EXHIBIT 10.9
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RECEIVABLES PURCHASE AGREEMENT
dated as of April 30, 2001
among
CSS FUNDING LLC
CSS INDUSTRIES, INC.
MARKET STREET FUNDING CORPORATION
and
PNC BANK, NATIONAL ASSOCIATION
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TABLE OF CONTENTS
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility ............................................. 1
Section 1.2. Making Purchases .............................................. 1
Section 1.3. Purchased Interest Computation ................................ 2
Section 1.4. Settlement Procedures ......................................... 3
Section 1.5. Fees .......................................................... 6
Section 1.6. Payments and Computations, Etc................................. 6
Section 1.7. Increased Costs ............................................... 6
Section 1.8. Requirements of Law ........................................... 7
Section 1.9. Inability to Determine Euro-Rate .............................. 8
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants ..................... 9
Section 2.2. Termination Events ............................................ 9
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller ..................................... 9
Section 3.2. Indemnities by the Servicer ................................... 11
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of the Servicer ................................... 12
Section 4.2. Duties of the Servicer ........................................ 12
Section 4.3. Lock-Box Arrangements ......................................... 13
Section 4.4. Enforcement Rights ............................................ 14
Section 4.5. Responsibilities of the Seller ................................ 15
Section 4.6. Servicing Fee ................................................. 15
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ARTICLE V.
MISCELLANEOUS
Section 5.1. Amendments, Etc................................................ 15
Section 5.2. Notices, Etc................................................... 16
Section 5.3. Assignability ................................................. 16
Section 5.4. Costs, Expenses and Taxes ..................................... 17
Section 5.5. No Proceedings; Limitation on Payments ........................ 17
Section 5.6. Confidentiality ............................................... 17
Section 5.7. GOVERNING LAW AND JURISDICTION ................................ 18
Section 5.8. Execution in Counterparts ..................................... 18
Section 5.9. Survival of Termination ....................................... 18
Section 5.10. WAIVER OF JURY TRIAL ......................................... 18
Section 5.11. Entire Agreement ............................................. 19
Section 5.12. Headings ..................................................... 19
Section 5.13. Issuer's, Administrator's, Seller's and Servicer's
Liabilities .................................................. 19
EXHIBIT I Definitions
EXHIBIT II Conditions of Purchases
EXHIBIT III Representations and Warranties
EXHIBIT IV Covenants
EXHIBIT V Termination Events
SCHEDULE I Credit and Collection Policy
SCHEDULE II Lock-box Banks and Lock-box Accounts
SCHEDULE III Trade Names
SCHEDULE IV Proceedings
ANNEX A Form of Information Package
ANNEX B Form of Purchase Notice
ANNEX C Form of Paydown Notice
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This RECEIVABLES PURCHASE AGREEMENT (as amended, supplemented or
otherwise modified from time to time, this "Agreement") is entered into as of
April 30, 2001, among CSS FUNDING CORPORATION, a Delaware limited liability
company, as seller (the "Seller"), CSS INDUSTRIES, INC., a Delaware corporation
("CSS"), as initial servicer (in such capacity, together with its successors and
permitted assigns in such capacity, the "Servicer"), MARKET STREET FUNDING
CORPORATION, a Delaware corporation (together with its successors and permitted
assigns, the "Issuer"), and PNC BANK, NATIONAL ASSOCIATION, a national banking
association ("PNC"), as administrator (in such capacity, together with its
successors and assigns in such capacity, the "Administrator").
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in Exhibit I. References in the Exhibits
hereto to the "Agreement" refer to this Agreement, as amended, supplemented or
otherwise modified from time to time.
The Seller desires to sell, transfer and assign an undivided variable
percentage interest in a pool of receivables, and the Issuer desires to acquire
such undivided variable percentage interest, as such percentage interest shall
be adjusted from time to time based upon, in part, reinvestment payments that
are made by the Issuer.
In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility. (a) On the terms and conditions
hereinafter set forth, the Issuer hereby agrees to purchase, and make
reinvestments of, undivided percentage ownership interests with regard to the
Purchased Interest from the Seller from time to time from the date hereof to the
Facility Termination Date. Under no circumstances shall the Issuer make any such
purchase or reinvestment if, after giving effect to such purchase or
reinvestment, the aggregate outstanding Capital of the Purchased Interest would
exceed the Purchase Limit.
(b) The Seller may, upon at least 60 days' written notice to the
Administrator, terminate the purchase facility provided in this Section in whole
or, upon at least 30 days' written notice to the Administrator, from time to
time, irrevocably reduce in part the unused portion of the Purchase Limit;
provided, that each partial reduction shall be in the amount of at least
$5,000,000, or an integral multiple of $1,000,000 in excess thereof.
Section 1.2. Making Purchases. (a) Each purchase (but not reinvestment)
of undivided percentage ownership interests with regard to the Purchased
Interest hereunder shall be made upon the Seller's irrevocable written notice in
the form of Annex B (the "Purchase Notice") delivered to the Administrator in
accordance with Section 5.2 (which notice must be received by the
Administrator before 11:00 a.m., New York City time) at least two Business Days
before the requested purchase date, which notice shall specify: (A) the amount
requested to be paid to the Seller (such amount, which shall not be less than
$1,000,000 and shall be in integral multiples of $100,000, being the Capital
relating to the undivided percentage ownership interest then being purchased),
(B) the date of such purchase (which shall be a Business Day), and (C) the pro
forma calculation of the Purchased Interest after giving effect to the increase
in Capital.
(b) On the date of each purchase (but not reinvestment) of undivided
percentage ownership interests with regard to the Purchased Interest hereunder,
the Issuer shall, upon satisfaction of the applicable conditions set forth in
Exhibit II, make available to the Seller in same day funds, at First Union Bank,
account number 2000006163185, ABA # 031201467, an amount equal to the Capital
relating to the undivided percentage ownership interest then being purchased.
(c) Effective on the date of each purchase pursuant to this Section and
each reinvestment pursuant to Section 1.4, the Seller hereby sells and assigns
to the Issuer an undivided percentage ownership interest in: (i) each Pool
Receivable then existing, (ii) all Related Security with respect to such Pool
Receivables, and (iii) all Collections with respect to, and other proceeds of,
such Pool Receivables and Related Security.
(d) To secure all of the Seller's obligations (monetary or otherwise)
under this Agreement and the other Transaction Documents to which it is a party,
whether now or hereafter existing or arising, due or to become due, direct or
indirect, absolute or contingent, the Seller hereby grants to the Issuer a
security interest in all of the Seller's right, title and interest (including
any undivided interest of the Seller) in, to and under all of the following,
whether now or hereafter owned, existing or arising: (i) all Pool Receivables,
(ii) all Related Security with respect to such Pool Receivables, (iii) all
Collections with respect to, and other proceeds of, such Pool Receivables and
Related Security, (iv) the Lock-Box Accounts and all amounts on deposit therein,
and all certificates and instruments, if any, from time to time evidencing such
Lock-Box Accounts and such amounts on deposit therein, (v) all books and records
of each Receivable, and all rights, remedies, powers and privileges of the
Seller in any accounts into which Collections are or may be received and (vi)
all proceeds and products of, and all amounts received or receivable under any
or all of, the foregoing (collectively, the "Pool Assets"). The Issuer shall
have, with respect to the Pool Assets, and in addition to all the other rights
and remedies available to the Issuer, all the rights and remedies of a secured
party under any applicable UCC.
Section 1.3. Purchased Interest Computation. The Purchased Interest
shall be initially computed on the date of the initial purchase hereunder.
Thereafter, until the Facility Termination Date, the Purchased Interest shall be
automatically recomputed (or deemed to be recomputed) on each Business Day other
than a Termination Day. From and after the occurrence of any Termination Day,
the Purchased Interest shall (until the event(s) giving rise to such Termination
Day are satisfied or are waived by the Administrator or the happening of the
events set forth in the next sentence) be deemed to be 100%. The Purchased
Interest shall become zero when the Capital thereof and Discount thereon shall
have been paid in full, all the amounts owed by the Seller hereunder to the
Issuer, the Administrator and any other Indemnified Party or Affected Person are
paid in full, and
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the Servicer shall have received the accrued Servicing Fee thereon; provided
that the reduction of the Purchased Interest to zero shall not affect in any way
the outstanding obligations (if any) of the Servicer.
Section 1.4. Settlement Procedures. (a) The collection of the Pool
Receivables shall be administered by the Servicer in accordance with this
Agreement. The Seller shall provide to the Servicer on a timely basis all
information needed for such administration, including notice of the occurrence
of any Termination Day and current computations of the Purchased Interest.
(b) The Servicer shall, on each day on which Collections of Pool
Receivables are received (or deemed received) by the Seller or the Servicer:
(i) set aside and hold in trust (and shall, at the request of
the Administrator, segregate in a separate account approved by the
Administrator) for the Issuer, out of the Issuer's Share of such
Collections, first, an amount equal to the Discount accrued through
such day for each Portion of Capital and not previously set aside,
second, an amount equal to the fees set forth in the Fee Letter accrued
and unpaid through such day, and third, to the extent funds are
available therefor, an amount equal to the Issuer's Share of the
Servicing Fee accrued through such day and not previously set aside,
(ii) subject to Section 1.4(f), if such day is not a
Termination Day, remit to the Seller, on behalf of the Issuer, the
remainder of the Issuer's Share of such Collections. Such remainder
shall be automatically reinvested in Pool Receivables, and in the
Related Security, Collections and other proceeds with respect
thereto; provided, however, that if the Purchased Interest would exceed
100%, then the Servicer shall not reinvest, but shall set aside and
hold in trust for the Issuer (and shall, at the request of the
Administrator, segregate in a separate account approved by the
Administrator) a portion of such Collections that, together with the
other Collections set aside pursuant to this paragraph, shall equal the
amount necessary to reduce the Purchased Interest to 100%,
(iii) if such day is a Termination Day, set aside, segregate
and hold in trust (and shall, at the request of the Administrator,
segregate in a separate account approved by the Administrator) for the
Issuer the entire remainder of the Issuer's Share of the Collections;
provided, that if amounts are set aside and held in trust on any
Termination Day of the type described in clause (a) of the definition
of "Termination Day" and, thereafter, the conditions set forth in
Section 2 of Exhibit II are satisfied or waived by the Administrator,
such previously set-aside amounts shall be reinvested in accordance
with clause (ii) on the day of such subsequent satisfaction or waiver
of conditions, and
(iv) release to the Seller (subject to Section 1.4(f)) for its
own account any Collections in excess of: (x) amounts required to be
reinvested in accordance with clause (ii) or the proviso to clause
(iii) plus (y) the amounts that are required to be set aside pursuant
to clause (i), the proviso to clause (ii) and clause (iii) plus (z) the
Seller's Share of the Servicing Fee accrued and unpaid through such day
and all reasonable and appropriate out-
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of-pocket costs and expenses of the Servicer for servicing, collecting
and administering the Pool Receivables.
(c) The Servicer shall deposit into the Administration Account (or such
other account designated by the Administrator), on each Settlement Date (or,
solely with respect to Collections held for the Issuer for payment pursuant to
clause (f), such other date with at least the applicable number of Business Days
prior written notice as set forth in clause (f) to the Administrator of such
payment), Collections held for the Issuer pursuant to clause (b)(i), (f) or (g)
plus the amount of Collections then held for the Issuer pursuant to clauses
(b)(ii) and (iii) of Section 1.4; provided, that if CSS or an Affiliate thereof
is the Servicer, such day is not a Termination Day and the Administrator has not
notified CSS (or such Affiliate) that the right to retain the portion of the
Collections set aside pursuant to clause (b)(i) that represent the Issuer's
Share of the Servicing Fee is revoked, CSS (or such Affiliate) may retain the
portion of the Collections set aside pursuant to clause (b)(i) that represents
the Issuer's Share of the Servicing Fee. On the last day of each Settlement
Period, the Administrator will notify the Servicer by facsimile of the amount of
Discount accrued with respect to each Portion of Capital during such Settlement
Period or portion thereof.
