Share, from
the date thereof until the later of the Commitment Termination
Date or the date on which such Capital is reduced to zero,
payable on the last day of each Settlement Period for such Share;
provided, however, that upon three Business Days' notice to the
-------- -------
Agent, the Collection Agent may elect to be paid, as such fee,
another percentage per annum on the average daily amount of
Capital of each such Share, but in no event in excess of 110% of
the costs and expenses referred to in Section 6.02(e); provided,
--------
further, that the fee paid to any Collection Agent other than an
-------
Owner shall not exceed 110% of the costs and expenses referred to
in Section 6.02(e); and provided, further, that such fee shall
-------- -------
be payable only from Collections pursuant to, and subject to the
priority of payment set forth in, Section 2.07(c) and (d).
SECTION 2.06. Share. (a) Each Share shall be
-----
initially computed as of the opening of business of the
Collection Agent on the date of Purchase of such Share from the
Seller hereunder. Thereafter until the Termination Date for such
Share, such Share shall be automatically recomputed as of the
close of business of the Collection Agent on each day (other than
a Liquidation Day). Such Share shall become zero at such time as
the Shareowner of such Share shall have recovered the Capital of
such Share and the Collection Agent shall have received the
accrued Collection Agent Fee for such Share. Such Share shall
remain constant from the time as of which any such computation or
recomputation is
23
made until the time as of which the next such recomputation, if any,
shall be made. Any Share, as computed as of the day immediately
preceding the Termination Date for such Share, shall remain constant
at all times on and after such Termination Date.
(b) If any Share would otherwise be reduced on any day
on account of Receivables arising as or becoming Pool
Receivables, the Shareowner of such Share may prevent such
reduction by giving notice to the Collection Agent, before the
close of business of the Collection Agent on such day, that such
Share's interest in such Receivables is to be limited so as to
prevent such reduction. If such notice is given for any day for
any Share, the Receivables Pool for such Share, and the Net
Receivables Pool Balance for such Share, will include, with
respect to Receivables arising as or becoming Pool Receivables on
such day, only such number of such Receivables or such portion of
such Receivables as shall cause such Share to remain constant,
such Receivables or portion thereof being included in the
Receivables Pool for such Share and in the Net Receivables Pool
Balance for such Share in the order of the Seller's account
numbers for such Receivables up to an aggregate amount so as to
cause such Share to remain constant, and the remainder of such
Receivables or portion thereof shall be treated as Receivables
arising on the next succeeding Business Day.
SECTION 2.07. Settlement Procedures. (a) During each
---------------------
Settlement Period for each Share, the Collection Agent shall on
each day Collections of Pool Receivables are received by it:
(i) if such day is not a Liquidation Day or a
Provisional Liquidation Day, (A) out of such Share of such
Collections hold in trust and, upon the request of the
Agent, set aside and hold in trust for the Shareowner of
such Share in accordance with Article VI an amount equal to
the Yield and Collection Agent Fee accrued through such day
for such Share and not so previously held in trust and (B),
to the extent such Share of such Collections exceeds the
aforementioned amount, apply the entire amount of the excess
to the purchase, for the account of the Shareowner of such
Share, of additional undivided interests in the then
existing and new Pool Receivables by recomputation of such
Share pursuant to Section 2.06 as of the end of such day and
by paying to the Seller on the same day the amount of such
excess (and the amount of such Collections theretofore so
set aside and any Collections allocated pursuant to Section
2.07(b)(iv)); provided, however, that to the extent any
-------- -------
Shareowner shall be required for any reason to pay over to
an Obligor any amount of Collections which shall have been
previously applied to the purchase, for the account of such
Shareowner, of additional undivided interests in Pool
Receivables pursuant hereto, such amount shall be deemed not
to have been so applied to such purchase but rather to have
been retained by the Seller and paid over for the account of
such Shareowner and, notwithstanding anything herein to the
contrary, such Shareowner
24
shall have a claim for such amount, payable when and to the
extent any distribution from or on behalf of such Obligor is
made in respect thereof; and
(ii) if such day is a Liquidation Day or a Provisional
Liquidation Day, out of such Collections hold in trust and,
upon the request of the Agent, set aside and hold in trust
for the Shareowner of such Share in accordance with Article
VI, the Share of Collections received on such day; provided,
--------
that if amounts are set aside pursuant to this paragraph
(ii) on any Provisional Liquidation Day that is subsequently
determined not to be a Liquidation Day, such amounts shall
be applied pursuant to paragraph (i) above on the day of
such subsequent determination.
(b) For the purposes of this Section 2.07:
(i) if on any day the Outstanding Balance of any Pool
Receivable is reduced as a result of any cancellation of a
Contract or an insurance policy, return of any premium, the
failure of any insurance agent of an Owner to pay over any
premium to such Owner or to the Seller, or any adjustment by
the Seller thereof, the Seller shall be deemed to have
received on such day a Collection of such Pool Receivable in
the amount of such reduction;
(ii) if on any day any of the representations or
warranties in Section 4.01(h), except for clause (iii)
thereof, by an Owner is no longer true with respect to any
Pool Receivable, or on any day any statement in clause (i)
of the definition of "Eligible Receivable" is no longer true
with respect to any Pool Receivable, the Seller shall be
deemed to have received on such day a Collection of such
Pool Receivable in full;
(iii) except as stated in paragraph (i) or (ii) of
this subsection 2.07(b) or as otherwise required by law or
the underlying Contract, all Collections received from an
Obligor of any Receivable shall be applied to Receivables
then outstanding of such Obligor in the order of the age of
such Receivables, starting with the oldest such Receivable,
except if payment is designated by such Obligor for
application for specific Receivables; and
(iv) if, on any day when the Collection Agent receives
a Collection of a Pool Receivable, the recomputation of a
Share in accordance with Section 2.06 would (for any reason,
including the application of Section 2.07(a)(i)) result in
the numerator of such Share exceeding its denominator, the
excess referred to in Section 2.07(a)(i) shall be applied to
the purchase of additional undivided interests in the then
existing and new Pool Receivables only to the extent, if
any, that the numerator of such Share shall not exceed its
denominator, and the remainder not so applied shall be
allocated
25
and held in trust and, upon request by the Agent, set aside
by the Collection Agent for the Shareowner of such Share;
provided, however, that on any subsequent day that is
-------- -------
not a Liquidation Day when all or any portion of such amount
so allocated on any previous day may be applied pursuant to
Section 2.07(a)(i) without allowing the numerator of such
Share to exceed its denominator, such application shall be
made. For purposes of computations under this paragraph
(iv), all of the Shares outstanding at the time of
computation shall be deemed to be combined as one Share.
(c) On the last Business Day of each Settlement Period
for each Share, if no Liquidation Day for such Share occurs
during such Settlement Period, the Collection Agent shall, for
the account of the Shareowner of such Share, deposit the amounts
referred to in paragraph (i)(A) of subsection (a) above with
respect to such Share received during such Settlement Period, in
the special account of the Agent (account no. 3885-8758)
maintained with Citibank at its office at 399 Park Avenue, New
York, New York 10043 (the "Agent's Account"). Upon receipt of
---------------
such funds by the Agent, the Agent shall distribute them to the
Shareowner of such Share in payment of the accrued Yield for such
Share and to the Collection Agent in payment of the accrued
Collection Agent Fee payable with respect to such Share. If
there shall be insufficient funds on deposit for the Agent to
distribute funds in payment in full of the aforementioned
amounts, the Agent shall distribute funds, first, in payment of
-----
the accrued Yield for such Share, and second, in payment of the
------
accrued Collection Agent Fee payable with respect to such Share.
(d) On the last Business Day of each Settlement Period
for each Share, if one or more Liquidation Days for such Share
occurs during such Settlement Period, the Collection Agent shall,
for the account of the Shareowner of such Share, deposit in the
Agent's Account the amounts referred to in paragraph (ii) of
subsection (a) above with respect to such Share received during
such Settlement Period. Upon receipt of funds by the Agent, the
Agent shall distribute them (A) to the Shareowner of such Share
(x) in payment of the accrued Yield for such Share, (y) in
reduction (to zero) of the Capital of such Share and (z) in
payment of any other amounts owed by the Seller hereunder to such
Shareowner and (B) to the Collection Agent in payment of the
accrued Collection Agent Fee payable with respect to such Share.
If there shall be insufficient funds on deposit for the Agent to
distribute funds in payment in full of the aforementioned
amounts, the Agent shall distribute funds, first, in payment of
-----
the accrued Yield for such Share, second, in reduction of Capital
------
of such Share, third, in payment of other amounts payable to such
-----
Shareowner, and fourth, in payment of the accrued Collection
------
Agent Fee payable with respect to such Share. If any amounts set
aside pursuant to paragraph (ii) of subsection (a) above are not
required to be deposited to the Agent's Account pursuant to this
subsection (d), such amounts shall be paid to the Seller by the
Collection Agent.
26
(e) If requested by the Agent, prior to the twelfth
Business Day following each Settlement Period, and in any event
prior to the twelfth Business Day of each month, the Collection
Agent shall prepare and forward to the Agent for each Shareowner
an Investor Report, relating to each Share owned by such
Shareowner, as of the close of business of the Collection Agent
on the last day of such Settlement Period, or of the immediately
preceding month, as the case may be.
(f) At or prior to the day the Collection Agent is
required to make a deposit with respect to a Settlement Period
pursuant to subsection (c) or (d) of this Section 2.07, the
Seller will advise the Agent of each Liquidation Day occurring
during such Settlement Period and of the allocation of the amount
of such deposit to each outstanding Share; provided, however,
-------- -------
that if the Seller is not the Collection Agent, the Seller shall
advise the Collection Agent of the occurrence of each such
Liquidation Day and Provisional Liquidation Day at or prior to
such day.
(g) On each day that is not a Liquidation Day or
Provisional Liquidation Day (or would become such a day as a
result of such release), installments under Contracts relating to
Installment Receivables in the Receivables Pool in respect of
which no installment remains a Statutory Overdue shall be deemed
to have been released automatically from the Receivables Pool.
SECTION 2.08. Payments and Computations, Etc. (a)
------------------------------
All amounts to be paid or deposited by the Seller or the
Collection Agent hereunder shall be paid or deposited in
accordance with the terms hereof no later than 11:00 A.M. (New
York City time) on the day when due in lawful money of the United
States of America in same day funds at the office of Citibank
referred to in Section 11.02.
(b) The Seller shall, to the extent permitted by law,
pay to the Agent interest on all amounts not paid or deposited
when due hereunder at the Alternate Base Rate, payable on demand,
provided, however, that such interest rate shall not at any time
-------- -------
exceed the maximum rate permitted by applicable law. Such
interest shall be for the account of, and be retained by, the
Agent except to the extent that such failure by the Seller to
make timely payment or deposit of any amount has continued beyond
the date for distribution by the Agent of any such overdue amount
to each Shareowner, in which case such interest accruing after
such date shall be for the account of, and distributed by the
Agent to, the Shareowners ratably in accordance with their
respective interests in such overdue amount.
(c) All computations of interest under subsection
(b) above and all computations of Yield and fees hereunder shall
be made on the basis of a year of 360 days for the actual number
of days (including the first but excluding the last day) elapsed.