(d) Upon receipt of funds deposited into the Administration Account
pursuant to clause (c), the Administrator shall cause such funds to be
distributed as follows:
(i) if such distribution occurs on a day that is not a
Termination Day and the Purchased Interest does not exceed 100%, first
to the Issuer in payment in full of all accrued Discount and fees
(other than Servicing Fees) with respect to each Portion of Capital,
and second, if the Servicer has set aside amounts in respect of the
Servicing Fee pursuant to clause (b)(i) and has not retained such
amounts pursuant to clause (c), to the Servicer (payable in arrears on
each Settlement Date) in payment in full of the Issuer's Share of
accrued Servicing Fees so set aside, and
(ii) if such distribution occurs on a Termination Day or on a
day when the Purchased Interest exceeds 100%, first to the Issuer in
payment in full of all accrued Discount with respect to each Portion of
Capital, second to the Issuer in payment in full of Capital (or, if
such day is not a Termination Day, the amount necessary to reduce the
Purchased Interest to 100%), third, to the Servicer in payment in full
of all accrued Servicing Fees, and fourth, if the Capital and accrued
Discount with respect to each Portion of Capital have been reduced to
zero, and all accrued Servicing Fees payable to the Servicer have been
paid in full, to the Issuer, the Administrator and any other
Indemnified Party or Affected Person in payment in full of any other
amounts owed thereto by the Seller hereunder.
After the Capital, Discount, fees payable pursuant to the Fee Letter and
Servicing Fees with respect to the Purchased Interest, and any other amounts
payable by the Seller and the Servicer to the Issuer, the Administrator or any
other Indemnified Party or Affected Person hereunder, have been paid in full,
all additional Collections with respect to the Purchased Interest shall be paid
to the Seller for its own account.
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(e) For the purposes of this Section 1.4:
(i) if on any day the Outstanding Balance of any Pool
Receivable is reduced or adjusted as a result of any defective,
rejected, returned, repossessed or foreclosed goods or services, or any
revision, cancellation, allowance, rebate, discount or other adjustment
made by the Seller or any Affiliate of the Seller, or any setoff or
dispute between the Seller or any Affiliate of the Seller and an
Obligor, the Seller shall be deemed to have received on such day a
Collection of such Pool Receivable in the amount of such reduction or
adjustment;
(ii) if on any day any of the representations or warranties in
Section 1(g) or (n) of Exhibit III is not 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 provided in clause (i) or (ii), or as
otherwise required by applicable law or the relevant Contract, all
Collections received from an Obligor of any Receivable shall be applied
to the Receivables of such Obligor in the order of the age of such
Receivables, starting with the oldest such Receivable, unless such
Obligor designates its payment for application to specific Receivables;
and
(iv) if and to the extent the Administrator or the Issuer
shall be required for any reason to pay over to an Obligor (or any
trustee, receiver, custodian or similar official in any Insolvency
Proceeding) any amount received by it hereunder, such amount shall be
deemed not to have been so received by the Administrator or the Issuer
but rather to have been retained by the Seller and, accordingly, the
Administrator or the Issuer, as the case may be, shall have a claim
against the Seller for such amount, payable when and to the extent that
any distribution from or on behalf of such Obligor is made in respect
thereof.
(f) If at any time the Seller shall wish to cause the reduction of
Capital (but not to commence the liquidation, or reduction to zero, of the
entire Capital of the Purchased Interest), the Seller may do so as follows:
(i) the Seller shall give the Administrator and the Servicer
written notice in the form of Annex C (A) at least two Business Days
prior to the date of such reduction for any reduction of Capital less
than or equal to $10,000,000, (B) at least four Business Days prior to
the date of such reduction for any reduction of Capital greater than
$10,000,000 and less than or equal to $20,000,000 and (C) at least ten
Business Days prior to the date of such reduction for any reduction of
Capital greater than $20,000,000 in each case such notice shall include
the amount of such proposed reduction and the proposed date on which
such reduction will commence;
(ii) to the extent funds equal to the amount of the proposed
reduction have not been set aside pursuant to Section 1.4(g) below, on
the proposed date of the commencement of such reduction and on each day
thereafter, the Servicer shall cause Collections not to be
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reinvested until the amount thereof not so reinvested, when added to
the amounts set aside pursuant to Section 1.4(g) below, shall equal the
desired amount of reduction; and
(iii) the Servicer shall hold such Collections, and all
amounts set aside pursuant to Section 1.4(g)(iii) below, in trust for
the Issuer, for payment to the Administrator on (A) the next Settlement
Date immediately following the current Settlement Period or (B) such
other earlier date with at least (1) two Business Days prior written
notice to the Administrator with respect to any payment of Capital less
than or equal to $10,000,000, or (2) four Business Days prior written
notice to the Administrator with respect to any payment of Capital
greater than $10,000,000 and less than or equal to $20,000,000 or (3)
ten Business Days prior written notice to the Administrator with
respect to any payment of Capital greater than $20,000,000, and Capital
shall be deemed reduced in the amount to be paid to the Administrator
only when in fact finally so paid;
provided, that (a) the amount of any such reduction shall be not less than
$1,000,000 and shall be an integral multiple of $100,000, and (b) the Seller
shall choose a reduction amount, and the date of commencement thereof, so that
to the extent practicable such reduction shall commence and conclude in the same
Settlement Period.
(g) If at any time the Seller shall wish to halt reinvestment during a
Settlement Period in order to fund reductions of Capital under Section 1.4(f)
above, the Seller may do so as follows:
(i) the Seller shall give written notice to the Administrator
and the Servicer specifying the Settlement Period during which it
wishes reinvestment to halt and the date it wishes such halt to
commence;
(ii) the Servicer shall, from the date specified in the notice
in Section 1.4(f)(i) above, cause Collections not to be reinvested
until either (A) it receives notice from the Seller that the Seller
wishes to resume reinvestment, (B) the Settlement Period specified in
the notice in Section 1.4(g)(i) ends or (C) reinvestment of Collections
shall be halted pursuant to Section 1.4(f)(ii) above; provided that
Collections may be reinvested pursuant to the proviso to Section
1.4(g)(iii) below; and
(iii) the Servicer shall set aside such Collections and hold
them in trust for the Issuer (and shall, at the request of the
Administrator, segregate in a separate account approved by the
Administrator); provided that at any time that Collections are thus set
aside, the Seller may request that the Servicer release all or a
portion of such amounts, and the Servicer shall then apply such amounts
pursuant to Section 1.4(b) (or, if the date of such request is a
Settlement Date, deposit such amounts in the Administration Account
pursuant to Section 1.4(b)).
Section 1.5. Fees. The Seller shall pay to the Administrator certain
fees in the amounts and on the dates set forth in a letter, dated the date
hereof, among CSS, the Seller and the Administrator
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(as such letter agreement may be amended, supplemented or otherwise modified
from time to time, the "Fee Letter").
Section 1.6. Payments and Computations, Etc. (a) All amounts to be paid
or deposited by the Seller or the Servicer hereunder shall be made without
reduction for offset or counterclaim and shall be paid or deposited no later
than noon (New York City time) on the day when due in same day funds to the
Administration Account. All amounts received after noon (New York City time)
will be deemed to have been received on the next Business Day.
(b) The Seller or the Servicer, as the case may be, shall, to the
extent permitted by law, pay interest on any amount not paid or deposited by the
Seller or the Servicer, as the case may be, when due hereunder, at an interest
rate equal to 2.0% per annum above the Base Rate, payable on demand.
(c) All computations of interest under clause (b) and all computations
of Discount, fees and other amounts hereunder shall be made on the basis of a
year of 360 (or 365 or 366, as applicable, with respect to Discount or other
amounts calculated by reference to the Base Rate) days for the actual number of
days elapsed. Whenever any payment or deposit to be made hereunder shall be due
on a day other than a Business Day, such payment or deposit shall be made on the
next Business Day and such extension of time shall be included in the
computation of such payment or deposit.
Section 1.7. Increased Costs. (a) If the Administrator, the Issuer, any
Purchaser, any other Program Support Provider or any of their respective
Affiliates (each an "Affected Person") reasonably determines that the existence
of or compliance with: (i) any law or regulation or any change therein or in the
interpretation or application thereof, in each case adopted, issued or occurring
after the date hereof, or (ii) any request, guideline or directive from any
central bank or other Governmental Authority (whether or not having the force of
law) issued or occurring after the date of this Agreement, affects or would
affect the amount of capital required or expected to be maintained by such
Affected Person, and such Affected Person determines 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
related to this Agreement or any related liquidity facility, credit enhancement
facility and other commitments of the same type, then, upon demand by such
Affected Person (with a copy to the Administrator), the Seller shall promptly
pay to the Administrator, for the account of such Affected Person, from time to
time as specified by such Affected Person, additional amounts sufficient to
compensate such Affected Person in the light of such circumstances, to the
extent that such Affected Person reasonably determines such increase in capital
to be allocable to the existence of any of such commitments. A certificate as to
such amounts submitted to the Seller and the Administrator by such Affected
Person shall be conclusive and binding for all purposes, absent manifest error.
(b) If, due to either: (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) 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 any Affected Person of agreeing to purchase or purchasing, or
maintaining the ownership of, the Purchased Interest in respect of which
Discount is computed by reference to the Euro-Rate, then,
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upon demand by such Affected Person, the Seller shall promptly pay to such
Affected Person, from time to time as specified by such Affected Person,
additional amounts sufficient to compensate such Affected Person for such
increased costs. A certificate as to such amounts submitted to the Seller and
the Administrator by such Affected Person shall be conclusive and binding for
all purposes, absent manifest error.
(c) If such increased costs affect the related Affected Person's
portfolio of financing transactions, such Affected Person shall use reasonable
averaging and attribution methods to allocate such increased costs to the
transactions contemplated by this Agreement.
(d) Each Affected Person will notify Seller and the Administrator
promptly after it has received official notice of any event which will entitle
such Affected Person to such additional amounts as compensation pursuant to this
Section 1.7. Such additional amounts shall accrue from the date as to which such
Affected Person becomes subject to such additional costs as a result of such
event (or if such notice of such event is not given to Seller by such Affected
Person within 90 days after such Affected Person received such official notice
of such event, from the date which is 90 days prior to the date such notice is
given to Seller by such Affected Person). The Administrator will make reasonable
efforts to cause the interest of any Affected Party (other than Issuer or its
domestic Affiliates) that makes a claim under this Section 1.7 to be transferred
to a party that is not subject to increased costs under this Section 1.7;
provided that neither the Administrator nor any of its Affiliates shall be
required hereunder to itself accept such transferred interest.
Section 1.8. Requirements of Law. If any Affected Person reasonably
determines that the existence of or compliance with: (a) any law or regulation
or any change therein or in the interpretation or application thereof, in each
case adopted, issued or occurring after the date hereof, or (b) any request,
guideline or directive from any central bank or other Governmental Authority
(whether or not having the force of law) issued or occurring after the date of
this Agreement:
(i) does or shall subject such Affected Person to any tax of
any kind whatsoever with respect to this Agreement, any increase in the
Purchased Interest or in the amount of Capital relating thereto, or
does or shall change the basis of taxation of payments to such Affected
Person on account of Collections, Discount or any other amounts payable
hereunder (excluding taxes imposed on the overall or branch pre-tax net
income of such Affected Person, and franchise taxes imposed on such
Affected Person, by the jurisdiction under the laws of which such
Affected Person is organized or otherwise is considered doing business
(unless the Affected Person would not be considered doing business in
such jurisdiction, but for having entered into, or engaged in the
transactions in connection with, this Agreement or any other
Transaction Document) or a political subdivision thereof),
(ii) does or shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, or deposits or other liabilities in or for the
account of, purchases, advances or loans by, or other credit extended
by, or any other acquisition of funds by, any office of such Affected
Person that are not otherwise included in the determination of the
Euro-Rate or the Base Rate hereunder, or
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(iii) does or shall impose on such Affected Person any other
condition,
and the result of any of the foregoing is: (A) to increase the cost to such
Affected Person of acting as Administrator, or of agreeing to purchase or
purchasing or maintaining the ownership of undivided percentage ownership
interests with regard to the Purchased Interest (or interests therein) or any
Portion of Capital, or (B) to reduce any amount receivable hereunder (whether
directly or indirectly), then, in any such case, upon demand by such Affected
Person, the Seller shall promptly pay to such Affected Person additional amounts
necessary to compensate such Affected Person for such additional cost or reduced
amount receivable. All such amounts shall be payable as incurred. A certificate
from such Affected Person to the Seller and the Administrator certifying, in
reasonably specific detail, the basis for, calculation of, and amount of such
additional costs or reduced amount receivable shall be conclusive and binding
for all purposes, absent manifest error; provided, however, that no Affected
Person shall be required to disclose any confidential or tax planning
information in any such certificate.