27
SECTION 2.09. Dividing or Combining of Shares. (a)
-------------------------------
The Seller may, on notice received by the Agent not later than
11:00 A.M. (New York City time) three Business Days before the
last day of any Fixed Period for any then existing Share (an
"Existing Share"), divide such Existing Share on such last day
--------------
into two or more new Shares, each such new Share having Capital
as designated in such notice and all such new Shares collectively
having aggregate Capital equal to the Capital of such Existing
Share.
(b) The Seller may, on notice received by the Agent
(i) not later than 11:00 A.M. (New York City time)
three Business Days before the last day of any Fixed Period
for two or more Existing Shares owned by the same
Shareowner, or
(ii) not later than 11:00 A.M. (New York City time)
three Business Days before the last day of any Fixed Period
for one or more Existing Shares owned by Citibank, the
Investor or CNA and the date (if such date is the same day
on such last day) of any proposed Purchase of a Share to be
made by Citibank, the Investor or CNA, respectively,
pursuant to Sections 2.02 and 2.03,
either (A) combine such Existing Shares of such Shareowner or (B)
combine such Existing Share or Shares of Citibank, the Investor
or CNA, as the case may be, and such proposed Share to be
purchased by Citibank, the Investor or CNA, as the case may be,
on such last day into one new Share of Citibank, the Investor or
CNA, as the case may be, such new Share having Capital equal to
the aggregate Capital of such Existing Shares, or such Existing
Share or Shares and such proposed Share, as the case may be.
(c) On and after any dividing of an Existing Share
pursuant to subsection (a) above or any combining of Existing
Shares or of an Existing Share or Shares and a proposed Share
pursuant to subsection (b) above, each of the new Shares
resulting from such dividing, or the new Share resulting from
such combining, as the case may be, shall be a separate Share
having Capital as set forth above, and shall take the place of
such Existing Share or Shares or proposed Share, as the case may
be, in each case under and for all purposes of this Agreement.
SECTION 2.10. Recourse for Yield. The Seller shall be
------------------
obligated to pay to the Agent, on the last day of each Settlement
Period for each Share, for the account of the Shareowner of such
Share, until the later of the Commitment Termination Date or the
date on which all Capital of all Shares is reduced to zero, an
amount equal to the accrued and unpaid Yield for such Share, by
deposit of such amount to the Agent's Account. Upon receipt of
such funds in the Agent's Account, the Agent shall distribute
such funds to the Shareowner of such Share in payment of such
accrued Yield.
28
SECTION 2.11. Increased Costs, Etc. (a) If, due to
--------------------
either (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) the compliance
with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law),
there shall be any increase in the cost to either Citibank or any
of its Affiliates or any Assignee hereunder (each, an
"Indemnified Party") of agreeing to make or of making Purchases,
-----------------
or any Indemnified Party of purchasing or maintaining Shares,
then the Seller shall from time to time, upon demand by such
Indemnified Party (with a copy of such demand to the Agent), pay
to the Agent for the account of such Indemnified Party additional
amounts sufficient to compensate such Indemnified Party for such
increased cost as provided herein.
(b) If any Indemnified Party determines that
compliance with any law or regulation or any guideline or request
from any central bank or other governmental authority (whether or
not having the force of law) affects or would affect the amount
of capital required or expected to be maintained by any
Indemnified Party and that the amount of such capital is
increased by or based upon the existence of any commitment to
make purchases of or otherwise to maintain the investment in Pool
Receivables or interest therein hereunder or to the funding
thereof, then, upon demand by the Agent, the Seller shall
immediately pay to the Agent, for the account of such Indemnified
Party (as third party beneficiaries), from time to time as
specified by the Agent, additional amounts sufficient to
compensate such Indemnified Party in the light of such
circumstances, to the extent that such Indemnified Party
reasonably determines such increase in capital to be allocable to
the existence of any such commitments, provided that the Seller's
liability for amounts under this Section 2.11 shall be limited to
those amounts which (i) were payable in respect of the one month
immediately preceding written notice from the Agent and (ii)
become payable at any time after such notice. A certificate as
to such amounts, giving a reasonable explanation thereof,
submitted to the Seller by such Indemnified Party shall be
conclusive and binding for all purposes, absent manifest error.
(c) If, with respect to any Shares for which the
Investor Rate is determined by reference to the Eurodollar Rate,
the Owner of such Share notifies the Agent that the Eurodollar
Rate for any Fixed Period for such Share will not adequately
reflect the cost to such Owner of making, funding or maintaining
such Shares for such Interest Period, the Agent shall forthwith
so notify the Seller and the Owners, whereupon each such Share
will automatically, on and after the last day of the then
existing Fixed Period therefor, have its Investor Rate equal to
the Alternate Base Rate.
(d) Notwithstanding any other provision of this
Agreement, if the introduction of or any change in or in the
interpretation of any law or regulation shall make it unlawful,
or any central bank or other governmental authority shall assert
that it is unlawful, for any Owner to fund or maintain any Share
for which the Investor Rate is
29
determined by reference to the Eurodollar Rate, then, on notice
thereof and demand therefor by such Owner to the Seller through the
Agent, each such Share will automatically, on and after the last day
of the then existing Fixed Period thereof, have its Investor Rate
equal to the Alternate Base Rate.
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial
-------------------------------
Purchase. The initial Purchase under the Receivables Agreement
--------
was subject to the condition precedent that the Agent shall have
received on or before the date of such Purchase the following,
each (unless otherwise indicated) dated such date, in form and
substance satisfactory to the Agent:
(a) The Certificates for Citibank, the Investor and
CNA;
(b) A copy of the resolutions of the Board of
Directors of each Owner approving this Agreement, the
Certificates and the other documents to be delivered by it
hereunder and the transactions contemplated hereby,
certified by its Secretary or Assistant Secretary;
(c) A certificate of the Secretary or Assistant
Secretary of each Owner certifying the names and true
signatures of the officers authorized on its behalf to sign
this Agreement, the Certificates and the other documents to
be delivered by it hereunder (on which certificate the
Agent, Citibank, the Investor and CNA may conclusively rely
unless and until such time as the Agent shall receive from
such Owner a revised certificate meeting the requirements of
this subsection (c));
(d) Except to the extent waived by the Agent, from
each Owner, acknowledgment copies of proper Financing
Statements (Form UCC-1), dated a date reasonably near to the
date of the initial Purchase, naming such Owner as the
assignor of Receivables and CNA, as Agent, as assignee, or
other similar instruments or documents, as may be necessary
or, in the opinion of the Agent, desirable under the UCC of
all appropriate jurisdictions or any comparable law to
perfect Citibank's, the Investor's and CNA's ownership
interests in all Receivables in which an interest may be
assigned to them hereunder;
(e) Except to the extent waived by the Agent,
certified copies of Requests for Information or Copies (Form
UCC-11) (or a similar search report certified by a party
acceptable to the Agent), dated a date reasonably near to
the date of the initial
30
Purchase, listing all effective financing statements which name
each Owner (under its present name and any previous name) as
debtor and which are filed in the jurisdictions in which filings
were made pursuant to subsection (d) above, together with copies
of such financing statements (none of which shall cover any
Receivables or Contracts);
(f) The notice of initial Designated Obligors required
by Section 2.01;
(g) A favorable opinion of Martin D. Haber, Esq.,
counsel for each Owner, in substantially the form of Exhibit
H and as to such other matters as the Agent may reasonably
request;
(h) Acknowledgment copies of proper Financing
Statements (Form UCC-1), dated a date reasonably near to the
date of the initial Purchase, naming the Investor as the
assignor of Receivables and CNA, as Agent for Citibank and
CNA, as assignee, or other similar instruments or documents,
as may be necessary or, in the opinion of the Agent,
desirable under the UCC of all appropriate jurisdictions or
any comparable law to perfect Citibank's and CNA's ownership
interests in all Receivables in which an interest may be
assigned to them hereunder;
(i) Certified copies of Requests for Information or
Copies (Form UCC-11) (or a similar search report certified
by a party acceptable to the Agent), dated a date reasonably
near to the date of the initial Purchase, listing all
effective financing statements which name the Investor
(under its present name and any previous name) as debtor and
which are filed in the jurisdictions in which filings were
made pursuant to subsection (h) above, together with copies
of such financing statements (none of which shall cover any
Receivables or Contracts); and
(j) A favorable opinion of Messrs. Shearman &
Sterling, counsel for Citibank and CNA, individually and as
Agent, as to such matters as Citibank and CNA may reasonably
request.
SECTION 3.02. Conditions Precedent to All Purchases.
-------------------------------------
Each Purchase (including the initial Purchase) hereunder shall be
subject to the further conditions precedent that (a) on or prior
to the date of such Purchase, the Collection Agent shall have
delivered to the Agent, in form and substance satisfactory to the
Agent, a completed Investor Report dated within 35 days of the
date of such Purchase and containing such additional information
as may be reasonably requested by the Agent, (b) on the date of
such Purchase the following statements shall be true (and each
Owner, by accepting through the Seller the amount of such
Purchase, shall be deemed to have certified, as to the
representations and warranties of such Owner and events relating
to such Owner, that):
31
(i) The representations and warranties of each Owner
contained in Section 4.01 hereof and of the Company
contained in Section 6 of the Company Agreement are correct
on and as of the date of such Purchase as though made on and
as of such date;
(ii) No event has occurred and is continuing, or would
result from such Purchase, which constitutes an Event of
Termination or would constitute an Event of Termination but
for the requirement that notice be given or time elapse or
both;
(iii) The Agent shall not have delivered to the
Seller a notice that the Investor shall not make any further
Purchases hereunder or that the Collection Agent shall not
reinvest in any Pool Receivables on behalf of the Investor;
and
(iv) On such date, all of Continental's or the
Company's long-term public senior debt securities are rated
at least BBB- by S&P or Baa3 by Moody's, or if unrated,
deemed to be the equivalent thereof by the Agent.
and (c) the Agent shall have received such other approvals,
opinions or documents as the Agent may reasonably request.
SECTION 3.03. Conditions Precedent to Designation of
--------------------------------------
Designated Obligors and to Reinvestments of Collections. The
-------------------------------------------------------
designation of additional Obligors as Designated Obligors
pursuant to Section 2.01 and the right of the Collection Agent to
reinvest in Pool Receivables on behalf of each Shareowner of a
Share those Collections allocable to such Share pursuant to
Section 2.07(a)(i) shall be subject to the condition precedent
that the following statements shall be true on the day of such
designation or reinvestment, as the case may be (and the Seller,
by making such designation, or receiving the proceeds of such
reinvestment, shall be deemed to have certified on behalf of each
Owner, as to the representations and warranties of such Owner and
the events relating to such Owner, that):
(i) The representations and warranties of each Owner
contained in Section 4.01 hereof and of the Company
contained in Section 6 of the Company Agreement are correct
on and as of the date of such Purchase as though made on and
as of such date;
(ii) No event has occurred and is continuing, or would
result from such adjustment or designation, which
constitutes an Event of Termination or would constitute an
Event of Termination but for the requirement that notice be
given or time elapse or both;
32
(iii) The Agent shall not have delivered to the
Seller a notice that the Investor shall not make any further
Purchases hereunder or that the Collection Agent shall not
reinvest in any Pool Receivables on behalf of the Investor;
and
(iv) On such date, all of Continental's or the
Company's long-term public senior debt securities are rated
at least BBB- by S&P or Baa3 by Moody's, or if unrated,
deemed to be the equivalent thereof by the Agent.
SECTION 3.04. Conditions Precedent to Effectiveness of
----------------------------------------
Amendment and Restatement. This Agreement shall amend and
-------------------------
restate the Receivables Agreement, and the terms of the
Receivables Agreement shall be superseded by the terms hereof.
This Agreement shall become effective on and as of the date on or
before which the Agent shall have received the following, each
(unless otherwise indicated) dated such date, in form and
substance satisfactory to the Agent:
(a) The Company Agreement, duly executed as of the
date hereof;
(b) Copies, certified as of such date, of (i) the
resolutions of the Board of Directors of each Owner
approving this Agreement and the matters contemplated
hereby, (ii) the resolutions of the Board of Directors of
the Company approving the execution and delivery of this
Agreement by the Owners and the matters contemplated hereby
and thereby and (iii) all documents evidencing other
necessary corporate action and governmental approvals, if
any, with respect to this Agreement and the matters
contemplated hereby and thereby;
(c) A certificate of the Secretary or an Assistant
Secretary of each Owner (other than Continental Lloyd's)
certifying the names and true signatures of the officers of
each Owner authorized to sign this Agreement and the other
documents to be delivered by it hereunder and a certificate
of the attorney-in-fact of Continental Lloyd's certifying
that he is the duly appointed attorney-in-fact of
Continental Lloyd's;
(d) A certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true
signatures of the officers of the Company authorized to sign
the documents to be delivered by it hereunder;
(e) A certificate of each Owner signed by a duly
authorized officer (or, in the case of Continental Lloyd's,
the attorney-in-fact) of each Owner stating that:
33
(i) The representations and warranties contained
in Section 4.01 are correct on and as of the date of
such certificate as though made on and as of such date,
and
(ii) No event has occurred and is continuing, or
would result from this Agreement, which constitutes an
Event of Termination or would constitute an Event of
Termination but for the requirement that notice be
given or time elapse or both;
(f) A certificate of the Company signed by a duly
authorized officer of the Company stating that:
(i) The representations and warranties contained
in Section 6 of the Company Agreement (except that,
with respect to Continental Lloyd's Insurance Company,
Section 6(e) shall be deemed to read: The Company is
the beneficial direct or indirect owner of all of the
interests in Continental Lloyd's Insurance Company) are
correct on and as of the date of such certificate as
though made on and as of such date,
(ii) No event has occurred and is continuing, or
would result from this Agreement, which constitutes an
Event of Termination or would constitute an Event of
Termination but for the requirement that notice be
given or time elapse or both,
(iii) The Company has received $275 million in
cash from the Equity Investor (or a wholly owned
subsidiary thereof) as payment for the issuance by the
Company of shares of its Series F Preferred Stock,
Series H Preferred Stock and Series T Preferred Stock
(such Series F Preferred Stock, Series H Preferred
Stock and Series T Preferred Stock being, collectively,
the "Preferred Stock") pursuant to the Securities
---------------
Purchase Agreement dated as of December 6, 1994 between
the Company and the Equity Investor as set forth in the
Current Report (the "Current Report") on Form 8-K dated
--------------
December 9, 1994 of the Company filed with the
Securities and Exchange Commission. The Current
Report, including all exhibits thereto, and the other
information furnished by or on behalf of the Company
with respect to the transactions described in the
Current Report do not contain any untrue statement of a
material fact or fail to state a material fact
necessary to make the statements made therein not
misleading,
34
(iv) No authorization or approval or other action
by any governmental authority or regulatory body was
required for the valid issuance by the Company of the
Preferred Stock, and
(v) An excerpt attached thereto from the
disclosure letter referred to in Section 4.1 of the
Agreement and Plan of Merger by and among the Equity
Investor, Chicago Acquisition Corp., and the Company
dated as of December 6, 1994 is true and correct and
provides the required consent of the Equity Investor to
the execution, delivery and performance of, and the
transactions contemplated by, this Agreement and the
Company Agreement;
(g) Acknowledgment copies or stamped receipt copies of
proper financing statements, dated on or before the date
hereof, naming Continental Reinsurance Corporation and any
other Owner as the assignor of Receivables and CNA, as
Agent, as the assignee, or other similar instruments or
documents, as may be necessary or, as the opinion of the
Agent, desirable under the UCC of all appropriate
jurisdictions or any comparable law to perfect the ownership
interests in all Receivables in which an interest may be
assigned hereunder;
(h) Completed requests for information, dated on or
before the date hereof, listing the financing statements
referred to in subsection (g) above and all other effective
financing statements filed in the jurisdictions referred to
in subsection (g) above that name Continental Reinsurance
Corporation and such other Owner as debtor, together with
copies of such financing statements (none of which shall
cover any Receivables or Contracts);
(i) An Assumption Agreement signed by Continental
Reinsurance Corporation and any other new Owner in form and
substance satisfactory to the Agent;
(j) A favorable opinion of counsel for each Owner as
to the due execution and delivery pursuant to due
authorization by each Owner of this Agreement and confirming
and restating, giving effect to this Agreement, the
substance of the opinion of Martin D. Haber, Esq. delivered
pursuant to Section 3.01; and
(k) A favorable opinion of counsel for the Company, in
form and substance satisfactory to the Agent.
35
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of each
--------------------------------------
Owner. Each Owner represents and warrants as follows:
-----
(a) Such Owner (other than Continental Lloyd's) is a
corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction named at the
beginning hereof. Continental Lloyd's has been duly formed
as a Lloyd's organization under the Texas Insurance Code and
is validly existing and in good standing under the laws of
the State of Texas.
(b) The execution, delivery and performance by such
Owner of this Agreement, the Certificates and all other
instruments and documents to be delivered hereunder, and the
transactions contemplated hereby and thereby, are within
such Owner's corporate powers, have been duly authorized by
all necessary corporate action, do not contravene (i) the
charter or by-laws of such Owner (other than Continental
Lloyd's) or the Articles of Agreement among Underwriters of
Continental Lloyd's or (ii) any law or any contractual
restriction binding on or affecting such Owner, and do not
result in or require the creation of any lien, security
interest or other charge or encumbrance upon or with respect
to any of its properties; and no transaction contemplated
hereby requires compliance with any bulk sales act or
similar law.
(c) No authorization or approval or other action by,
and no notice to or filing with, any governmental authority
or regulatory body or any other Person (including, without
limitation, the Equity Investor or any of its Affiliates) is
required for the due execution, delivery and performance by
such Owner of this Agreement, the Certificates or any other
document or instrument to be delivered hereunder except for
------
(i) the filing of the UCC Financing Statements and the
consent of the Equity Investor referred to in Article III,
all of which, at the time required in Article III, shall
have been duly made and shall be in full force and effect
and (ii) the execution by the Company of the Company
Agreement.
(d) This Agreement and the Company Agreement
constitute, and each Certificate when delivered hereunder
shall constitute, the legal, valid and binding obligation of
such Owner or the Company, as the case may be, enforceable
against such Owner or the Company, as the case may be, in
accordance with their respective terms.
36
(e) The statutory balance sheet of such Owner as at
December 31, 1993, and the related statutory statements of
income and surplus of such Owner for the fiscal year then
ended, and the statutory balance sheet of such Owner as at
September 30, 1994, and the related statutory statements of
income and surplus of such Owner for the nine-month period
then ended, certified by the controller or other appropriate
officer of such Owner, copies of which have been furnished
to the Agent, fairly present the financial condition of such
Owner for the periods ended on such dates, all in accordance
with the accounting principles prescribed or permitted and
authorized by the department of insurance of the state of
incorporation of such Owner and consistently applied to such
financial statements, and since September 30, 1994, there
has been no material adverse change in any such condition or
operations.
(f) There are no actions, suits or proceedings
pending, or to the knowledge of such Owner threatened,
against or affecting such Owner or any subsidiary, or the
property of such Owner or of any subsidiary, in any court,
or before any arbitrator of any kind, or before or by any
governmental body, which may materially adversely affect the
ability of such Owner to perform its obligations under this
Agreement or the Certificates delivered pursuant hereto.
Neither such Owner nor any subsidiary is in default with
respect to any order of any court, arbitrator or
governmental body except for defaults which will not
materially adversely affect the ability of such Owner to
perform its obligations under this Agreement or the
Certificates delivered pursuant hereto.
(g) No proceeds of any Purchase will be used by such
Owner to acquire any security in any transaction which is
subject to Sections 13 and 14 of the Securities Exchange Act
of 1934.
(h) Each Pool Receivable shall (i) at the time that
Citibank, the Investor or CNA initially purchases a Share in
such Pool Receivable, be owned 100% (except as to interests
sold to and purchased by Citibank, the Investor or CNA
hereunder) by the Seller free and clear of any Adverse
Claim, (ii) at all times comply with the criteria of clauses
(ii) through or (x) of the definition of "Eligible
Receivable", (iii) to the best of such Owner's knowledge, at
all times comply with the criteria of clause (i) of the
definition of "Eligible Receivable" and (iv) together with
the Contract related thereto, at all times be free and clear
of any Adverse Claim except as provided hereunder. Upon
each Purchase, Citibank, the Investor or CNA making such
Purchase shall acquire a valid and perfected first priority
undivided ownership interest to the extent of the Share
purchased by such Purchase in each Pool Receivable then
existing or thereafter arising and in the Related Security
and Collections with respect thereto free and clear of any
Adverse Claim except as provided hereunder; and no effective
financing statement or other instrument similar in effect
covering any Pool
37
Receivable or the Related Security or Collections with respect
thereto shall at any time be on file in any recording office
except such as may be filed in favor of the Agent in accordance
with this Agreement. At the time of the initial Purchase on or
after the date hereof, the aggregate Outstanding Balance of Pool
Receivables which are Defaulted Receivables will not exceed
$15,000,000.
(i) No Investor Report (if prepared by the Seller on
behalf of such Owner, or to the extent that information
contained therein is supplied by the Seller on behalf of
such Owner), information, exhibit, financial statement,
document, book, record or report furnished or to be
furnished by the Seller to the Agent or any Shareowner in
connection with this Agreement is or shall be inaccurate in
any material respect as of the date it is or shall be dated
or (except as otherwise disclosed to the Agent or such
Shareowner, as the case may be, at such time) as of the date
so furnished, or contains or shall contain any material
misstatement of fact or omits or shall omit to state a
material fact or any fact necessary to make the statements
contained therein not materially misleading.
(j) The chief executive office of such Owner, if other
than Casualty Insurance Company and Continental Lloyd's
Insurance Company, is located at 180 Maiden Lane, New York,
New York 10038; the chief executive office of such Owner, if
Casualty Insurance Company, is 321 Clark Street, Chicago,
Illinois 60610; and the chief executive office of such
Owner, if Continental Lloyd's Insurance Company, is 600
North Pearl Street, Dallas, Texas 75201; and the offices
where such Owner keeps all of its books, records and
documents evidencing the Pool Receivables or the related
Contracts are located at the addresses specified in Exhibit
I (or at such other locations, permitted by Section 5.01(e),
in jurisdictions where all action required by Section 6.05
has been taken and completed).
(k) All of the capital stock of such Owner (other than
Continental Lloyd's Insurance Company) is directly or
indirectly owned beneficially and of record by the Company.
All of the interests of Continental Lloyd's Insurance
Company are directly or indirectly owned beneficially by the
Company.