Section 1.9. Inability to Determine Euro-Rate. (a) If the Administrator
determines before the first day of any Settlement Period (which determination
shall be final and conclusive) that, by reason of circumstances affecting the
interbank eurodollar market generally, deposits in dollars (in the relevant
amounts for such Settlement Period) are not being offered to banks in the
interbank eurodollar market for such Settlement Period, or adequate means do not
exist for ascertaining the Euro-Rate for such Settlement Period, then the
Administrator shall give notice thereof to the Seller. Thereafter, until the
Administrator notifies the Seller that the circumstances giving rise to such
suspension no longer exist, (a) no Portion of Capital shall be funded at the
Alternate Rate determined by reference to the Euro-Rate and (b) the Discount for
any outstanding Portions of Capital then funded at the Alternate Rate determined
by reference to the Euro-Rate shall, on the last day of the then current
Settlement Period, be converted to the Alternate Rate determined by reference to
the Base Rate.
(b) If, on or before the first day of any Settlement Period, the
Administrator shall have been notified by any Purchaser that, such Purchaser has
determined (which determination shall be final and conclusive) that, any
enactment, promulgation or adoption of or any change in any applicable law, rule
or regulation, or any change in the interpretation or administration thereof by
a governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by such Purchaser with
any guideline, request or directive (whether or not having the force of law) of
any such authority, central bank or comparable agency shall make it unlawful or
impossible for such Purchaser to fund or maintain any Portion of Capital at the
Alternate Rate and based upon the Euro-Rate, the Administrator shall notify the
Seller thereof. Upon receipt of such notice, until the Administrator notifies
the Seller that the circumstances giving rise to such determination no longer
apply, (a) no Portion of Capital shall be funded at the Alternate Rate
determined by reference to the Euro-Rate and (b) the Discount for any
outstanding Portions of Capital then funded at the Alternate Rate determined by
reference to the Euro-Rate shall be converted to the Alternate Rate determined
by reference to the Base Rate either (i) on the last day of the then current
Settlement Period if such Purchaser may lawfully continue to maintain such
Portion of Capital at the Alternate Rate determined by reference to the
Euro-Rate to such day, or (ii)
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immediately, if such Purchaser may not lawfully continue to maintain such
Portion of Capital at the Alternate Rate determined by reference to the
Euro-Rate to such day.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS; TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants. Each of the
Seller, CSS and the Servicer hereby makes the representations and warranties,
and hereby agrees to perform and observe the covenants, applicable to it set
forth in Exhibits III and IV, respectively.
Section 2.2. Termination Events. If any of the Termination Events set
forth in Exhibit V shall occur, the Administrator may, by notice to the Seller,
declare the Facility Termination Date to have occurred (in which case the
Facility Termination Date shall be deemed to have occurred); provided, that
automatically upon the occurrence of any event (without any requirement for the
passage of time or the giving of notice) described in paragraph (f) of Exhibit
V, the Facility Termination Date shall occur. Upon any such declaration,
occurrence or deemed occurrence of the Facility Termination Date, the Issuer and
the Administrator shall have, in addition to the rights and remedies that they
may have under this Agreement, all other rights and remedies provided after
default under the New York UCC and under other applicable law, which rights and
remedies shall be cumulative.
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller. Without limiting any other
rights that the Administrator, the Issuer, any Program Support Provider or any
of their respective Affiliates, employees, officers, directors, agents, counsel,
successors, transferees or assigns (each, an "Indemnified Party") may have
hereunder or under applicable law, the Seller hereby agrees to indemnify each
Indemnified Party from and against any and all claims, damages, expenses, costs,
losses and liabilities (including Attorney Costs) (all of the foregoing being
collectively referred to as "Indemnified Amounts") arising out of or resulting
from this Agreement (whether directly or indirectly), the use of proceeds of
purchases or reinvestments, the ownership of the Purchased Interest, or any
interest therein, or in respect of any Receivable, Related Security or Contract,
excluding, however: (a) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of such Indemnified Party or its
officers, directors, agents or counsel, (b) any indemnification which has the
effect of recourse for the non-payment of Receivables to any indemnitor (except
as otherwise specifically provided under Section 1.4(e) and this Section 3.1)
for Receivables, or (c) any overall net income taxes or franchise taxes imposed
on such Indemnified Party by the jurisdiction under the laws of which such
Indemnified Party is organized or any political subdivision thereof. Without
limiting or being limited by the foregoing, and subject to the exclusions set
forth in the preceding sentence, the Seller shall pay on demand (which demand
shall be accompanied by documentation of the Indemnified Amounts, in reasonable
detail) to each
10
Indemnified Party any and all amounts necessary to indemnify such Indemnified
Party from and against any and all Indemnified Amounts relating to or resulting
from any of the following:
(i) the failure of any Receivable included in the calculation
of the Net Receivables Pool Balance as an Eligible Receivable to be an
Eligible Receivable, the failure of any information contained in an
Information Package to be true and correct as of the date set forth in
such Information Package, or the failure of any other information
provided to the Issuer or the Administrator with respect to Receivables
or this Agreement to be true and correct as of the date such
information is provided,
(ii) the failure of any representation, warranty or statement
made or deemed made by the Seller (or any of its officers) under or in
connection with this Agreement to have been true and correct as of the
date made or deemed made in all respects when made,
(iii) the failure by the Seller to comply with any applicable
law, rule or regulation with respect to any Pool Receivable or the
related Contract, or the failure of any Pool Receivable or the related
Contract to conform to any such applicable law, rule or regulation,
(iv) the failure to vest in the Issuer a valid and
enforceable: (A) perfected undivided percentage ownership interest, to
the extent of the Purchased Interest, in the Receivables in, or
purporting to be in, the Receivables Pool and the other Pool Assets, or
(B) first priority perfected security interest in the Pool Assets, in
each case, free and clear of any Adverse Claim,
(v) the failure to have filed, 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 and the other Pool Assets, whether at the time of any purchase or
reinvestment 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 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 goods or services related to such
Receivable or the furnishing or failure to furnish such goods or
services or relating to collection activities with respect to such
Receivable (if such collection activities were performed by the Seller
or any of its Affiliates acting as Servicer or by any agent or
independent contractor retained by the Seller or any of its
Affiliates),
(vii) any failure of the Seller (or any of its Affiliates
acting as the Servicer) to perform its duties or obligations in
accordance with the provisions hereof or under the Contracts,
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(viii) any products liability or other claim, investigation,
litigation or proceeding arising out of or in connection with
merchandise, insurance or services that are the subject of any
Contract,
(ix) the commingling of Collections at any time with other
funds,
(x) the use of proceeds of purchases or reinvestments, or
(xi) any reduction in Capital as a result of the distribution
of Collections pursuant to Section 1.4(d), if all or a portion of such
distributions shall thereafter be rescinded or otherwise must be
returned for any reason.
Section 3.2. Indemnities by the Servicer. Without limiting any other
rights that the Administrator, the Issuer or any other Indemnified Party may
have hereunder or under applicable law, the Servicer hereby agrees to indemnify
each Indemnified Party from and against any and all Indemnified Amounts arising
out of or resulting from (whether directly or indirectly): (a) the failure of
any information contained in an Information Package to be true and correct as of
the date set forth in such Information Package, or the failure of any other
information provided to the Issuer or the Administrator by, or on behalf of, the
Servicer to be true and correct as of the date such information is provided, (b)
the failure of any representation, warranty or statement made or deemed made by
the Servicer (or any of its officers) under or in connection with this Agreement
to have been true and correct as of the date made or deemed made in all respects
when made, (c) the failure by the Servicer to comply with any applicable law,
rule or regulation with respect to any Pool Receivable or the related Contract,
(d) any dispute, claim, offset or defense of the Obligor to the payment of any
Receivable in, or purporting to be in, the Receivables Pool resulting from or
related to the collection activities with respect to such Receivable, or (e) any
failure of the Servicer to perform its duties or obligations in accordance with
the provisions hereof or any other Transaction Document to which it is a party,
(f) the failure to have filed, 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 and any other Pool Assets, whether at
the time of any purchase or reinvestment or at any subsequent time, or (g) any
commingling by the Servicer of Collections at any time with other funds.
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of the Servicer. (a) The servicing,
administering and collection of the Pool Receivables shall be conducted by the
Person so designated from time to time as the Servicer in accordance with this
Section. Unless the Administrator gives notice to CSS upon or after the
occurrence of a Termination Event (in accordance with this Section) of the
designation of a new Servicer, CSS is hereby designated as, and hereby agrees to
perform the duties and obligations of, the Servicer pursuant to the terms
hereof. Upon the occurrence of a Termination Event, the
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Administrator may designate as Servicer any Person (including itself) to
succeed CSS or any successor Servicer, on the condition in each case that any
such Person so designated shall agree to perform the duties and obligations of
the Servicer pursuant to the terms hereof.
(b) Upon the designation of a successor Servicer as set forth in clause
(a), CSS agrees that it will terminate its activities as Servicer hereunder in a
manner that the Administrator determines will facilitate the transition of the
performance of such activities to the new Servicer, and CSS shall cooperate with
and assist such new Servicer. Such cooperation shall include access to and
transfer of related records and the Required Servicing Data and use by the new
Servicer of all licenses, hardware or software (in each case to the extent
permitted by the applicable licence or contract) necessary or desirable to
collect the Pool Receivables and the Related Security to the extent permissible
under the applicable agreements. To the extent the new Servicer finds its
necessary or desirable to use any license, hardware or software and such use
requires the consent of a third party under the applicable license or contract,
CSS shall use all commercially reasonable efforts to obtain such consent on an
expedited basis.
(c) CSS acknowledges that, in making their decision to execute and
deliver this Agreement, the Administrator and the Issuer have relied on CSS's
agreement to act as Servicer hereunder. Accordingly, CSS agrees that it will not
voluntarily resign as Servicer.
(d) The Servicer may delegate its duties and obligations hereunder to
any subservicer (each a "Sub-Servicer"); provided, that, in each such
delegation: (i) such Sub-Servicer shall agree in writing to perform the duties
and obligations of the Servicer pursuant to the terms hereof, (ii) the Servicer
shall remain primarily liable for the performance of the duties and obligations
so delegated, (iii) the Seller, the Administrator and the Issuer shall have the
right to look solely to the Servicer for performance, and (iv) the terms of any
agreement with any Sub-Servicer shall provide that the Administrator may
terminate such agreement upon the termination of the Servicer hereunder by
giving notice of its desire to terminate such agreement to the Servicer (and the
Servicer shall provide appropriate notice to each such Sub-Servicer); provided,
however, that if any such delegation is to any Person other than an Originator
or an Affiliate of an Originator, the Administrator shall have consented in
writing in advance to such delegation.
Section 4.2. Duties of the Servicer. (a) The Servicer shall take or
cause to be taken all such action as may be necessary or advisable to administer
and collect each Pool Receivable from time to time, all in accordance with this
Agreement and all applicable laws, rules and regulations, with reasonable care
and diligence, and in accordance with the Credit and Collection Policies. The
Servicer shall set aside, for the accounts of the Seller and the Issuer, the
amount of the Collections to which each is entitled in accordance with Article
I. The Servicer may, in accordance with the applicable Credit and Collection
Policy, extend the maturity of any Pool Receivable (but not beyond 30 days) and
extend the maturity or adjust the Outstanding Balance of any Defaulted
Receivable as the Servicer may determine to be appropriate to maximize
Collections thereof; provided, however, that: for the purposes of this
Agreement, (i) such extension shall not change the number of days such Pool
Receivable has remained unpaid from the date of the original due date related to
such Pool Receivable, (ii) such extension or adjustment shall not alter the
status of such Pool Receivable as
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a Delinquent Receivable or a Defaulted Receivable or limit the rights of the
Issuer or the Administrator under this Agreement and (iii) if a Termination
Event has occurred and CSS or an Affiliate thereof is serving as the Servicer,
CSS or such Affiliate may make such extension or adjustment only upon the prior
approval of the Administrator. The Seller shall deliver to the Servicer and the
Servicer shall hold for the benefit of the Seller and the Administrator
(individually and for the benefit of the Issuer), in accordance with their
respective interests, all records and documents (including computer tapes or
disks) with respect to each Pool Receivable. Notwithstanding anything to the
contrary contained herein, at any time after a Termination Event has occurred
and is continuing the Administrator may direct the Servicer (whether the
Servicer is CSS or any other Person) to commence or settle any legal action to
enforce collection of any Pool Receivable or to foreclose upon or repossess any
Related Security.
(b) The Servicer shall, as soon as practicable following actual receipt
of collected funds, turn over to the Seller (who shall then turn over, or cause
to be turned over, such funds to the appropriate party in the case of
receivables assigned in accordance with the Transaction Documents) the
collections of any indebtedness that is not a Pool Receivable, less, if CSS or
an Affiliate thereof is not the Servicer, all reasonable and appropriate
out-of-pocket costs and expenses of such Servicer of servicing, collecting and
administering such collections. The Servicer, if other than CSS or an Affiliate
thereof, shall, as soon as practicable upon demand, deliver to the Seller all
records in its possession that evidence or relate to any indebtedness that is
not a Pool Receivable, and copies of records in its possession that evidence or
relate to any indebtedness that is a Pool Receivable.
(c) The Servicer's obligations hereunder shall terminate on the later
of: (i) the Facility Termination Date and (ii) the date on which all amounts
required to be paid to the Issuer, the Administrator and any other Indemnified
Party or Affected Person hereunder shall have been paid in full.
After such termination, if CSS or an Affiliate thereof was not the
Servicer on the date of such termination, the Servicer shall promptly deliver to
the Seller all books, records and related materials that the Seller previously
provided to the Servicer, or that have been obtained by the Servicer, in
connection with this Agreement.
Section 4.3. Lock-Box Arrangements. Prior to the initial purchase
hereunder, the Seller shall enter into Lock-Box Agreements with all of the
Lock-Box Banks and deliver original counterparts thereof to the Administrator.
Upon the occurrence and continuation of a Termination Event, the Administrator
may at any time thereafter give notice to each Lock-Box Bank that the
Administrator is exercising its rights under the Lock-Box Agreements to do any
or all of the following: (a) to have the exclusive ownership and control of the
Lock-Box Accounts transferred to the Administrator and to exercise exclusive
dominion and control over the funds deposited therein, (b) to have the proceeds
that are sent to the respective Lock-Box Accounts redirected pursuant to the
Administrator's instructions rather than deposited in the applicable Lock-Box
Account, and (c) to take any or all other actions permitted under the applicable
Lock-Box Agreement. The Seller hereby agrees that if the Administrator at any
time takes any action set forth in the preceding sentence, the Administrator
shall have exclusive control of the proceeds (including Collections) of all Pool
14
Receivables and the Seller hereby further agrees to take any other action that
the Administrator may reasonably request to transfer such control. Any proceeds
of Pool Receivables received by the Seller or the Servicer thereafter shall be
sent immediately to the Administrator. The parties hereto hereby acknowledge
that if at any time the Administrator takes control of any Lock-Box Account, the
Administrator shall not have any rights to the funds therein in excess of the
unpaid amounts due to the Administrator, the Issuer or any other Person
hereunder, and the Administrator shall distribute or cause to be distributed
such funds in accordance with Section 4.2(b) and Article I (in each case as if
such funds were held by the Servicer thereunder).
Section 4.4. Enforcement Rights. (a) At any time following the
occurrence and continuation of a Termination Event:
(i) the Administrator may direct the Obligors that payment of
all amounts payable under any Pool Receivable is to be made directly to
the Administrator or its designee,
(ii) the Administrator may instruct the Seller or the Servicer
to give notice of the Issuer's interest in Pool Receivables to each
Obligor, which notice shall direct that payments be made directly to
the Administrator or its designee, and the Seller or the Servicer, as
the case may be, shall give such notice at the expense of the Seller or
the Servicer, as the case may be; provided, that if the Seller or the
Servicer, as the case may be, fails to so notify each Obligor, the
Administrator (at the Seller's or the Servicer's, as the case may be,
expense) may so notify the Obligors, and
(iii) the Administrator may request the Servicer to, and upon
such request the Servicer shall: (A) assemble all of the records
necessary or desirable to collect the Pool Receivables and the Related
Security, and transfer or license to a successor Servicer the use of
all software necessary or desirable to collect the Pool Receivables and
the Related Security, and make the same available to the Administrator
or its designee at a place selected by the Administrator to the extent
permissible under the applicable agreements, and (B) segregate all
cash, checks and other instruments received by it from time to time
constituting Collections in a manner acceptable to the Administrator
and, promptly upon receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of
transfer, to the Administrator or its designee.
(b) The Seller hereby authorizes the Administrator, and irrevocably
appoints the Administrator as its attorney-in-fact with full power of
substitution and with full authority in the place and stead of the Seller, which
appointment is coupled with an interest, to take any and all steps in the name
of the Seller and on behalf of the Seller necessary or desirable, in the
determination of the Administrator, to collect any and all amounts or portions
thereof due under any and all Pool Assets, including endorsing the name of the
Seller on checks and other instruments representing Collections and enforcing
such Pool Assets. Notwithstanding anything to the contrary contained in this
subsection, (i) the Administrator agrees that it will refrain from taking any
such steps until the occurrence of a Termination Event and (ii) none of the
powers conferred upon such attorney-in-fact pursuant to the preceding sentence
shall subject such attorney-in-fact to any liability if any
15
action taken by it shall prove to be inadequate or invalid, nor shall they
confer any obligations upon such attorney-in-fact in any manner whatsoever;
provided, however, that the Administrator shall not be relieved of any
liability it might otherwise have to any party hereunder for its own gross
negligence or willful misconduct.
Section 4.5. Responsibilities of the Seller. (a) Anything herein to the
contrary notwithstanding, the Seller shall: (i) perform all of its obligations,
if any, under the Contracts related to the Pool Receivables to the same extent
as if interests in such Pool Receivables had not been transferred hereunder, and
the exercise by the Administrator or the Issuer of their respective rights
hereunder shall not relieve the Seller from such obligations, and (ii) pay when
due any taxes, including any sales taxes payable in connection with the Pool
Receivables and their creation and satisfaction. The Administrator and the
Issuer shall not have any obligation or liability with respect to any Pool
Asset, nor shall either of them be obligated to perform any of the obligations
of the Seller, CSS or the Originator thereunder.
(b) CSS hereby irrevocably agrees that if at any time it shall cease to
be the Servicer hereunder, it shall act (if the then-current Servicer so
requests) as the data-processing agent of the Servicer and, in such capacity,
CSS shall conduct the data-processing functions of the administration of the
Receivables and the Collections thereon in substantially the same way that CSS
conducted such data-processing functions while it acted as the Servicer.
Section 4.6. Servicing Fee. (a) Subject to clause (b), the Servicer
shall be paid a fee equal to 1.0% per annum (the "Servicing Fee Rate") of the
daily average aggregate Outstanding Balance of the Pool Receivables. The
Issuer's Share of such fee shall be paid through the distributions contemplated
by Section 1.4(d), and the Seller's Share of such fee shall be paid by the
Seller on each Settlement Date.
(b) If the Servicer ceases to be CSS or an Affiliate thereof, the
servicing fee shall be the greater of: (i) the amount calculated pursuant to
clause (a), and (ii) an alternative amount specified by the successor Servicer
not to exceed 110% of the aggregate reasonable costs and expenses incurred by
such successor Servicer in connection with the performance of its obligations as
Servicer.
ARTICLE V.
MISCELLANEOUS
Section 5.1. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or any other Transaction Document, or consent to any departure
by the Seller or the Servicer therefrom, shall be effective unless in a writing
signed by the Administrator, and, in the case of any amendment, by the other
parties thereto; and then such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given. No
failure on the part of the Issuer or the Administrator to exercise, and no delay
in exercising any right hereunder
16
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.
Section 5.2. Notices, Etc. (i) All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by
certified mail, postage prepaid, or by facsimile, to the intended party at the
mailing address or facsimile number of such party set forth under its name on
the signature pages hereof or at such other address or facsimile number as shall
be designated by such party in a written notice to the other parties hereto. All
such notices and communications shall be effective (i) if personally delivered,
when received, (ii) if sent by certified mail three Business Days after having
been deposited in the mail, postage prepaid, and (iii) if transmitted by
facsimile, when sent, receipt confirmed by telephone or electronic means (and
shall be followed by a hard copy sent by first class mail).
Section 5.3. Assignability. (a) This Agreement and the Issuer's rights
and obligations herein (including ownership of the Purchased Interest or an
interest therein) shall be assignable, in whole or in part, by the Issuer and
its successors and assigns with the prior written consent of the Seller;
provided, however, that such consent shall not be unreasonably withheld; and
provided further, that no such consent shall be required if the assignment is
made to PNC, any domestic Affiliate of PNC (other than a director or officer of
PNC), any Purchaser or other Program Support Provider or any Person that is: (i)
in the business of issuing Notes and (ii) associated with or administered by PNC
or any Affiliate of PNC. Each assignor may, in connection with the assignment,
disclose to the applicable assignee (that shall have agreed to be bound by
Section 5.6) any information relating to the Servicer, the Seller or the Pool
Receivables furnished to such assignor by or on behalf of the Servicer, the
Seller, the Issuer or the Administrator. The Administrator shall give prior
written notice of any assignment of the Issuer's rights and obligations
(including ownership of the Purchased Interest to any Person other than a
Program Support Provider).
(b) The Issuer may at any time grant to one or more banks or other
institutions (each a "Purchaser") party to the Liquidity Agreement, or to any
other Program Support Provider, participating interests in the Purchased
Interest. In the event of any such grant by the Issuer of a participating
interest to a Purchaser or other Program Support Provider, the Issuer shall
remain responsible for the performance of its obligations hereunder. The Seller
agrees that each Purchaser or other Program Support Provider shall be entitled
to the benefits of Sections 1.7 and 1.8.
(c) This Agreement and the rights and obligations of the Administrator
hereunder shall be assignable, in whole or in part, by the Administrator and its
successors and assigns; provided, that unless: (i) such assignment is to an
Affiliate of PNC, (ii) it becomes unlawful for PNC to serve as the Administrator
or (iii) a Termination Event exists, the Seller has consented to such
assignment, which consent shall not be unreasonably withheld.
(d) Except as provided in Section 4.1(d), none of the Seller, CSS or
the Servicer may assign its rights or delegate its obligations hereunder or any
interest herein without the prior written consent
17
of the Administrator (which shall not be unreasonably withheld if the proposed
assignee is an Affiliate of CSS).
(e) Without limiting any other rights that may be available under
applicable law, the rights of the Issuer may be enforced through it or by its
agents.
Section 5.4. Costs, Expenses and Taxes. (a) In addition to the rights
of indemnification granted under Section 3.1, the Seller agrees to pay on demand
(which demand shall be accompanied by documentation thereof in reasonable
detail) all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration (including periodic internal audits by
the Administrator of Pool Receivables provided, that the Company shall not pay
for more than one audit per year unless a Termination Event or an Unmatured
Termination Event has occurred and is continuing) of this Agreement, the other
Transaction Documents and the other documents and agreements to be delivered
hereunder (and all reasonable costs and expenses in connection with any
amendment, waiver or modification of any thereof), including: (i) Attorney Costs
for the Administrator, the Issuer and their respective Affiliates and agents
with respect thereto and with respect to advising the Administrator, the Issuer
and their respective Affiliates and agents as to their rights and remedies under
this Agreement and the other Transaction Documents, and (ii) all reasonable
costs and expenses (including Attorney Costs), if any, of the Administrator, the
Issuer and their respective Affiliates and agents in connection with the
enforcement of this Agreement and the other Transaction Documents.