(l) Each Pool Receivable is assignable under
applicable law and is not subject to any restriction or
limitation upon assignment under the related Contract,
insurance policy or any other agreements or arrangements
with or relating to such Pool Receivable.
(m) No Plan Termination Event has occurred or is
reasonably expected to occur with respect to any Plan.
38
(n) The Intercompany Pooling Agreement constitutes the
legal, valid and binding obligation of each Owner
enforceable against such Owner in accordance with its terms.
Pursuant to the Intercompany Pooling Agreement, each Owner
(i) has purchased and, immediately prior to each Purchase
and each reinvestment of Collections, owns, free and clear
of any Adverse Claim except as provided under this
Agreement, a discrete participation and percentage interest
in each Pool Receivable which is the subject of such
Purchase or reinvestment, (ii) receives, in connection with
such Purchase, an amount equal to such percentage of the
aggregate Capital of the Share purchased and (iii) together
with each other Owner, is, immediately prior to such
Purchase or reinvestment, the owner of such Pool Receivable
in its entirety.
ARTICLE V
GENERAL COVENANTS OF EACH OWNER
SECTION 5.01. Affirmative Covenants of each Owner. So
-----------------------------------
long as any Capital for any Share shall be existing, or Citibank
shall have any Commitment, each Owner will, unless the Agent
shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material
-------------------------
respects with all applicable laws, rules, regulations, and
orders with respect to it, its business and properties and
all Pool Receivables and related Contracts; provided,
--------
however, that with respect to such business and properties
-------
this Section 5.01(a) is applicable to the extent that the
failure to so comply might materially adversely affect such
Owner.
(b) Preservation of Corporate Existence. Preserve and
-----------------------------------
maintain its corporate (or, in the case of Continental
Lloyd's, its Lloyd's organizational) existence, rights,
franchises and privileges in the jurisdiction of its
incorporation or, in the case of Continental Lloyd's, its
organization, and remain licensed as a foreign insurer in
each other jurisdiction in which it conducts an insurance
business and is required to be so licensed where the failure
to preserve and maintain such existence, rights, franchises,
privileges and license would materially adversely affect the
interests of a Shareowner hereunder or in the Pool
Receivables or the ability of such Owner or the Collection
Agent to perform its obligations hereunder.
(c) Audits. At any time and from time to time during
------
regular business hours upon two Business Days' prior
notification to such Owner, permit the Agent, or its agents
or representatives, (i) to examine and make copies of and
abstracts from all books, records and documents (including,
without limitation, computer tapes and disks) in the
possession or under the control of such Owner relating to
the Pool
39
Receivables, including, without limitation, the related
Contracts, and (ii) to visit the offices and properties
of such Owner located at the addresses specified in Exhibit
H (or at such other locations as are notified to the Agent
from time to time in accordance with Section 5.01(e)) for
the purpose of examining such materials described in
subsection (i) above, and to discuss matters relating
to the Pool Receivables or such Owner's performance
hereunder with any of the officers or employees of such
Owner having knowledge of such matters. The Agent agrees
that it will not disclose and will not permit any of its
agents or representatives to disclose (other than to its
employees, auditors or counsel) any information with respect
to any Owner which is furnished or obtained pursuant to this
Section 5.01(c) or Section 5.02; provided, however, that the
-------- -------
Agent may disclose any such information (a) as may be
required or appropriate in any report, statement or
testimony submitted to any municipal, state or federal
regulatory body having jurisdiction over it, (b) as may be
required or appropriate in response to any summons or
subpoena or in connection with any litigation and (c) to the
extent that it believes it appropriate, to protect the
investment of a Shareowner hereunder in the Pool Receivables
or in order to comply with any law, order, regulation or
ruling applicable to the Agent.
(d) Keeping of Records and Books of Account. Maintain
---------------------------------------
and implement, or cause to be maintained or implemented,
administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing the
Pool Receivables in the event of the destruction of the
originals thereof), and keep and maintain, or cause to be
kept and maintained, all documents, books, records and other
information reasonably necessary or advisable for the
collection of all Pool Receivables (including, without
limitation, records adequate to permit the daily
identification of each new Pool Receivable and all
Collections of and adjustments to each existing Pool
Receivable).
(e) Location of Records. Keep its chief place of
-------------------
business and chief executive office, and the offices where
it keeps its records concerning the Pool Receivables and all
Contracts related thereto (and all original documents
relating thereto), at the addresses of such Owner referred
to in Section 4.01(j) or at any other address where no
additional action is required by Section 6.05 to be taken or
completed on account of such office being located at such
address, or, upon 30 days' prior written notice to the
Agent, at such other address or addresses where all action
required by Section 6.05 shall have been taken and
completed. Within three Business Days after having been
requested to do so by the Agent, the Seller will deliver to
the Agent a list setting forth, as of the date on which such
list is delivered, the chief place of business and chief
executive office of each Owner, and the offices where each
Owner keeps its records concerning the Pool Receivables and
all Contracts related thereto (and all original documents
relating thereto).
40
(f) Credit and Collection Policies. Comply in all
------------------------------
material respects with its Credit and Collection Policy in
regard to each Pool Receivable and the related Contract.
(g) Renegotiation of Agreement. Negotiate in good
--------------------------
faith any structural modifications to, or changes to the
terms and conditions of, this Agreement as may be proposed
by the Agent in its sole discretion based on the information
provided to it pursuant to Section 5.02(e) or, to the extent
that any Owner fails to provide such information, based on
such other information as is available to the Agent.
SECTION 5.02. Reporting Requirements of each Owner.
------------------------------------
So long as any Capital for any Share shall be existing, or
Citibank shall have any Commitment, each Owner will, unless the
Agent shall otherwise consent in writing, furnish to the Agent:
(a) as soon as available and in any event within 60
days after the end of each of the first three quarters of
each fiscal year of such Owner, a statutory balance sheet of
such Owner as of the end of such quarter, and statutory
statements of income and surplus of such Owner each for the
period commencing at the end of the previous fiscal year and
ending with the end of such quarter, certified by the
controller or other appropriate officer of such Owner;
(b) as soon as available and in any event within 120
days after the end of each fiscal year of such Owner, a copy
of the statutory balance sheet of such Owner as of the end
of such year and the related statutory statements of income
and surplus of such Owner for such year each reported on by
the controller or other appropriate officer of such Owner;
(c) promptly after the filing or receiving thereof,
copies of all reports and notices with respect to any
reportable event, as defined in Article IV of ERISA, which
such Owner or any subsidiary files under ERISA (other than
any reportable event for which the 30 day reporting
requirement has been waived by regulation) with the Internal
Revenue Service or the Pension Benefit Guaranty Corporation
or the U.S. Department of Labor or which such Owner or any
subsidiary receives from such Corporation;
(d) as soon as possible and in any event within five
days after the occurrence of each Event of Termination or
each event which, with the giving of notice or lapse of time
or both, would constitute an Event of Termination, the
statement of the chief financial officer or chief accounting
officer of such Owner setting forth details of such Event of
Termination or event and the action which such Owner
proposes to take with respect thereto;
41
(e) (i) on or before January 31, 1996, such
information, documents, records or reports respecting the
Receivables as the Agent may request, it being understood
that such information may be based on such sampling
techniques as are satisfactory to, and, at its discretion,
tested by, the Agent and (ii) on or before December 15,
1995, actual information, documents, records or reports
respecting the Receivables as are satisfactory to the Agent;
and
(f) promptly, from time to time, such other
information, documents, records or reports respecting the
Receivables or the conditions or operations, financial or
otherwise, of such Owner, or any subsidiary as the Agent may
from time to time reasonably request in order to protect the
interests of the Shareowners under or contemplated by this
Agreement or the related Certificates.
SECTION 5.03. Negative Covenants of each Owner. So
--------------------------------
long as any Capital for any Share shall be existing, or Citibank
shall have any Commitment, each Owner will not, without the
written consent of the Agent:
(a) Sales, Liens, Etc. Except as otherwise provided
-----------------
herein, sell, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist, any
Adverse Claim upon or with respect to, the Seller's
undivided interest in any Pool Receivable or related
Contract, or assign any right to receive income in respect
thereof.
(b) Extension or Amendment of Receivables. Except as
-------------------------------------
otherwise permitted in Section 6.02(c), extend, amend or
otherwise modify the terms of any Pool Receivables.
(c) Change in Business or Credit and Collection
-------------------------------------------
Policy. Make any change in the character of its business or
------
in the Credit and Collection Policy which change would, in
either case, materially impair the collectibility of any
Pool Receivable.
(d) Amendments, Etc. to Intercompany Pooling
----------------------------------------
Agreement. Amend, modify or waive by one or more addenda or
---------
otherwise any provision of the Intercompany Pooling
Agreement or consent to any departure therefrom which would
(giving effect to one or more additional Owners becoming
parties hereto pursuant to Section 11.10) have the effect of
diluting, transferring, selling or otherwise disposing of
the ownership interest of any Owner in any Pool Receivable.
42
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Collection Agent. (a)
-------------------------------
The servicing, administering and collection of the Pool
Receivables shall be conducted by such Person (the "Collection
----------
Agent") so designated from time to time in accordance with this
-----
Section 6.01. Until the Agent gives notice to the Seller of a
designation of a new Collection Agent, Continental is hereby
designated as, and hereby agrees to perform the duties and
obligations of, the Collection Agent pursuant to the terms
hereof.
(b) The Agent, at any time it reasonably deems itself
insecure, upon three Business Days' notice to the Seller, may
designate as Collection Agent any Person (including itself) to
succeed Continental as Collection Agent, and designate any Person
(including itself) to succeed any successor Collection Agent, on
the condition in each case that any such Person so designated
shall agree to perform the duties and obligations of the
Collection Agent pursuant to the terms hereof. Provided no
Events of Termination specified in subsections (f) and (h)(ii) of
Section 7.01 shall have occurred and be continuing, any Person
designated by the Agent to succeed any Owner as Collection Agent
shall subcontract with the Seller or any Owner designated by the
Seller for the performance of certain limited duties in the
collection of Pool Receivables, including the giving of any
notice to Obligors of Pool Receivables; provided, however, that
-------- -------
any such subcontract shall be terminable by the Agent, upon three
Business Days' notice by the Agent to the Seller, if the Agent
shall determine, in its sole discretion, that such Owner is not
satisfactorily performing its duties and obligations. For
performing such limited duties such Owner shall receive a fee to
be agreed upon by the Agent and the Seller.
(c) For purposes of satisfying the condition contained
in subsection (b) above, the Agent hereby agrees that if and when
it shall designate itself as the Collection Agent it shall
perform the duties and obligations of the Collection Agent
pursuant to the terms hereof. Subject to the provisions of
subsection (b) above, the Collection Agent may, with the prior
consent of the Agent, subcontract with any other Person for
servicing, administering or collecting the Pool Receivables,
provided that the Collection Agent shall remain liable for the
--------
performance of the duties and obligations of the Collection Agent
pursuant to the terms hereof.
SECTION 6.02. Duties of Collection Agent. (a) The
--------------------------
Collection Agent shall take or cause to be taken all such actions
as may be necessary or advisable to collect each Pool Receivable
from time to time, all in accordance with applicable laws, rules
and regulations, with reasonable care and diligence, and in
accordance with the Credit and Collection Policy. The Seller,
Citibank, the Investor and CNA each hereby appoints as their
43
respective agent the Collection Agent, from time to time
designated pursuant to Section 6.01 to enforce their respective
rights and interests in and under the Pool Receivables, the
Related Security and the Contracts.