(b) In addition, the Seller shall pay on demand any and all stamp and
other taxes and fees payable in connection with the execution, delivery, filing
and recording of this Agreement or the other documents or agreements to be
delivered hereunder, and agrees to save each Indemnified Party harmless from and
against any liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
Section 5.5. No Proceedings; Limitation on Payments. Each of the
Seller, CSS, the Servicer, the Administrator, each assignee of the Purchased
Interest or any interest therein, and each Person that enters into a commitment
to purchase the Purchased Interest or interests therein, hereby covenants and
agrees that it will not institute against, or join any other Person in
instituting against, the Issuer any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceeding, or other proceeding under any federal or
state bankruptcy or similar law, for one year and one day after the latest
maturing Note issued by the Issuer is paid in full. The provision of this
Section 5.5 shall survive any termination of this Agreement.
Section 5.6. Confidentiality. Each of the Seller and the Servicer
agrees to maintain the confidentiality of this Agreement and the other
Transaction Documents (and all drafts thereof) in communications with third
parties and otherwise; provided, that this Agreement may be disclosed to: (a)
third parties to the extent such disclosure is made pursuant to a written
agreement of confidentiality in form and substance reasonably satisfactory to
the Administrator, (b) the Seller's legal counsel and auditors if they agree to
hold it confidential and (c) to any Person as otherwise required by applicable
law. Unless otherwise required by applicable law, each of the Administrator
18
and the Issuer agrees to maintain the confidentiality of non-public financial
information regarding CSS and its Subsidiaries and Affiliates; provided, that
such information may be disclosed to: (i) third parties to the extent such
disclosure is made pursuant to a written agreement of confidentiality in form
and substance reasonably satisfactory to CSS, (ii) legal counsel and auditors of
the Issuer or the Administrator if they agree to hold it confidential, (iii) the
rating agencies rating the Notes, (iv) any Program Support Provider or potential
Program Support Provider (if they agree to hold it confidential), (v) any
placement agent placing the Notes and (vi) any regulatory authorities having
jurisdiction over PNC, the Issuer, any Program Support Provider or any
Purchaser.
Section 5.7. GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL
BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF A SECURITY INTEREST OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF NEW YORK; AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES
HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY
BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
Section 5.8. Execution in Counterparts. This Agreement may be executed
in any number of 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.
Section 5.9. Survival of Termination. The provisions of Sections 1.7,
1.8, 3.1, 3.2, 5.4, 5.5, 5.6, 5.7, 5.10 and 5.13 shall survive any termination
of this Agreement.
Section 5.10. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY
19
OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR
OTHERWISE. EACH OF THE PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES THAT ITS RESPECTIVE RIGHT
TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING THAT SEEKS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT.
Section 5.11. Entire Agreement. This Agreement and the other
Transaction Documents embody the entire agreement and understanding between the
parties hereto, and supersede all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof, except for any prior arrangements made with respect
to the payment by the Issuer of (or any indemnification for) any fees, costs or
expenses payable to or incurred (or to be incurred) by or on behalf of the
Seller, the Servicer and the Administrator.
Section 5.12. Headings. The captions and headings of this Agreement and
any Exhibit, Schedule or Annex hereto are for convenience of reference only and
shall not affect the interpretation hereof or thereof.
Section 5.13. Issuer's, Administrator's, Seller's and Servicer's
Liabilities. The obligations of the Issuer, the Administrator, the Seller and
the Servicer under the Transaction Documents are solely the corporate
obligations of the Issuer, the Administrator, the Seller and the Servicer,
respectively. No recourse shall be had for any obligation or claim arising out
of or based upon any Transaction Document against any stockholder, employee,
officer, director or incorporator of the Issuer, the Administrator, the Seller
or the Servicer; provided, however, that this Section shall not relieve any such
Person of any liability it might otherwise have for its own gross negligence or
willful misconduct.
Section 5.14. Purchaser Tax Documentation. The Administrator agrees to
provide to CSS, from time to time upon CSS's request, completed and signed
copies of any documents that may be required by an applicable taxing authority
to certify each Purchaser's exemption from withholding tax with respect to
payments to be made to such Purchaser under this Agreement (and shall notify CSS
if any Purchaser is unable or unwilling to provide such documents).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
20
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.
CSS FUNDING LLC
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
Address:
CSS Funding LLC
1845 Walnut Street, Suite 800
Philadelphia, PA 19103-4755
Attention: Clifford Pietrafitta
Telephone: (215) 569-9900
Facsimile: (215) 569-9979
CSS INDUSTRIES, INC.
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
Address:
CSS Industries, Inc.
1845 Walnut Street, Suite 800
Philadelphia, PA 19103-4755
Attention: Clifford Pietrafitta
Telephone: (215) 569-9900
Facsimile: (215) 569-9979
S-1
BERWICK INDUSTRIES LLC, as a Subservicer
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
Address:
Berwick Industries LLC
Bomboy Lane and Ninth Street
Berwick, PA 18603
Attention: Christopher J. Munyan
Telephone: (570) 752-5934
Facsimile: (570) 752-6531
CLEO INC, as a Subservicer
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
Address:
Cleo Inc
4025 Viscount
Memphis, TN 38118
Attention: Andrew W. Kelly
Telephone: (901) 369-6620
Facsimile: (901) 362-0864
S-2
THE PAPER MAGIC GROUP, INC.,
as a Subservicer
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
Address:
The Paper Magic Group, Inc.
401 Adams Avenue
Scranton, PA 18510
Attention: Frank Macero, Jr.
Telephone: (570) 961-3863
Facsimile: (570) 961-3930
S-3
MARKET STREET FUNDING CORPORATION
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
Address:
Market Street Funding
Corporation
c/o AMACAR Group, LLC
6525 Morrison Boulevard,
Suite 318
Charlotte, North Carolina 28211
Attention: Douglas K. Johnson
Telephone No.: (704) 365-0569
Facsimile No.: (704) 365-1362
With a copy to:
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania
15222-2707
Attention: John T. Smathers
Telephone No.: (412) 762-6440
Facsimile No.: (412) 762-9184
S-4
PNC BANK, NATIONAL ASSOCIATION,
as Administrator
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
Address:
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania
15222-2707
Attention: John T. Smathers
Telephone No.: (412) 762-6440
Facsimile No.: (412) 762-9184
S-5
EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits, Schedules and
Annexes), 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). Unless otherwise indicated, all Section, Annex, Exhibit and Schedule
references in this Exhibit are to Sections of and Annexes, Exhibits and
Schedules to the Agreement.
"Administration Account" means the account (account number 1002422076,
ABA number 043000096) of the Administrator maintained at the office of PNC at
One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707, or such
other account as may be so designated in writing by the Administrator to the
Servicer.
"Administrator" has the meaning set forth in the preamble to the
Agreement.
"Adverse Claim" means a lien, security interest or other charge or
encumbrance, or any other type of preferential arrangement; it being understood
that any thereof in favor of, or assigned to, the Issuer or the Administrator
(for the benefit of the Issuer) shall not constitute an Adverse Claim.
"Affected Person" has the meaning set forth in Section 1.7 of the
Agreement.
"Affiliate" means, as to any Person: (a) any Person that, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person, or (b) who is a director or officer: (i) of such Person or (ii) of
any Person described in clause (a), except that, with respect to the Issuer,
Affiliate shall mean the holder(s) of its capital stock. For purposes of this
definition, control of a Person shall mean the power, direct or indirect: (x) to
vote 25% or more of the securities having ordinary voting power for the election
of directors or managers of such Person, or (y) to direct or cause the direction
of the management and policies of such Person, in either case whether by
ownership of securities, contract, proxy or otherwise.
"Agreement" has the meaning set forth in the preamble to the Agreement.
"Alternate Rate" for any Settlement Period for any Portion of Capital
of the Purchased Interest means an interest rate per annum equal to: (a) (i) at
anytime the Issuer is not funding a Portion of Capital during such Settlement
Period through the issuance of Notes as a result of factors adversely affecting
securitization transactions in general but not as a result of any action or
inaction of the Originators, the Servicer or the Seller, the applicable rate of
interest under the Credit Agreement or (ii) at any other time, 1.50% per annum
above the Euro-Rate for such Settlement Period; provided, however, that if (x)
it shall become unlawful for any Purchaser or Program Support Provider to obtain
funds in the London interbank eurodollar market in order to make, fund or
maintain any Purchased Interest, or if such funds shall not be reasonably
available to any
I-1
Purchaser or Program Support Provider, or (y) there shall not be at least two
Business Days prior to the commencement of an applicable Settlement Period to
determine a Euro-Rate in accordance with its terms, then the "Alternate Rate"
shall be equal to the Base Rate in effect for each day during the remainder of
such Settlement Period or (b) if requested by the Seller the Base Rate for such
Settlement Period; provided, however, that the "Alternate Rate" for any day
while a Termination Event exists shall be an interest rate equal to 2.00% per
annum above the Base Rate in effect on such day.
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel.
"Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978
(11 U.S.C. ss. 101, et seq.), as amended from time to time.
"Base Rate" means, for any day, a fluctuating interest rate per annum
as shall be in effect from time to time, which rate shall be at all times equal
to the higher of:
(a) the rate of interest in effect for such day as publicly
announced from time to time by PNC in Pittsburgh, Pennsylvania as its
"prime rate." Such "prime rate" is set by PNC based upon various
factors, including PNC's costs and desired return, general economic
conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above or below such
announced rate, and
(b) 0.50% per annum above the latest Federal Funds Rate.
"BBA" means the British Bankers' Association.
"Benefit Plan" means any employee benefit pension plan as defined in
Section 3(2) of ERISA in respect of which the Seller, the Originator, CSS or any
ERISA Affiliate is, or at any time during the immediately preceding six years
was, an "employer" as defined in Section 3(5) of ERISA.
"Berwick" means Berwick Industries LLC, a Pennsylvania limited
liability company.
"Berwick Default Amount" means an amount computed as of the last day of
each calendar month equal to: (a) the aggregate Outstanding Balance of all Pool
Receivables, the Originator of which is Berwick, that became Defaulted
Receivables during such month minus (b) the portion of such Defaulted
Receivables which represents the Reserved Dispute Amount.
"Berwick Default Factor" means (a) for all months other than March or
April, the aggregate credit sales made by Berwick during the calendar month that
is three calendar months prior to such month, (b) for the month of March, the
Berwick Peak Christmas Sales times 50% plus the aggregate credit sales made by
Berwick during the month of December and (c) for the month of April, the
I-2
Berwick Peak Christmas Sales times 50% plus the aggregate credit sales made by
Berwick during the month of January.
"Berwick Peak Christmas Sales" means the sum of the aggregate credit
sales made by Berwick during the months of August through November.
"Berwick Specific Reserve Percentage" means a percentage determined by
the Seller and Servicer and reasonably consented to by the Administrator, that
represents the maximum allowable reserves and allowances negotiated between
Berwick and its Obligors.
"Berwick Specifically Reserved Dilution Amount" means, for any calendar
month, the greater of (a) the sum of the reported reserves for Obligor programs
and returns and allowances on the books and records of Berwick at the end of
such month and (b) an amount equal to the product of (i) the sum of the year to
date aggregate credit sales of Berwick and (ii) the Berwick Specific Reserve
Percentage.
"Business Day" means any day (other than a Saturday or Sunday) on
which: (a) banks are not authorized or required to close in New York City, New
York or Pittsburgh, Pennsylvania, and (b) if this definition of "Business Day"
is utilized in connection with the Euro-Rate, dealings are carried out in the
London interbank market.
"Capital" means the amount paid to the Seller in respect of the
Purchased Interest by the Issuer pursuant to the Agreement, or such amount
divided or combined in order to determine the Discount applicable to any Portion
of Capital, in each case reduced from time to time by Collections distributed
and applied on account of such Capital pursuant to Section 1.4(d) of the
Agreement; provided, that if such Capital shall have been reduced by any
distribution, and thereafter all or a portion of such distribution is rescinded
or must otherwise be returned for any reason, such Capital shall be increased by
the amount of such rescinded or returned distribution as though it had not been
made.
"Change in Control" means that (a) CSS ceases to own, directly or
indirectly, 100% of the equity of the Seller free and clear of all Adverse
Claims and (b) CSS, ceases to own, directly or indirectly, 100% of the equity of
the Originators free and clear of all Adverse Claims.
"Cleo" means Cleo Inc. a Tennessee corporation.
"Cleo Default Amount" means an amount computed as of the last day of
each calendar month equal to: (a) the aggregate Outstanding Balance of all Pool
Receivables, the Originator of which is Cleo, that became Defaulted Receivables
during such month minus (b) the portion of such Defaulted Receivables which
represent the Reserved Dispute Amount.
"Cleo Default Factor" means (a) for all months other than March or
April, the aggregate credit sales made by Cleo during the calendar month that is
four calendar months prior to such month, (b) for the month of March, the Cleo
Peak Christmas Sales times 33.00% (or such other
I-3
factor as reasonably determined by the Administrator and CSS, as may be
representative of the percentage of Obligors of Cleo with invoice payment dates
of December 10th) and (c) for the month of April, the Cleo Peak Christmas Sales
times 67.00% (or such other factor as reasonably determined by the Administrator
and CSS, as may be representative of the percentage of Obligors of Cleo with
invoice payment dates of January 10th or such other date after January 10th)
plus the aggregate credit sales made by Cleo during the month of December.
"Cleo Peak Christmas Sales" means the sum of the aggregate credit sales
made by Cleo during the months of August through November.
"Cleo Specific Reserve Percentage" means a percentage determined by the
Seller and Servicer and reasonably consented to by the Administrator, that
represents the maximum allowable reserves and allowances negotiated between Cleo
and its Obligors.
"Cleo Specifically Reserved Dilution Amount" means, for any calendar
month, the greater of (a) the sum of the reported reserves for Obligor programs
and returns and allowances on the books and records of Cleo at the end of such
month and (b) an amount equal to the product of (i) the sum of the year to date
aggregate credit sales of Cleo and (ii) the Cleo Specific Reserve Percentage.
"Closing Date" means April 30, 2001.
"Collections" means, with respect to any Pool Receivable: (a) all funds
that are received by any Originator, CSS, the Seller or the Servicer in payment
of any amounts owed in respect of such Receivable (including purchase price,
finance charges, interest and all other charges), or applied to amounts owed in
respect of such Receivable (including insurance payments and net proceeds of the
sale or other disposition of repossessed goods or other collateral or property
of the related Obligor or any other Person directly or indirectly liable for the
payment of such Pool Receivable and available to be applied thereon), (b) all
amounts deemed to have been received pursuant to Section 1.4(e) of the Agreement
and (c) all other proceeds of such Pool Receivable.
"Concentration Percentage" means for any: (a) Group A Obligor (i) other
than Wal-Mart Stores, Inc. or any Affiliate thereof (and, to the extent Wal-Mart
Stores, Inc. fails to maintain a rating of at least "AA-" from Standard & Poors
and "AA3" by Moody's on its long-term senior unsecured and uncredit-enhanced
debt securities but remains a Group A Obligor, Wal-Mart Stores, Inc. or any
Affiliate thereof) 16.00% and (ii) that is Wal-Mart Stores, Inc. or any
Affiliate thereof (to the extent Wal-Mart Stores, Inc. maintains a rating of at
least "AA-" from Standard & Poors and "AA3" by Moody's on its long-term senior
unsecured and uncredit-enhanced debt securities) 30.00%, (b) Group B Obligor,
16.00%, (c) Group C Obligor, 8.00% and (d) Group D Obligor, 4.00%.
"Concentration Reserve" means, at any time: (a) the aggregate Capital
at such time multiplied by (b)(i) the Concentration Reserve Percentage, divided
by (ii) 100%, minus the Concentration Reserve Percentage.
I-4
"Concentration Reserve Percentage" means, at any time, the largest of:
(a) the sum of four largest Group D Obligor Percentages, (b) the sum of the two
largest Group C Obligor Percentages and (c) the largest Group B Obligor
Percentage or Group A Obligor Percentage; provided that if such Obligor is
Wal-Mart Stores, Inc. or any Affiliate thereof, its Group A Obligor Percentage
shall not exceed 16% for the purposes of calculating the Concentration Reserve
Percentage.
"Contract" means, with respect to any Receivable, any and all
contracts, instruments, agreements, leases, invoices, notes or other writings
pursuant to which such Receivable arises or that evidence such Receivable or
under which an Obligor becomes or is obligated to make payment in respect of
such Receivable.
"CP Rate" for any Settlement Period for any Portion of Capital means a
rate calculated by the Administrator equal to: (a) the rate (or if more than one
rate, the weighted average of the rates) at which Notes of the Issuer on each
day during such period have been outstanding; provided, that if such rate(s) is
a discount rate(s), then the CP Rate shall be the rate (or if more than one
rate, the weighted average of the rates) resulting from converting such discount
rate(s) to an interest-bearing equivalent rate plus (b) the commissions and
charges charged by such placement agent or commercial paper dealer with respect
to such Notes, expressed as a percentage of the face amount of such Notes and
converted to an interest-bearing equivalent rate per annum. Notwithstanding the
foregoing, the "CP Rate" for any day while a Termination Event exists shall be
an interest rate equal to 2% above the Base Rate in effect on such day.
"Credit Agreement" means, the Loan Agreement, dated as of April 30,
2001 among, CSS, the various lenders parties thereto and PNC as agent.
"Credit and Collection Policy" means, as the context may require, those
receivables credit and collection policies and practices of each Originator in
effect on the date of the Agreement and described in Schedule I to the
Agreement, as modified in compliance with the Agreement.
"CSS" has the meaning set forth in the preamble to the Agreement.
"Cut-off Date" has the meaning set forth in the Purchase and Sale
Agreement.
"Debt" means: (a) indebtedness for borrowed money, (b) obligations
evidenced by bonds, debentures, notes or other similar instruments, (c)
obligations to pay the deferred purchase price of property or services, (d)
obligations as lessee under leases that shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases, and (e) obligations under direct or indirect guaranties 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 clauses (a) through (d).
I-5
"Defaulted Receivable" means a Receivable:
(a) as to which any payment, or part thereof, remains unpaid for more
than (i) 90 days from the original due date for such payment for Receivables
originated by Cleo, or (ii) 60 days for Receivables originated by Paper Magic
and Berwick, or
(b) without duplication (i) as to which an Insolvency Proceeding shall
have occurred with respect to the Obligor thereof or any other Person obligated
thereon or owning any Related Security with respect thereto, or (ii) that has
been written off the Seller's books as uncollectible;
provided that in each case the portion of such Receivable, if any, consisting
of Reserved Dispute Amount shall not be deemed defaulted.
"Default Ratio" means the ratio (expressed as a percentage and rounded
to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of
the last day of each calendar month by dividing: (a) the sum of the Berwick
Default Amount, plus the Cleo Default Amount, plus the Paper Magic Default
Amount by (b) the sum of the Berwick Default Factor, plus the Cleo Default
Factor, plus the Paper Magic Default Factor.
"Delinquency Ratio" means the ratio (expressed as a percentage and
rounded to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed
as of the last day of each calendar month by dividing: (a) the aggregate
Outstanding Balance of all Pool Receivables that were Delinquent Receivables on
such day by (b) the aggregate Outstanding Balance of all Pool Receivables on
such day.
"Delinquent Receivable" means a Receivable as to which any payment, or
part thereof, remains unpaid for more than 60 days from the original due date
for such payment; provided that the portion of such Receivable, if any,
consisting of Reserved Dispute Amount shall not be deemed delinquent.
"Dilution Horizon" means, for any calendar month, the ratio (expressed
as a percentage and rounded to the nearest 1/100th of 1%, with 5/1000th of 1%
rounded upward) computed as of the last day of such calendar month of: (a) the
aggregate credit sales made by the Originator during the two most recent
calendar months to (b) the aggregate Outstanding Balance of the Eligible
Receivables at the last day of the most recent calendar month.
"Dilution Ratio" means the ratio (expressed as a percentage and rounded
to the nearest 1/100th of 1%, with 5/1000th of 1% rounded upward), computed as
of the last day of each calendar month by dividing: (a) the aggregate amount of
payments, other than credit memos and non-cash adjustments related to
Specifically Reserved Dilution Amount, required to be made by the Seller
pursuant to Section 1.4(e)(i) of the Agreement during such calendar month by (b)
the aggregate credit sales made by the Originator during the month that is two
calendar months before such month.
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"Dilution Reserve" means, on any date, an amount equal to: (a) the
Capital at the close of business of the Servicer on such date multiplied by (b)
(i) the Dilution Reserve Percentage on such date, divided by (ii) 100% minus the
Dilution Reserve Percentage on such date.
"Dilution Reserve Percentage" means on any date, the product of (a) the
Dilution Horizon multiplied by (b) the sum of (i) 2 times the average of the
Dilution Ratios for the twelve most recent calendar months and (ii) the Spike
Factor.
"Discount" means:
(a) for the Portion of Capital for any Settlement Period to
the extent the Issuer will be funding such Portion of Capital during
such Settlement Period through the issuance of Notes:
CPR x C x ED/360
(b) for the Portion of Capital for any Settlement Period to
the extent the Issuer will not be funding such Portion of Capital
during such Settlement Period through the issuance of Notes:
AR x C x ED/Year + TF
where:
AR = the Alternate Rate for the Portion of Capital
for such Settlement Period,
C = the Portion of Capital during such Settlement
Period,
CPR = the CP Rate for the Portion of Capital for such
Settlement Period,
ED = the actual number of days during such Settlement
Period,
Year = if such Portion of Capital is funded based upon:
(i) the Euro-Rate, 360 days, and (ii) the Base
Rate, 365 or 366 days, as applicable, and
TF = the Termination Fee, if any, for the Portion of
Capital for such Settlement Period;
provided, that no provision of the Agreement shall require the payment or
permit the collection of Discount in excess of the maximum permitted by
applicable law; and provided further, that Discount for the Portion of Capital
shall not be considered paid by any distribution to the extent that at any time
all or a portion of such distribution is rescinded or must otherwise be returned
for any reason.
I-7
"Eligible Receivable" means, at any time and without duplication, a
Pool Receivable:
(a) the Obligor of which is (i) a (1) United States resident;
provided, however, that if the Obligor of such Pool Receivable is a
resident of Canada, such Receivable shall satisfy the requirements of
clause (a)(i), if the Outstanding Balance of such Receivable when added
to the aggregate Outstanding Balance of all other Eligible Receivables
that are included in the calculation of Net Receivables Pool Balance at
such time of Obligors that are residents of Canada does not exceed 5%
of the Outstanding Balance of all Eligible Receivables at such time as
determined without giving effect to this proviso, (ii) not a government
or a governmental subdivision, affiliate or agency, (iii) not subject
to any action of the type described in paragraph (f) of Exhibit V to
the Agreement and (iv) not an Affiliate of CSS,
(b) that is denominated and payable only in U.S. dollars in
the United States,
(c) that does not have a stated maturity which is more than
180 days after the original invoice date of such Receivable,
(d) that arises under a duly authorized Contract for the sale
and delivery of goods and services in the ordinary course of the
applicable Originator's business,
(e) that arises under a duly authorized Contract that is in
full force and effect and that is a legal, valid and binding obligation
of the related Obligor, enforceable against such Obligor in accordance
with its terms, except as limited by the potential future application
of applicable bankruptcy, fraudulent conveyance, insolvency,
reorganization and other similar laws.