(b) The Collection Agent shall hold in trust for the
account of the Seller and for the Agent on behalf of the
respective accounts of each holder of a Certificate their
respective allocable shares of the Collections of Pool
Receivables in accordance with Section 2.07, but shall not be
required (unless otherwise requested by the Agent) to segregate
the funds constituting such portion of such Collections (other
than as provided in Section 2.07) prior to the remittance thereof
in accordance with said Section.
(c) Provided no Event of Termination shall have
occurred and be continuing, any Owner, while it is Collection
Agent, may, in accordance with the Credit and Collection Policy,
extend the maturity or adjust the Outstanding Balance of any Pool
Receivable as such Owner may determine to be appropriate to
maximize collections thereof.
(d) In the event that any Owner is replaced as
Collection Agent by another Person designated by the Agent, such
Owner shall, except to the extent necessary to perform any
responsibilities under a subcontract or to comply with applicable
law, deliver to the Collection Agent, and the Collection Agent
shall hold in trust for the Seller and the Agent on behalf of
each Shareowner in accordance with their respective interests,
all documents, instruments and records (including, without
limitation, computer tapes or disks) which evidence or relate to
Pool Receivables.
(e) The Collection Agent shall as soon as practicable
following receipt turn over to the Seller (i) that portion of
Collections of Pool Receivables representing its undivided
interest therein, less, in the event an Owner is not the
Collection Agent, all reasonable and appropriate out-of-pocket
costs and expenses of such Collection Agent of servicing,
collecting and administering the Pool Receivables to the extent
not covered by the Collection Agent Fee received by it and (ii)
the Collections of any Receivable which is not a Pool Receivable.
(f) The Collection Agent, if other than an Owner,
shall as soon as practicable upon demand deliver to the Seller
all documents, instruments and records in its possession which
evidence or relate to Receivables other than Pool Receivables,
and copies of documents, instruments and records in its
possession which evidence or relate to Pool Receivables.
(g) The Collection Agent shall, at any time and from
time to time at the request of the Agent, furnish to the Agent
(within four Business Days after such request) the calculation of
each Share.
44
(h) The Collection Agent's authorization under this
Agreement shall terminate, after the Commitment Termination Date,
upon receipt by each Shareowner of an amount equal to the Capital
for Shares owned by it, plus all other amounts owed to the Agent,
each Shareowner and the Seller and (unless otherwise agreed by
the Agent and the Collection Agent) the Collection Agent under
this Agreement.
SECTION 6.03. Rights and Duties of the Agent. At any
------------------------------
time following any designation by the Agent of a Collection Agent
other than any Owner pursuant to Section 6.01:
(i) The Agent may notify the Obligors of Pool
Receivables of the ownership of Shares by any Shareowner or
all of them, and may direct that payment of all amounts due
or to become due under any or all Pool Receivables be made
directly to the Agent or its designee.
(ii) The Seller shall, at the Agent's request and at
the Seller's expense, give notice of such ownership to each
said Obligor and direct that payments be made directly to
the Agent or its designee.
(iii) The Seller shall, at the Agent's request, (A)
assemble all of the documents, instruments and other records
(including, without limitation, computer tapes and disks)
which evidence the Pool Receivables and the related
Contracts and Related Security or which are otherwise
necessary or desirable to collect such Pool Receivables and
shall make the same available to the Agent at a place
selected by the Agent or its designee and (B) segregate all
cash, checks and other instruments received by it from time
to time constituting Collections of Pool Receivables in a
manner acceptable to the Agent and shall, promptly upon
receipt, remit all such cash, checks and instruments, duly
endorsed or with duly executed instruments of transfer, to
the Agent or its designee.
(iv) The Seller, Citibank, the Investor and CNA hereby
authorize the Agent to take any and all steps in the
Seller's name and on behalf of each Owner, Citibank, the
Investor and CNA, respectively, necessary or desirable, in
the reasonable determination of the Agent, to collect all
amounts due under any and all Pool Receivables, including,
without limitation, endorsing any Owner's name on checks and
other instruments representing Collections and enforcing
such Pool Receivables and the related Contracts.
SECTION 6.04. Responsibilities of the Seller.
------------------------------
Anything herein to the contrary notwithstanding:
45
(a) The exercise by the Agent of any of its rights
hereunder shall not release the Seller from any of its
duties or obligations with respect to the Pool Receivables
or related Contracts and owed to any party to any of such
Contracts;
(b) So long as any Owner or any other Person
subcontracting with such Owner shall act as Collection Agent
hereunder, neither the Agent nor any Shareowner shall have
any obligation or liability with respect to any Pool
Receivables or related Contracts, nor shall any of them be
obligated to perform any of the duties or obligations of the
Seller or any Owner thereunder. In the event that any other
Person shall act as Collection Agent, the liabilities of the
Agent or any Shareowner referred to above in respect of any
Pool Receivable or related Contract shall be limited
to any losses, damages, or liabilities, arising from or as a
result of their gross negligence or wilful misconduct,
subject to the provisions of Section 6.01(c) in the case of
the Agent;
(c) The Seller shall promptly notify the Agent of any
claim or threatened claim, other than by Citibank, the
Investor or CNA, probable, in the opinion of the management
of the Seller, to result in any material liability arising
under or incurred in connection with the provisions of
Article X; and
(d) The Seller shall, within ten Business Days of the
end of each fiscal month, or within ten Business Days of
such time as the Agent may request, furnish Investor Reports
and lists of changes in Designated Obligors, if any.
SECTION 6.05. Further Action Evidencing Purchases.
-----------------------------------
(a) The Seller agrees that from time to time, at its expense, it
will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or
desirable or that the Agent may reasonably request, in order to
perfect, protect or more fully evidence the Shares purchased
hereunder, or to enable any Shareowner or the Agent to exercise
or enforce any of their respective rights hereunder or under the
Certificates. Without limiting the generality of the foregoing,
each Owner will upon the request of the Agent: (i) execute and
file such financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be
necessary or appropriate; and (ii) mark its master data
processing records evidencing such Pool Receivables and related
Contracts with a legend, acceptable to the Agent, evidencing that
such Shares have been sold in accordance with this Agreement.
(b) The Seller hereby authorizes the Agent to file one
or more financing or continuation statements, and amendments
thereto, relative to all or any of the Pool Receivables now
existing or hereafter arising without the signature of the Seller
or any Owner where permitted by law.
46
(c) If the Seller fails to perform any of its
agreements or obligations under this Agreement, the Agent may,
upon three Business Days' prior written notification to the
Seller (but shall not be required to), itself perform, or cause
performance of, such agreement or obligation, and the expenses of
the Agent reasonably incurred in connection therewith shall be
payable by the Seller as provided in Section 10.01.
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination. If any of the
---------------------
following events ("Events of Termination") shall occur and be
---------------------
continuing:
(a) If any Owner is acting as a Collection Agent, the
Collection Agent (i) shall fail to perform or observe any
term, covenant or agreement hereunder (other than as
referred to in clause (ii) below) and such failure shall
remain unremedied for three Business Days or (ii) shall fail
to make any payment or deposit to be made by it hereunder
when due; or
(b) Any representation or warranty made or deemed to
be made by any Owner or the Seller (or any of its officers)
under or in connection with this Agreement or by the Company
(or any of its officers) under or in connection with the
Company Agreement or any Investor Report or other
information or report delivered pursuant hereto, shall prove
to have been false or incorrect in any material respect when
made; or
(c) The Seller or any Owner or the Company shall fail
to perform or observe any other term, covenant or agreement
contained in this Agreement or in the Company Agreement,
respectively, on its part to be performed or observed and
any such failure shall remain unremedied for three Business
Days after written notice thereof shall have been given by
the Agent to the Seller or the Company, respectively; or
(d) Any Owner or the Company shall fail to pay any
Debt (in an aggregate principal amount in excess of
$5,000,000), or any installment thereof or any interest or
premium thereon, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument
relating to such Debt; or any other default under any
agreement or instrument relating to any such Debt, or any
other event, shall occur and shall continue after the
applicable grace period, if
47
any, specified in such agreement or instrument, if the effect of
such default or event is to accelerate, or to permit the
acceleration of, the maturity of such Debt; or any such Debt
shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled required prepayment), prior
to the stated maturity thereof; or
(e) Any Purchase shall for any reason, except to the
extent permitted by the terms hereof, cease to create a
valid and perfected first priority undivided ownership
interest to the extent of the Share purchased or purported
to be purchased by such Purchase in each Pool Receivable and
the Related Security and Collections with respect thereto;
or
(f) (i) Any Owner or the Company shall generally not
pay its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, or shall
make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against any Owner
or the Company seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief,
or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property
and, if instituted against any Owner or the Company, either
such proceeding shall not be stayed or dismissed for 45 days
or any of the actions sought in such proceeding (including,
without limitation, the entry of an order for relief against
it or the appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial part of
its property) shall occur; or (ii) any Owner or the Company
shall take any corporate action to authorize any of the
actions set forth in clause (i) above in this subsection
(f); or
(g) The Delinquency Ratio on any day shall exceed
7.5%, the Default Ratio on any day shall exceed 4% or any
Share on any day shall exceed 100%;
(h) (i) There shall have been any material adverse
change in the financial condition or operations of the
Seller or of the Company since September 30, 1994 or (ii)
there shall have occurred any event which materially
adversely affects the ability of the Seller to collect Pool
Receivables or the ability of the Seller to perform
hereunder or the ability of the Company to perform under the
Company Agreement or (iii) there shall be any action, suit
or proceeding pending, or threatened against or affecting
any Owner or any subsidiary or the Company, or the property
of such Owner or any subsidiary or the Company, in any
court, or before any arbitrator of any kind, or before or by
any governmental body, which materially adversely affects
48
the condition of such Owner or such Owner and its
subsidiaries taken as a whole or the Company;
(i) Continental's claims paying rating shall be rated
lower than A- by S&P or Baa1 by Moody's; or
(j) A "specified corporate action" (as defined on the
date hereof in the Certificate of Amendment of the
Certificate of Incorporation of the Company included as
Exhibit A to the Securities Purchase Agreement dated as of
December 6, 1994 between the Company and the Equity
Investor, both as set forth in the Current Report on Form 8-
K dated December 9, 1994 of the Company filed with the
Securities and Exchange Commission) shall have occurred;
then, and in any such event, the Agent shall, at the request, or
may, with the consent, of either Citibank or the Investor, by
notice to the Seller declare the Commitment to be terminated,
whereupon the Commitment shall terminate, except that, in the
------
case of any event described in clause (i) of subsection (f) above
or described in subsection (g) above, the Commitment shall
terminate automatically upon the occurrence of such event. Upon
any such termination of the Commitment, the Agent and each
Shareowner shall have, in addition to all other rights and
remedies under this Agreement or otherwise, all other rights and
remedies provided under the UCC of the applicable jurisdiction
and other applicable laws, which rights shall be cumulative.
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action. Citibank, the
------------------------
Investor and CNA each hereby appoints and authorizes the Agent to
take such action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to the Agent by the
terms hereof, together with such powers as are reasonably
incidental thereto.
SECTION 8.02. Agent's Reliance, Etc. Neither the
---------------------
Agent nor any of its directors, officers, agents or employees
shall be liable to any Shareowner for any action taken or omitted
to be taken by it or them as Agent under or in connection with
this Agreement (including, without limitation, the Agent's
servicing, administering or collecting Pool Receivables as
Collection Agent pursuant to Section 6.01), except for its or
their own gross negligence or willful misconduct. Without
limitation of the generality of the foregoing, the Agent: (i)
may consult with legal counsel (including counsel for the
Seller), independent public accountants and other experts
selected by it and shall not be liable to any Shareowner
49
for any action taken or omitted to be taken in good faith by it
in accordance with the advice of such counsel, accountants or
experts; (ii) makes no warranty or representation to any
Shareowner and shall not be responsible to any of them for any
statements, warranties or representations made in or in
connection with this Agreement; (iii) shall not have any duty to
ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement on
the part of the Seller or any Owner or to inspect the property
(including the books and records) of any Owner; (iv) shall not be
responsible to any Shareowner for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of
this Agreement, the Certificates or any other instrument or
document furnished pursuant hereto; and (v) shall incur no
liability to any Shareowner under or in respect of this Agreement
by acting upon any notice (including notice by telephone),
consent, certificate or other instrument or writing (which may be
by telex) believed by it to be genuine and signed or sent by the
proper party or parties.
SECTION 8.03. CNA and Affiliates. With respect to any
------------------
Share owned by it, CNA shall have the same rights and powers
under this Agreement as any other Shareowner and may exercise the
same as though it were not the Agent. CNA and its affiliates may
generally engage in any kind of business with the Seller or any
Obligor, any of their respective subsidiaries and any person or
entity who may do business with or own securities of the Seller
or any Owner or any Obligor or any of their respective
subsidiaries, all as if CNA were not the Agent and without any
duty to account therefor to any Shareowners.
SECTION 8.04. Investor's Purchase Decision. The
----------------------------
Investor acknowledges that it has, independently and without
reliance upon the Agent or Citibank and based on the financial
statements referred to in Section 4.01(e) and such other
documents and information as it has deemed appropriate, made its
own evaluation and decision to enter into this Agreement and, if
it so determines, to purchase an undivided ownership interest in
Pool Receivables hereunder. The Investor also acknowledges that
it will, independently and without reliance upon the Agent or
Citibank and based on such documents and information as it shall
deem appropriate at the time, continue to make its own decisions
in taking or not taking action under this Agreement.
ARTICLE IX
ASSIGNMENT OF SHARES
SECTION 9.01. Assignment. The Investor, Citibank and
----------
CNA may assign to any Assignee, and any such Assignee may assign
to any other Assignee (in each case in which such Assignee is not
an Affiliate of the Investor, Citibank or CNA, only upon at least
15 Business Days' prior notice to the Seller), any Share and,
upon any such assignment, (i)
50
the applicable Assignee shall become the owner of such Share for all
purposes of this Agreement and (ii) the assignor thereof shall
relinquish its rights with respect to such Share for all purposes of
this Agreement. Such assignments shall be upon such terms and
conditions as the assignor and the Assignee of such Share may mutually
agree. The assignor of any Share shall deliver to the Assignee an
Assignment, duly executed by such assignor, assigning such Share
to the Assignee, and such assignor shall promptly execute and
deliver all further instruments and documents, and take all
further action, that the Assignee may reasonably request, in
order to perfect, protect or more fully evidence the Assignee's
right, title and interest in and to such Share, and to enable the
Assignee to exercise or enforce any rights hereunder or under the
Certificate. Upon the assignment of any Share as described
above, the Assignee thereof shall have all of the rights and
obligations of the assignor hereunder with respect to such Share.
An assignor of a Share shall provide notice to the Agent and the
Seller of any assignment of a Share by such assignor hereunder.
SECTION 9.02. Annotation of Certificate. The Agent
-------------------------
shall annotate the Certificate to reflect any assignments made
pursuant to Section 9.01 or otherwise.
SECTION 9.03. Payments to Agent. Notwithstanding any
-----------------
assignment pursuant to Section 9.01, the Collection Agent may pay
the Agent for the account of the Investor, Citibank, CNA or any
Assignee all amounts owing to the Investor, Citibank, CNA or any
Assignee, respectively, and neither the Collection Agent nor the
Seller shall have any duty or obligation with respect to the
Agent's application of such amount.
ARTICLE X
INDEMNIFICATION
SECTION 10.01. Indemnities by the Seller and the
---------------------------------
Owners. (a) Without prejudice to any other rights which the
------
Agent, or any Shareowner may have hereunder or under applicable
law, the Seller and each Owner hereby agrees to indemnify upon
demand and save harmless the Agent and each Shareowner from and
against any and all damages, losses, claims, liabilities, costs
and expenses (including reasonable attorneys' fees and
disbursements) awarded against or incurred by it arising out of
or as a result of:
(i) the transfer to any Shareowner of any Share in any
Receivable or other indebtedness other than an Eligible
Receivable which is in the Receivables Pool;
(ii) its reliance on any representation or warranty
made by any Owner or the Seller (or any of its officers)
under or in connection with this Agreement, any Investor
Report or any other information or report delivered by such
Owner or by the
51
Seller pursuant hereto, which shall have been false
or incorrect in any material respect when made or deemed
made (the veracity of such representation or warranty
to be determined without regard to any qualification or
exception as to any Owner's knowledge contained in such
representation or warranty);
(iii) the failure by any Owner or the Seller to
comply with any applicable law, rule or regulation with
respect to any Pool Receivables or the related Contract, or
the nonconformity of any Pool Receivables or the related
Contract with any such applicable law, rule or regulation;
(iv) the failure to vest in any Shareowner a valid and
perfected first-priority undivided fractional ownership
interest, to the extent of each Share owned by it hereunder,
in the Receivables in, or purporting to be in, the
Receivables Pool, free and clear of any Adverse Claim;
(v) the failure to file, or any delay in filing,
financing statements or other similar instruments or
documents under the UCC of any applicable jurisdiction or
other applicable laws with respect to any Receivables in, or
purporting to be in, the Receivables Pool, whether at the
time of any Purchase or at any subsequent time;
(vi) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to
the payment of any Receivable in, or purporting to be in,
the Receivables Pool (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 insurance
products or services related to such Receivable or the
furnishing or failure to furnish such insurance products or
services;
(vii) any failure of any Owner, as Collection Agent
or otherwise, to perform its duties or obligations in
accordance with the provisions of Article VI;
(viii) any failure by an insurance agent to pay to
any Owner or to the Seller the amount of any insurance
premium received from any Obligor; or
(ix) any failure by the Seller or any Owner to
terminate coverage under any insurance policy pursuant to
the terms of such policy.
SECTION 10.02. Seller to Advise Agent. The Seller
----------------------
will use its best efforts to identify situations involving
possible liability or obligations under this Article X and to
52
determine the amount of any such liability or obligations, and,
upon having notice of such situations, it will promptly advise
the Agent thereof.
SECTION 10.03. Cooperation in Litigation. The Seller,
-------------------------
at its expense, agrees to assist, at the request of the Agent or
any Shareowner in any action, suit or proceeding brought by or
against the Agent or such Shareowner relating to any of the
transactions contemplated by this Agreement or to any of the
Receivables in, or purporting to be in, the Receivables Pool or
the related Contracts. If (i) the Seller or any Owner shall have
acknowledged that Section 10.01 will cover any judgment or
expenses in any action, suit or proceeding and (ii) in the sole
determination of the Agent or such Shareowner, as the case may
be, the Seller or such Owner has the financial ability to satisfy
such judgment or expenses, then the Seller or such Owner shall
have the right, on behalf of the Agent or such Shareowner, as the
case may be, but at the Seller's or such Owner's expense, to
defend such action, suit or proceeding with counsel selected by
it and shall have sole discretion as to whether to litigate,
appeal or settle.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments, Etc. No amendment or
---------------
waiver of any provision of this Agreement nor consent to any
departure by any Seller therefrom, shall in any event be
effective unless the same shall be in writing and signed by the
Agent and each Shareowner, and then such waiver or consent shall
be effective only in the specific instance and for the specific
purpose for which given.
SECTION 11.02. Notices, Etc. All notices and other
------------
communications provided for hereunder shall, unless otherwise
stated herein, be in writing and mailed or delivered, as to each
party hereto, at its address set forth under its name on the
signature pages hereof or at such other address as shall be
designated by such party in a written notice to the other parties
hereto provided, however, that any such notice or communication
-------- -------
to the Seller or any Owner shall be mailed or delivered to
Continental. All such notices and communications shall be
effective, in the case of written notice, when deposited in the
mails, in each case addressed as aforesaid, except that notices
and communications pursuant to Article II shall not be effective
until received.
SECTION 11.03. No Waiver; Remedies. No failure on the
-------------------
part of the Agent or any Shareowner to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right
hereunder preclude
53
any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 11.04. Binding Effect; Assignability. (a)
-----------------------------
This Agreement shall be binding upon and inure to the benefit of
the Seller, each Owner, the Agent, each Shareowner and their
respective successors and assigns. This Agreement and the rights
and obligations of each Shareowner or the Agent therein shall be
assignable by such Shareowner or the Agent, respectively, and
their respective successors or assignees, provided, however, that
-------- -------
this Assignment and the rights and obligations of each Shareowner
or the Agent and any of their respective successors or assigns
therein may be assigned (i) only to an Assignee and (ii) to a
Person which is not an Affiliate of the Investor, Citibank or CNA
only upon at least 15 Business Days' prior notice to the Seller.
Any Share and the related rights and obligations shall not be
assignable except as provided in Article IX. None of the
Company, the Seller or any Owner shall assign its rights or
obligations hereunder or any interest herein, or under or in the
Company Agreement, without the prior written consent of the
Agent.
(b) 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 such
time, after the Commitment Termination Date, as no Share shall be
outstanding; provided, however, that rights and remedies with
-------- -------
respect to any breach of any representation and warranty made by
any Owner pursuant to Article IV and the indemnification
provisions of Article X and Section 11.06 shall be continuing and
shall survive any termination of this Agreement.
SECTION 11.05. Governing Law. This Agreement shall be
-------------
governed by, and construed in accordance with, the laws of the
State of New York, except to the extent that the validity or
perfection of the interests of the Shareowners in the Pool
Receivables, or remedies hereunder, in respect thereof, are
governed by the laws of a jurisdiction other than the State of
New York.
SECTION 11.06. Costs, Expenses and Taxes. In addition
-------------------------
to the rights of indemnification granted to the Agent and each
Shareowner under Article X hereof, the Seller and each Owner
agrees to pay on demand all costs and expenses in connection with
the preparation, execution, delivery and administration
(including periodic auditing) of this Agreement, the Certificates
and the other documents to be delivered hereunder, including,
without limitation, the reasonable fees and out-of-pocket
expenses of counsel for Citibank and the Agent with respect
thereto and with respect to advising the Agent as to its rights
and remedies under this Agreement, and all costs and expenses, if
any (including reasonable counsel fees and expenses), in
connection with the enforcement of this Agreement, the
Certificates and the other documents to be delivered hereunder.