(f) that conforms in all material respects with all applicable
laws, rulings and regulations in effect,
(g) to the extent that it is not the subject of any asserted
dispute, offset, hold back defense, Adverse Claim or other claim,
(h) that satisfies all applicable requirements of the
applicable Credit and Collection Policy,
(i) that has not been modified, waived or restructured since
its creation, except as permitted pursuant to Section 4.2 of the
Agreement,
(j) in which the Seller owns good and marketable title, free
and clear of any Adverse Claims, and that is freely assignable by the
Seller (including without any consent of the related Obligor),
(k) for which the Issuer shall have a valid and enforceable
undivided percentage ownership or security interest, to the extent of
the Purchased Interest, and a valid and
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enforceable first priority perfected security interest therein and in
the Related Security and Collections with respect thereto, in each case
free and clear of any Adverse Claim,
(l) that constitutes an account as defined in the UCC, and
that is not evidenced by instruments or chattel paper,
(m) that is neither a Defaulted Receivable nor a Delinquent
Receivable,
(n) for which neither the Originator thereof, the Seller nor
the Servicer has established any offset arrangements with the related
Obligor,
(o) of an Obligor as to which Defaulted Receivables (other
than the portion of such Defaulted Receivables which represent the
Reserved Dispute Amount) of such Obligor do not exceed 35% of the
Outstanding Balance of all such Obligor's Receivables, and
(p) that represents amounts earned and payable by the Obligor
that are not subject to the performance of additional services by any
Originator thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"ERISA Affiliate" means: (a) any corporation that is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as the Seller, any Originator or CSS, (b) a trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Internal Revenue Code) with the Seller, any Originator
or CSS, or (c) a member of the same affiliated service group (within the meaning
of Section 414(m) of the Internal Revenue Code) as the Seller, any Originator,
any corporation described in clause (a) or any trade or business described in
clause (b).
"Euro-Rate" means with respect to any Settlement Period the interest
rate per annum determined by the Administrator by dividing (the resulting
quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum)
(i) the rate of interest determined by the Administrator in accordance with its
usual procedures (which determination shall be conclusive absent manifest error)
to be the average of the London interbank market offered rates for U.S. dollars
quoted by the British Bankers' Association ("BBA") as set forth on Dow Jones
Markets Service (formerly known as Telerate) (or appropriate successor or, if
British Bankers' Association or its successor ceases to provide display page
3750 (or such other display page on the Dow Jones Markets Service system as may
replace display page 3750) at or about 11:00 a.m. (London time) on the Business
Day which is two (2) Business Days prior to the first day of such Settlement
Period for an amount comparable to the Portion of Capital to be funded at the
Alternate Rate and based upon the Euro-Rate during
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such Settlement Period by (ii) a number equal to 1.00 minus the Euro-Rate
Reserve Percentage. The Euro-Rate may also be expressed by the following
formula:
Average of London interbank offered rates quoted by
BBA as shown on Dow Jones Markets Service display page 3750
or appropriate successor
Euro-Rate = ---------------------------------------------------
1.00 - Euro-Rate Reserve Percentage
where "Euro-Rate Reserve Percentage" means, the maximum effective percentage in
effect on such day as prescribed by the Board of Governors of the Federal
Reserve System (or any successor) for determining the reserve requirements
(including without limitation, supplemental, marginal, and emergency reserve
requirements) with respect to eurocurrency funding (currently referred to as
"Eurocurrency Liabilities"). The Euro-Rate shall be adjusted with respect to any
Portion of Capital funded at the Alternate Rate and based upon the Euro-Rate
that is outstanding on the effective date of any change in the Euro-Rate Reserve
Percentage as of such effective date. The Administrator shall give prompt notice
to the Seller of the Euro-Rate as determined or adjusted in accordance herewith
(which determination shall be conclusive absent manifest error).
"Excess Concentration" means the sum of the amounts by which the
Outstanding Balance of Eligible Receivables of each Obligor then in the
Receivables Pool exceeds an amount equal to: (a) the Concentration Percentage
for such Obligor multiplied by (b) the Outstanding Balance of all Eligible
Receivables then in the Receivables Pool.
"Facility Termination Date" means the earliest to occur of: (a) April
30, 2004, (b) the date determined pursuant to Section 2.2 of the Agreement, (c)
the date the Purchase Limit reduces to zero pursuant to Section 1.1(b) of the
Agreement, (d) the date that the commitments of the Purchasers terminate under
the Liquidity Agreement, and (e) the Issuer shall fail to cause the amendment or
modification of any Transaction Document or related opinion as required by
Moody's or Standard and Poor's, and such failure shall continue for 30 days
after such amendment is initially requested.
"Federal Funds Rate" means, for any day, the per annum rate set forth
in the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)." If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotations") for such day under the caption "Federal Funds Effective Rate." If
on any relevant day the appropriate rate is not yet published in either
H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be
the arithmetic mean as determined by the Administrator of the rates for the last
transaction in overnight Federal funds arranged before 9:00 a.m. (New York time)
on that
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day by each of three leading brokers of Federal funds transactions in New York
City selected by the Administrator.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any entity succeeding to any of its principal functions.
"Fee Letter" has the meaning set forth in Section 1.5 of the Agreement.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any body or entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including any court, and any Person owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Group A Obligor" means any Obligor with a short-term rating of at
least: (a) "A-1" by Standard & Poor's, or if such Obligor does not have a
short-term rating from Standard & Poor's, a rating of "A+" or better by Standard
& Poor's on its long-term senior unsecured and uncredit-enhanced debt
securities, and (b) "P-1" by Moody's, or if such Obligor does not have a
short-term rating from Moody's, "A1"or better by Moody's on its long-term senior
unsecured and uncredit-enhanced debt securities.
"Group A Obligor Percentage" means, at any time, for each Group A
Obligor, the percentage equivalent of: (a) the aggregate Outstanding Balance of
the Eligible Receivables of such Group A Obligor less any Excess Concentrations
of such Obligor, divided by (b) the aggregate Outstanding Balance of all
Eligible Receivables at such time.
"Group B Obligor" means an Obligor, not a Group A Obligor, with a
short-term rating of at least: (a) "A-2" by Standard & Poor's, or if such
Obligor does not have a short-term rating from Standard & Poor's, a rating of
"BBB+" to "A" by Standard & Poor's on its long-term senior unsecured and
uncredit-enhanced debt securities, and (b) "P-2" by Moody's, or if such Obligor
does not have a short-term rating from Moody's, "Baa1" to "A2" by Moody's on its
long-term senior unsecured and uncredit-enhanced debt securities.
"Group B Obligor Percentage" means, at any time, for each Group B
Obligor, the percentage equivalent of: (a) the aggregate Outstanding Balance of
the Eligible Receivables of such Group B Obligor less any Excess Concentrations
of such Obligor, divided by (b) the aggregate Outstanding Balance of all
Eligible Receivables at such time.
"Group C Obligor" means an Obligor, not a Group A Obligor or a Group B
Obligor, with a short-term rating of at least: (a) "A-3" by Standard & Poor's,
or if such Obligor does not have a short-term rating from Standard & Poor's, a
rating of "BBB-" to "BBB" by Standard & Poor's on its long-term senior unsecured
and uncredit-enhanced debt securities, and (b) "P-3" by Moody's, or if such
Obligor does not have a short-term rating from Moody's, "Baa3" to "Baa2" by
Moody's on its long-term senior unsecured and uncredit-enhanced debt securities.
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"Group C Obligor Percentage" means, at any time, for each Group C
Obligor, the percentage equivalent of: (a) the aggregate Outstanding Balance of
the Eligible Receivables of such Group C Obligor less any Excess Concentrations
of such Obligor, divided by (b) the aggregate Outstanding Balance of all
Eligible Receivables at such time.
"Group D Obligor" means any Obligor that is not a Group A Obligor,
Group B Obligor or Group C Obligor.
"Group D Obligor Percentage" means, at any time, for each Group D
Obligor: (a) the aggregate Outstanding Balance of the Eligible Receivables of
such Group D Obligor less any Excess Concentrations of such Obligor, divided by
(b) the aggregate Outstanding Balance of all Eligible Receivables at such time.
"Indemnified Amounts" has the meaning set forth in Section 3.1 of the
Agreement.
"Indemnified Party" has the meaning set forth in Section 3.1 of the
Agreement.
"Independent Director" has the meaning set forth in paragraph 3(c) of
Exhibit IV to the Agreement.
"Insured Receivable" mean any Receivable which is covered by a credit
insurance policy.
"Information Package" means a report, in substantially the form of
either Annex A-1 (in the case of a Information Package delivered in connection
with a Settlement Date) or Annex A-2 (in the case of Information Package
delivered at any other time) to the Agreement, furnished to the Administrator
pursuant to the Agreement.
"Insolvency Proceeding" means: (a) any case, action or proceeding
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of creditors
of a Person, or composition, marshaling of assets for creditors of a Person, or
other, similar arrangement in respect of its creditors generally or any
substantial portion of its creditors, in each of cases (a) and (b) undertaken
under U.S. Federal, state or foreign law, including the Bankruptcy Code.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to time.
References to sections of the Internal Revenue Code also refer to any successor
sections.
"Issuer" has the meaning set forth in the preamble to the Agreement.
"Issuer's Share" of any amount means such amount multiplied by the
Purchased Interest at the time of determination.
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"Liquidity Agent" means PNC in its capacity as the Liquidity Agent
pursuant to the Liquidity Agreement.
"Liquidity Agreement" means the Liquidity Asset Purchase Agreement,
dated as of even date herewith, between the purchasers from time to time party
thereto, the Issuer and PNC, as Administrator and Liquidity Agent, as the same
may be further amended, supplemented or otherwise modified from time to time.
"Lock-Box Account" means an account in the name of the Seller and
maintained by the Seller at a bank or other financial institution for the
purpose of receiving Collections.
"Lock-Box Agreement" means an agreement, in form and substance
satisfactory to the Administrator, among the Seller, the applicable Originator,
the Servicer, the Administrator, the Issuer and a Lock-Box Bank.
"Lock-Box Bank" means any of the banks or other financial institutions
holding one or more Lock-Box Accounts.
"Loss Reserve" means, on any date, an amount equal to: (a) the Capital
at the close of business of the Servicer on such date multiplied by (b)(i) the
Loss Reserve Percentage on such date divided by (ii) 100% minus the Loss Reserve
Percentage on such date.
"Loss Reserve Percentage" means, on any date, the greater of: (a)
12.00% or (b) the product of (i) 2, (ii) the highest average of the Default
Ratios for any three consecutive calendar months during the twelve most recent
calendar months, and (iii)(A) the aggregate credit sales (other than Peak
Christmas Sales) made by the Originators during the four most recent calendar
months, plus, for the months of August through February only, the year to date
Peak Christmas Sales for such months less the product of (x) the amount of
Collections received on a cumulative basis from December through February times
(y) in the case of Cleo and Paper Magic, 100% or, in the case of Berwick, 80% ,
divided by (B) the aggregate Outstanding Balance of Eligible Receivables as of
such date.
"Material Adverse Effect" means, relative to any Person with respect to
any event or circumstance, a material adverse effect on:
(a) the assets, operations, business or financial condition of
such Person,
(b) the ability of any of such Person to perform its
obligations under the Agreement or any other Transaction Document to
which it is a party,
(c) the validity or enforceability of any other Transaction
Document, or the validity, enforceability or collectibility of a
material portion of the Pool Receivables, or
I-13
(d) the status, perfection, enforceability or priority of the
Issuer's or the Seller's interest in the Pool Assets.
"Moody's" means Moody's Investors Service, Inc.
"Net Receivables Pool Balance" means, at any time: (a) the Outstanding
Balance of Eligible Receivables then in the Receivables Pool minus (b) the sum
of (i) the Excess Concentration and (ii) the Specifically Reserved Dilution
Amount.
"Notes" means short-term promissory notes issued, or to be issued, by
the Issuer to fund its investments in accounts receivable or other financial
assets.
"Obligor" means, with respect to any Receivable, the Person obligated
to make payments pursuant to the Contract relating to such Receivable.
"Originator" has the meaning set forth in the Purchase and Sale
Agreement.
"Originator Assignment Certificate" means the assignment, in
substantially the form of Exhibit C to the Purchase and Sale Agreement,
evidencing Seller's ownership of the Receivables generated by each Originator,
as the same may be amended, supplemented, amended and restated, or otherwise
modified from time to time in accordance with the Purchase and Sale Agreement.
"Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof.
"Paper Magic" means The Paper Magic Group, Inc., a Pennsylvania
corporation.
"Paper Magic Default Amount" means an amount computed as of the last
day of each calendar month equal to: (a) the aggregate Outstanding Balance of
all Pool Receivables, the Originator of which is Paper Magic, that became
Defaulted Receivables during such month minus (b) the aggregate portion of such
Defaulted Receivables which respresents the Reserved Dispute Amount.