In addition, the Seller and each Owner shall pay any and all
stamp and other taxes and fees payable or determined to be
54
payable in connection with the execution, delivery, filing and
recording of this Agreement, the Certificates or the other
documents to be delivered hereunder, and agrees to save the Agent
and each Shareowner harmless from and against any and all
liabilities with respect to or resulting from any delay in paying
or omission to pay such taxes and fees. In addition, the Seller
and each Owner shall pay on demand all other costs, expenses and
taxes incurred by the Investor or any general or limited partner
of the Investor ("Other Costs"), including, without limitation,
-----------
the cost of auditing the Investor's books by certified public
accountants, the cost of rating the Investor's commercial paper
by independent financial rating agencies, the taxes (including
income taxes) resulting from the Investor's operations, and the
reasonable fees and out-of-pocket expenses of counsel for the
Investor or any counsel for any general or limited partner of the
Investor with respect to (i) the formation of the Investor, (ii)
advising the Investor or such general or limited partner as to
its rights and remedies under this Agreement, (iii) the
enforcement of this Agreement, the Certificate of the Investor
and the other documents to be delivered hereunder, or (iv)
advising the Investor or such general or limited partner as to
matters relating to the Investor's operations; provided,
--------
however, that if the Investor enters into agreements for the
-------
purchase of interests in receivables from one or more other
Persons ("Other Sellers"), the Seller shall not be liable for
-------------
such Other Costs in an amount which would exceed its
proportionate share thereof allocated ratably among the Seller
and the Other Sellers in accordance with the respective
commitments or options (whether used or unused) of the Investor
to purchase receivables or interests therein from the Seller and
each Other Seller; and provided further that if such Other Costs
-------- -------
are attributable to the Seller and not attributable to any Other
Seller, the Seller shall be solely liable for such Other Costs;
and provided further that no Other Seller shall be benefited by
-------- -------
this sentence and neither any general or limited partner of the
Investor nor any Other Seller nor any other Person other than the
Investor (which may present claims on behalf of such general or
limited partners) shall be entitled to enforce the obligations of
the Seller or any Owner under this sentence, and such obligations
may be waived or limited by the Investor (or the Agent acting on
its behalf) without the consent of any other Person.
SECTION 11.07. No Proceedings. The Seller, each
--------------
Owner, the Agent, Citibank and CNA each hereby agrees that it
will not institute against the Investor any proceeding of the
type referred to in clause (i) of Section 7.01(f) so long as any
commercial paper issued by the Investor shall be outstanding or
there shall not have elapsed one year plus one day since the last
day on which any such commercial paper shall have been
outstanding.
SECTION 11.08. Security Interest. The parties hereto
-----------------
intend that each Purchase hereunder shall constitute a sale and
purchase, and not a loan. However, in the event that for any
reason any Purchase hereunder shall not be deemed to be a sale
and purchase, then Purchases hereunder and such reinvestments and
the interests created thereby
55
shall be deemed to create a security interest therein securing the
obligations of the respective Owners hereunder.
SECTION 11.09. Non-Assignment of Contracts.
---------------------------
Notwithstanding anything in this Agreement to the contrary,
nothing in this Agreement shall constitute or be deemed to
constitute an assignment by the Seller to any Shareowner of any
Contract.
SECTION 11.10. Additional Owners. Section 5.03(d)
-----------------
hereof, in effect, prohibits amendments or modifications to the
Intercompany Pooling Agreement which would dilute the interest of
the Seller in Pool Receivables. In the event that it is at any
time proposed to add another party to the Intercompany Pooling
Agreement and the consequence thereof would be to cause such
dilution, Continental may give notice thereof to the Agent and
request in such notice that such party be added as a party to
this Agreement as an Owner hereunder, effective as of the date
specified in such notice (which shall be a date prior to such
party becoming a party to the Intercompany Pooling Agreement and
at least ten Business Days subsequent to the date of the Agent's
receipt of such notice; the "Effective Date"). In any such
event, such party shall, as of the Effective Date, become a party
hereto and an Owner hereunder, subject to the obligations and
entitled to the benefits hereof as if an original party hereto;
provided, however, that:
-------- -------
(a) The Agent shall not have, on or prior to the fifth
Business Day preceding the Effective Date, given notice to
the Seller to the effect that in the good faith judgment of
the Agent such party is not acceptable;
(b) As of the Effective Date and giving effect to the
addition of such party as a party hereto and as Owner
hereunder, the representations and warranties in Section
4.01 are true and correct as to such party and no event or
circumstance shall have occurred which constitutes an Event
of Termination or would constitute an Event of Termination
with the giving of notice or the lapse of time, or both; and
(c) The Agent shall have received, on or prior to the
Effective Date, an Assumption Agreement signed by such party
and an opinion of counsel to such party in substantially the
form of Exhibit J hereto, in each case in form and substance
satisfactory to the Agent.
SECTION 11.11. Execution in 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 when taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature
page to this Agreement by facsimile transmission shall be
effective as delivery of a manually executed counterpart of this
Agreement.
56
SECTION 11.12. Reference to the Documents. As of the
--------------------------
date referred to in Section 3.04, upon the satisfaction or waiver
by the Agent of the conditions contained in Section 3.04, each
reference in any Certificate, any Assignment, the Company
Agreement or any instrument or document entered into pursuant
hereto or thereto or to any term, condition or provision
contained in the Receivables Agreement in connection herewith or
therewith to the Receivables Agreement or, in each case,
"thereunder", "thereof", "therein", or words of
57
like import, shall mean and be a reference to this Agreement or
such term, condition or provision, as applicable as amended and
restated herein.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
THE CONTINENTAL INSURANCE COMPANY
Individually and on behalf of the
Seller
By Francis M. Colalucci
--------------------------------------
Name: Francis M. Colalucci
Title: V.P./Treasurer
180 Maiden Lane, 40th Floor
New York, New York 10038
Attention: Mr. William F. Gleason, Jr.
Senior Vice President,
General Counsel and
Secretary
(with a copy to:
The Continental Insurance Companies
2 Corporate Place South
Piscataway, New Jersey 08854
Attention: Mr. Francis M. Colalucci
Vice President and
Controller)
BOSTON OLD COLONY INSURANCE COMPANY
By Francis M. Colalucci
--------------------------------------
Name: Francis M. Colalucci
Title: V.P./Treasurer
58
THE BUCKEYE UNION INSURANCE COMPANY
By Francis M. Colalucci
--------------------------------------
Name: Francis M. Colalucci
Title: V.P. Treasurer
CASUALTY INSURANCE COMPANY
By Francis M. Colalucci
--------------------------------------
Name: Francis M. Colalucci
Title: V.P. Ass't Treasurer
COMMERCIAL INSURANCE COMPANY OF NEWARK,
N.J.
By Francis M. Colalucci
--------------------------------------
Name: Francis M. Colalucci
Title: V.P. Treasurer
THE CONTINENTAL INSURANCE COMPANY OF
NEW JERSEY
By Francis M. Colalucci
--------------------------------------
Name: Francis M. Colalucci
Title: V.P. Treasurer
59
CONTINENTAL LLOYD'S INSURANCE COMPANY
By Francis M. Colalucci
--------------------------------------
Name: Francis M. Colalucci
Title: Attorney-in-Fact
CONTINENTAL REINSURANCE CORPORATION
By Francis M. Colalucci
--------------------------------------
Name: Francis M. Colalucci
Title: V.P. and Treasurer
THE FIDELITY AND CASUALTY COMPANY
OF NEW YORK
By Francis M. Colalucci
--------------------------------------
Name: Francis M. Colalucci
Title: V.P. and Treasurer
FIREMEN'S INSURANCE COMPANY OF
NEWARK, NEW JERSEY
By Francis M. Colalucci
--------------------------------------
Name: Francis M. Colalucci
Title: V.P. and Treasurer
60
THE GLENS FALLS INSURANCE COMPANY
By Francis M. Colalucci
--------------------------------------
Name: Francis M. Colalucci
Title: V.P. and Treasurer
KANSAS CITY FIRE AND MARINE
INSURANCE COMPANY
By Francis M. Colalucci
--------------------------------------
Name: Francis M. Colalucci
Title: V.P. and Treasurer
THE MAYFLOWER INSURANCE COMPANY, LTD.
By Francis M. Colalucci
--------------------------------------
Name: Francis M. Colalucci
Title: V.P. and Treasurer
NATIONAL-BEN FRANKLIN INSURANCE
COMPANY OF ILLINOIS
By Francis M. Colalucci
--------------------------------------
Name: Francis M. Colalucci
Title: V.P. and Treasurer
EXHIBIT C
AGREEMENT, dated as of December 30, 1994, made by THE CONTINENTAL
CORPORATION, a New York corporation (the "Company"), in favor of CIESCO, L.P.
-------
(formerly known as Commercial Industrial Trade-Receivables Investment Company),
a New York limited partnership (the "Investor"), CITIBANK, N.A. ("Citibank") and
-------- --------
CITICORP NORTH AMERICA, INC., a Delaware corporation (and successor in interest
to Citicorp Industrial Credit, Inc., a former Delaware corporation),
individually ("CNA") and as agent for the Investor, Citibank and CNA (the
---
"Agent") (the Investor, Citibank and CNA being each a "Purchaser" and,
-----
collectively, the "Purchasers").
PRELIMINARY STATEMENTS.
(1) The Continental Insurance Company, Boston Old Colony Insurance
Company, The Buckeye Union Insurance Company, Casualty Insurance Company,
Commercial Insurance Company of Newark, N.J., The Continental Insurance Company
of New Jersey, Continental Lloyd's Insurance Company, Continental Reinsurance
Corporation, The Fidelity and Casualty Company of New York, Firemen's Insurance
Company of Newark, New Jersey, The Glens Falls Insurance Company, Kansas City
Fire and Marine Insurance Company, The Mayflower Insurance Company, Ltd.,
National-Ben Franklin Insurance Company of Illinois, Niagara Fire Insurance
Company, Pacific Insurance Company and Workers' Compensation and Indemnity
Company of California (each such company, individually, being herein referred to
as an "Owner" and, collectively, as the "Owners" or the "Seller"), each a direct
----- ------ ------
or indirect subsidiary of the Company, have entered into a Trade Receivables
Purchase and Sale Agreement dated as of December 28, 1984, as amended to date,
and intend to enter into an amendment thereto to be dated as of December 30,
1994 (the "Amendment") (said Agreement as so amended being the "Receivables
--------- -----------
Agreement"; the terms defined therein and not otherwise defined herein being
---------
used herein as therein defined). Pursuant to the terms and conditions of the
Receivables Agreement, the Seller will sell Shares to the Purchasers.
(2) It is a condition precedent to the Amendment that the Company, as
the beneficial owner of all of the outstanding shares of stock of each Owner,
shall have executed and delivered this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Purchasers to enter into the Amendment and to make Purchases under the
Receivables Agreement as so amended, the Company hereby agrees as follows:
SECTION 1. Unconditional Undertaking; Enforcement. (a)
--------------------------------------
The Company hereby unconditionally and irrevocably undertakes and
agrees with and for the benefit of each Purchaser and the Agent
to cause the due and punctual performance and observance by
2
the Seller and its successors and assigns of all the terms, covenants, cond-
itions, agreements and undertakings on the part of the Seller to be performed or
observed under Sections 2.10 and 2.11 of the Receivables Agreement in accordance
with the terms thereof, including, without limitation, any agreement of the
Seller therein to pay money (all such terms, covenants, conditions, agreements
and undertakings on the part of the Seller being, collectively, the "Seller
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Obligations"). In the event that the Seller shall fail in any manner whatsoever
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to perform or observe any of the Seller Obligations when the same shall be
required to be performed or observed under the Receivables Agreement, then the
Company will itself duly and punctually perform or observe, or cause to be duly
and punctually performed or observed, such Seller Obligation, and it shall not
be a condition to the accrual of the obligation of the Company hereunder to
perform or observe any Seller Obligation (or to cause the same to be performed
or observed) that any Purchaser or the Agent shall have first made any request
of or demand upon or given any notice to the Company or to the Seller or their
respective successors or assigns, or have instituted any action or proceeding
against the Company or the Seller or their respective successors or assigns in
respect thereof.