"Paper Magic Default Factor" means (a) for the months of November,
December and January, the sum of the aggregate credit sales made by Paper Magic
during the months of June and July and the aggregate credit sales made by the
Minneapolis division of Paper Magic during the month of August, (b) for the
months of February and March, the Paper Magic Peak Christmas Sales times 70%,
(c) for the month of March, the Paper Magic Peak Christmas Sales times 30%, (d)
for the month of April, the aggregate sales made by Paper Magic during the month
of December less aggregate credit sales made by the Scranton division of Paper
Magic during the month of December times 25%, (e) for the month of May, the
Paper Magic Peak Christmas Sales times 15.00%, (f) for the month of June, the
sum of the aggregate credit sales made by Paper Magic during the months of
January through March plus the aggregate credit sales made by the Scranton
division of Paper Magic in the month of December times 25%, and (g) for the
months of July, August, September and
I-14
October, the aggregate credit sales made by Paper Magic during the calendar
month that is three calendar months prior to such month.
"Paper Magic Peak Christmas Sales" means the sum of the aggregate
credit sales made by Paper Magic during the months of August through November
other than the aggregate credit sales made by the Minneapolis division of Paper
Magic during the month of August..
"Paper Magic Specific Reserve Percentage" means a percentage determined
by the Seller and Servicer and reasonably consented to by the Administrator,
that represents the maximum allowable reserves and allowances negotiated between
Paper Magic and its Obligors.
"Paper Magic Specifically Reserved Dilution Amount" means, for any
calendar month, the greater of (a) the sum of the reported reserves for Obligor
programs and returns and allowances on the books and records of Paper Magic at
the end of such month and (b) an amount equal to the product of (i) the sum of
the year to date aggregate credit sales of Paper Magic and (ii) the Paper Magic
Specific Reserve Percentage.
"Payment Date" has the meaning set forth in Section 2.1 of the Purchase
and Sale Agreement.
"Peak Christmas Sales" means for any calendar month the sum of the
Berwick Peak Christmas Sale, plus the Cleo Peak Christmas Sales plus, the Paper
Magic Peak Christmas Sales.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company or other entity, or a government or any
political subdivision or agency thereof.
"PNC" has the meaning set forth in the preamble to the Agreement.
"Pool Assets" has the meaning set forth in Section 1.2(d) of the
Agreement.
"Pool Receivable" means a Receivable in the Receivables Pool.
"Portion of Capital" means any separate portion of Capital being funded
or maintained by the Issuer (or its successors or permitted assigns) by
reference to a particular interest rate basis. In addition, at any time when the
Capital of the Purchased Interest is not divided into two or more such portions,
"Portion of Capital" means 100% of the Capital.
"Program Support Agreement" means and includes the Liquidity Agreement
and any other agreement entered into by any Program Support Provider providing
for: (a) the issuance of one or more letters of credit for the account of the
Issuer, (b) the issuance of one or more surety bonds for which the Issuer is
obligated to reimburse the applicable Program Support Provider for any drawings
thereunder, (c) the sale by the Issuer to any Program Support Provider of the
Purchased Interest (or portions thereof) and/or (d) the making of loans and/or
other extensions of credit to the Issuer in
I-15
connection with the Issuer's Receivables-securitization program contemplated in
the Agreement, together with any letter of credit, surety bond or other
instrument issued thereunder (but excluding any discretionary advance facility
provided by the Administrator).
"Program Support Provider" means and includes any Purchaser and any
other Person (other than any customer of the Issuer) now or hereafter extending
credit or having a commitment to extend credit to or for the account of, or to
make purchases from, the Issuer pursuant to any Program Support Agreement.
"Purchase and Sale Agreement" means the Purchase and Sale Agreement,
dated as of even date herewith, between the Seller, and each of the entities
listed on Schedule I thereto, as such agreement may be amended, amended and
restated, supplemented or otherwise modified from time to time.
"Purchase and Sale Indemnified Amounts" has the meaning set forth in
Section 9.1 of the Purchase and Sale Agreement.
"Purchase and Sale Indemnified Party" has the meaning set forth in
Section 9.1 of the Purchase and Sale Agreement.
"Purchase Notice" has the meaning set forth in Section 1.2(a) of the
Agreement.
"Purchase and Sale Termination Date" has the meaning set forth in
Section 1.4 of the Purchase and Sale Agreement.
"Purchase and Sale Termination Event" has the meaning set forth in
Section 8.1 of the Purchase and Sale Agreement.
"Purchase Facility" has the meaning set forth in Section 1.1 of the
Purchase and Sale Agreement.
"Purchase Limit" means $100,000,000, as such amount may be reduced
pursuant to Section 1.1(b) of the Agreement. References to the unused portion of
the Purchase Limit shall mean, at any time, the Purchase Limit minus the then
outstanding Capital.
"Purchase Price" has the meaning set forth in Section 2.1 of the
Purchase and Sale Agreement.
"Purchase Report" has the meaning set forth in Section 2.1 of the
Purchase and Sale Agreement.
"Purchased Interest" means, at any time, the undivided percentage
ownership interest in: (a) each and every Pool Receivable now existing or
hereafter arising, (b) all Related Security with
I-16
respect to such Pool Receivables and (c) all Collections with respect to, and
other proceeds of, such Pool Receivables and Related Security. Such undivided
percentage interest shall be computed as:
Capital + Total Reserves
----------------------------------
Net Receivables Pool Balance
The Purchased Interest shall be determined from time to time pursuant to Section
1.3 of the Agreement.
"Purchaser" has the meaning set forth in Section 5.3(b) of the
Agreement.
"Receivable" means any indebtedness and other obligations owed to the
Seller (as assignee of any Originator) or any Originator by, or any right of the
Seller or any Originator to payment from or on behalf of, an Obligor, whether
constituting an account, chattel paper, instrument or general intangible,
arising in connection with the sale of goods or the rendering of services by any
Originator, and includes the obligation to pay any finance charges, fees and
other charges with respect thereto. Indebtedness and other obligations arising
from any one transaction, including indebtedness and other obligations
represented by an individual invoice or agreement, shall constitute a Receivable
separate from a Receivable consisting of the indebtedness and other obligations
arising from any other transaction.
"Receivables Pool" means, at any time, all of the then outstanding
Receivables (other than Receivables assigned to the Originators or a third party
in accordance with the terms of the Transaction Documents) purchased by the
Seller pursuant to the Purchase and Sale Agreement prior to the Facility
Termination Date.
"Reference Bank" means PNC.
"Related Rights" has the meaning set forth in Section 1.1 of the
Purchase and Sale Agreement.
"Related Security" means, with respect to any Receivable:
(a) all of the Seller's and the Originator thereof's interest
in any goods (including returned goods), and documentation of title
evidencing the shipment or storage of any goods (including returned
goods), relating to any sale giving rise to such Receivable,
(b) all instruments and chattel paper that may evidence such
Receivable,
(c) all other 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, together with all UCC financing statements or similar
filings relating thereto, and
I-17
(d) all of the Seller's and the Originator thereof's rights,
interests and claims under the Contracts and all guaranties,
indemnities, insurance, letters of credit and other agreements
(including the related Contract) or arrangements of whatever character
from time to time supporting or securing payment of such Receivable or
otherwise relating to such Receivable, whether pursuant to the Contract
related to such Receivable or otherwise.
"Required Servicing Data" shall mean data (in a readily downloadable
and transferrable software format in widespread commercial use and not subject
to any third party consent or other restrictions on transfer) regarding the
Receivables including (a) the corporate name, corporate address, and key
corporate contact person(s) (included telephone and fax numbers) for each
Obligor; (b) detailed daily balances for each Receivable, including the name of
the related Obligor, the invoice number, invoice amount, due date and all
applicable credit memos thereof and (c) detailed listing of daily Collections on
the Receivables, identified by Obligor and by Receivable.
"Reserved Dispute Amount" means the Outstanding Balance of a Pool
Receivable which remains unpaid for more than 60 days from the original due date
for such payment which has been specifically identified by the Seller or the
Servicer as an amount related to a claim and deduction taken by an Obligor
related to a customer program or allowance and the reserve for which is included
in the Specifically Reserved Dilution Amount.
"Seller" has the meaning set forth in the preamble to the Agreement.
"Seller's Share" of any amount means the greater of: (a) $0 and (b)
such amount minus the Issuer's Share.
"Servicer" has the meaning set forth in the preamble to the Agreement.
"Servicing Fee" shall mean the fee referred to in Section 4.6 of the
Agreement.
"Servicing Fee Rate" shall mean the rate referred to in Section 4.6 of
the Agreement.
"Settlement Date" means with respect to any Portion of Capital for any
Settlement Period, (i) prior to the Facility Termination Date, the 20th day of
each calendar month (or the next succeeding Business Day if such day is not a
Business Day) beginning with May 20, 2001 and (ii) on and after the Facility
Termination Date, each day selected from time to time by the Administrator (it
being understood that the Administrator may select such Settlement Date to occur
as frequently as daily), or, in the absence of such selection, the date
specified in clause (i) above.
"Settlement Period" means: (a) before the Facility Termination Date:
(i) initially the period commencing on the date of the initial purchase pursuant
to Section 1.2 of the Agreement (or in the case of any fees payable hereunder,
commencing on the Closing Date) and ending on (but not including) the next
Settlement Date, and (ii) thereafter, each period commencing on such Settlement
Date and ending on (but not including) the next Settlement Date, and (b) on and
after the Facility Termination Date: such period (including a period of one day)
as shall be selected from time to time
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by the Administrator or, in the absence of any such selection, each period of 30
days from the last day of the preceding Settlement Period.
"Solvent" means, with respect to any Person at any time, a condition
under which:
(i) the fair value and present fair saleable value of such
Person's total assets is, on the date of determination, greater than
such Person's total liabilities (including contingent and unliquidated
liabilities) at such time;
(ii) the fair value and present fair saleable value of such
Person's assets is greater than the amount that will be required to pay
such Person's probable liability on its existing debts as they become
absolute and matured ("debts," for this purpose, includes all legal
liabilities, whether matured or unmatured, liquidated or unliquidated,
absolute, fixed, or contingent);
(iii) such Person is and shall continue to be able to pay all
of its liabilities as such liabilities mature; and
(iv) such Person does not have unreasonably small capital with
which to engage in its current and in its anticipated business.
For purposes of this definition:
(A) the amount of a Person's contingent or unliquidated
liabilities at any time shall be that amount which, in light of all the
facts and circumstances then existing, represents the amount which can
reasonably be expected to become an actual or matured liability;
(B) the "fair value" of an asset shall be the amount which may
be realized within a reasonable time either through collection or sale
of such asset at its regular market value;
(C) the "regular market value" of an asset shall be the amount
which a capable and diligent business person could obtain for such
asset from an interested buyer who is willing to Purchase such asset
under ordinary selling conditions; and
(D) the "present fair saleable value" of an asset means the
amount which can be obtained if such asset is sold with reasonable
promptness in an arm's-length transaction in an existing and not
theoretical market.
"Specifically Reserved Dilution Amount" mean, for any calendar month
the sum of the Berwick Specially Reserved Amount, plus the Cleo Specifically
Reserved Amount plus the Paper Magic Specifically Reserved Dilution Amount.
I-19
"Spike Factor" means, for any calendar month, (a) the positive
difference, if any, between: (i) the highest Dilution Ratio for any calendar
month during the twelve most recent calendar months and (ii) the arithmetic
average of the Dilution Ratios for such twelve months times (b) (i) the highest
Dilution Ratio for any calendar month during the twelve most recent calendar
months divided by (ii) the arithmetic average of the Dilution Ratios for such
twelve months
"Standard & Poor's" means Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
"Subsidiary" means, as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock of each class
or other interests having ordinary voting power (other than stock or other
interests having such power only by reason of the happening of a contingency) to
elect a majority of the Board of Directors or other managers of such entity are
at the time owned, or management of which is otherwise controlled: (a) by such
Person, (b) by one or more Subsidiaries of such Person or (c) by such Person and
one or more Subsidiaries of such Person.
"Termination Day" means: (a) each day on which the conditions set forth
in Section 2 of Exhibit II to the Agreement are not satisfied or (b) each day
that occurs on or after the Facility Termination Date.
"Termination Event" has the meaning specified in