(b) Any Purchaser and the Agent may proceed to enforce the obligations
of the Company under this Section 1 without first pursuing or exhausting any
right or remedy which any Purchaser or the Agent may have against the Seller,
any other Person or with respect to the Shares.
SECTION 2. Obligation Absolute. The Company will perform its
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obligations under this Agreement regardless of any law, rule, regulation or
order now or hereafter in effect in any jurisdiction affecting any of the terms
of the Receivables Agreement or any document delivered in connection with the
Receivables Agreement or the rights of any Purchaser or the Agent with respect
thereto. The obligations of the Company under this Agreement shall be absolute
and unconditional irrespective of:
(i) any lack of validity or enforceability of the
Receivables Agreement or the Certificate or any document or any
other agreement or instrument relating thereto;
(ii) any change in the time, manner or place of performance of, or in
any other term of, all or any of the Seller Obligations, or any other
amendment or waiver of or any consent to departure from the Receivables
Agreement or the Certificate or any document or any other agreement or
instrument relating thereto;
(iii) any exchange, release or failure to transfer title to the Shares,
or any release or amendment or waiver of or consent to departure from any
other guaranty, for all or any of the Seller's Obligations;
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(iv) any failure to obtain any authorization or approval from or other
action by, or to notify or file with, any governmental authority or
regulatory body required in connection with the performance of such
obligations by the Company;
(v) any impossibility or impracticality of performance, illegality,
force majeure, any act of any government, or any other circumstance which
might constitute a defense available to, or a discharge of, the Seller or
the Company, or any other circumstance, event or happening whatsoever,
whether foreseen or unforeseen and whether similar or dissimilar to
anything referred to above in this Section; or
(vi) any disposition of the stock of any Owner.
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment by the Seller under Section 2.10 or 2.11 of the
Receivables Agreement is rescinded or must otherwise be returned by any
Purchaser or the Agent upon the insolvency, bankruptcy or reorganization of any
Owner or otherwise, all as though such payment had not been made. The
obligations of the Company under this Agreement shall not be subject to
reduction, termination or other impairment by reason of any set-off, recoupment,
counterclaim or defense or for any other reason. The obligations of the Company
under this Agreement shall not be discharged except by performance as herein
provided.
SECTION 3. Waiver. The Company hereby waives promptness, diligence,
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notice of acceptance and any other notice with respect to any of the Seller
Obligations and this Agreement, the Receivables Agreement, the Certificates and
any other document related thereto and any requirement that any Purchaser or the
Agent exhaust any right or take any action against the Seller, any other Person
or with respect to any Share.
SECTION 4. Subrogation. The Company will not exercise or assert any
-----------
rights which it may acquire by way of subrogation under this Agreement unless
and until all of the Seller Obligations shall have been paid and performed in
full. If any payment shall be made to the Company on account of any subrogation
rights at any time when all of the Seller Obligations shall not have been paid
and performed in full, each and every amount so paid will be held in trust for
the benefit of the Purchasers and forthwith be paid to the Agent to be credited
and applied to the Seller Obligations to the extent then unsatisfied, in
accordance with the terms of the Receivables Agreement or any document delivered
in connection with the Receivables Agreement, as the case may be. In the event
that (i) the Company shall have satisfied any of the Seller Obligations and (ii)
all of the Seller Obligations shall have been paid and performed in full, the
Agent will, at the Company's request and expense, execute and deliver to the
Company appropriate documents, without recourse and without representation or
warranty of any kind, necessary to evidence or confirm the transfer by way of
subrogation to the Company of the rights of any Purchaser or the Agent, as the
case may
4
be, with respect to the Seller Obligations to which the Company shall have
become entitled by way of subrogation, thereafter any Purchaser and the Agent
shall have no responsibility to the Company or any other Person with respect
thereto.
SECTION 5. Representations and Warranties of the
-------------------------------------
Company. The Company hereby represents and warrants as follows:
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(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction named at the beginning
of this Agreement and is duly qualified to do business, and in good
standing, in every jurisdiction where the nature of its business requires
it to be so qualified.
(b) The execution, delivery and performance by the Company of this
Agreement and the other instruments and documents to be delivered by it in
connection herewith, and the transactions contemplated hereby, are within
the Company's corporate powers, have been duly authorized by all necessary
corporate action, do not contravene (i) the Company's charter or by-laws,
(ii) any law, rule or regulation applicable to the Company, (iii) any
contractual restriction contained in any indenture, loan or credit
agreement, lease, mortgage, security agreement, bond, note, or other
agreement or instrument binding on the Company or affecting its property
or (iv) any order, writ, judgement, award, injunction or decree binding
on the Company or affecting its property, and do not result in or require
the creation of any lien, security interest or other charge or encumbrance
upon or with respect to any of its properties; and no transaction
contemplated hereby requires compliance with any bulk sales act or similar
law. This Agreement has been duly executed and delivered by the Company.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other
Person (including, without limitation, the Equity Investor or any of its
Affiliates) is required for the due execution, delivery and performance by
the Company of this Agreement or any other document or instrument to be
delivered in connection therewith except for the consent of the Equity
Investor referred to in Article III of the Receivables Agreement, which,
at the time required in Article III, shall have been duly made and in
full force and effect.
(d) This Agreement is the legal, valid and binding agreement of the
Company enforceable against the Company in accordance with its terms.
(e) The Company is the registered and beneficial direct or indirect
owner of all of each class of the issued and outstanding shares of the
capital stock of each
5
Owner other than Continental Lloyd's Insurance Company. All of the
interests in Continental Lloyd's Insurance Company are directly or
indirectly beneficially owned by the Company.
(f) There are no actions, suits or proceedings pending or, to the
knowledge of the Company, threatened against or affecting the Company or
any subsidiary, or the property of the Company or of any subsidiary, in
any court, or before any arbitrator of any kind, or before or by any
governmental body, which may materially adversely affect either the
financial condition or operations of the Company or the Company and its
subsidiaries taken as a whole or the ability of the Company to perform
its obligations hereunder. Neither the Company nor any subsidiary is in
default with respect to any order of any court, arbitrator or
governmental body except for defaults, if any, with respect to orders of
governmental agencies which defaults are not material to the business
or operations of the Company or any subsidiary.
(g) The consolidated balance sheet of the Company and its consolidated
subsidiaries as at December 31, 1993, and the related consolidated
statements of income and retained earnings of the Company and its
consolidated subsidiaries for the fiscal year then ended, in each case
certified by KPMG Peat Marwick, independent public accountants, copies of
which have been furnished to the Agent, fairly present the consolidated
financial condition of the Company and its consolidated subsidiaries as
at such date and the consolidated results of the operations of the
Company and its consolidated subsidiaries for the period ended on such
date, all in accordance with generally accepted accounting principals
consistently applied, and since December 31, 1993, there has been no
material adverse change in such condition or operations.
(h) The Company has received $275 million in cash from the Equity
Investor (or a wholly owned subsidiary thereof) as payment for the
issuance by the Company of shares if its Series F Preferred Stock, Series
H Preferred Stock and Series T Preferred Stock (such Series F Preferred
Stock, Series H Preferred Stock and Series T Preferred Stock being,
collectively, the "Preferred Stock") pursuant to the Securities Purchase
---------------
Agreement (the "Securities Purchase Agreement") dated as of December 6,
-----------------------------
1994 between the Company and the Equity Investor attached as an exhibit
to the Current Report (the "Current Report") on Form 8-K dated December
--------------
9, 1994 of the Company filed by the Securities and Exchange Commission.
The Current Report, including all exhibits thereto, and the other
information furnished by or on behalf of the Company with respect to the
transactions described in the Current Report do not contain any untrue
statement of a material fact or fail to state a material fact necessary
to make the statements made therein not misleading.
6
(i) No authorization or approval or other action by any governmental
authority or regulatory body was required for the valid issuance by the
Company of the Preferred Stock.
(j) No "specified corporate action" (as defined on the date hereof in
the Certificate of Amendment of the Certificate of Incorporation of the
Company attached as Exhibit A to the Securities Purchase Agreement) has
occurred on or prior to the date hereof.
SECTION 6. Covenants. Until the date on which all of the Seller
---------
Obligations shall have been fully satisfied, the Company will, unless the Agent
shall have otherwise consented in writing:
(a) Compliance with Laws, Etc. Comply in all material respects with all
-------------------------
applicable laws, rules, regulations and orders with respect to it, its
business and properties, the non-compliance with which would materially
adversely affect it, its business and properties.
(b) Preservation of Corporate Existence. Preserve and maintain its
-----------------------------------
corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation, and qualify and remain qualified in good standing
as a foreign corporation in each jurisdiction where the failure to
preserve and maintain such existence, rights, franchises, privileges and
qualification would materially adversely affect the interests of any
Purchaser or the Agent under the Receivables Agreement or the ability of
the Company to perform its obligations under this Agreement.
SECTION 7. Amendments, Etc. No amendment or waiver of any provision of
---------------
this Agreement nor consent to any departure by the Company therefrom shall in
any event be effective unless the same shall be in writing and signed by the
Agent, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 8. Expenses. The Company will upon demand pay to the Agent and
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any Purchaser, respectively, the amount of any and all reasonable expenses,
including attorney's fees and expenses, which they may incur in connection with
the exercise or enforcement of any of their respective rights or interests
hereunder.
SECTION 9. Addresses for Notices. All demands, notices
---------------------
and other communications provided for hereunder shall be in
writing (including telex communication) and, if to the Company,
mailed or telexed or delivered to it, addressed to it at 180
Maiden Lane, New York, New York 10038, Attention of William F.
Gleason (Telex No. 426785); if
7
to the Agent or any Purchaser, mailed or telexed to the Agent at its address
referred to in Section 11.02 of the Agreement; or, as to any such Person
(excluding any Purchaser), at such other address as shall be designated by such
Person in a written notice to each other such Person complying as to delivery
with the terms of this Section 10. All such demands, notices and other
communications shall be effective when presented at the address of the addressee
thereof or, in the case of notice by telex, when telexed against receipt of an
answerback, in each case addressed as aforesaid.
SECTION 10. No Waiver; Remedies. No failure on the part of the Agent or
-------------------
any Purchaser to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 11. Continuing Agreement. This Agreement is a continuing
--------------------
agreement and shall (i) remain in full force and effect until the Receivables
Agreement shall have been terminated and all of the Seller Obligations shall
have been fully satisfied, (ii) be binding upon the Company, its successors and
assigns and (iii) inure to the benefit of and be enforceable by the Agent, each
Purchaser, and their respective successors, transferees and assigns.
SECTION 12. Governing Law. This Agreement shall be
-------------
governed by, and construed in accordance with, the laws of the
State of New York.
8
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
THE CONTINENTAL CORPORATION
By
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Title: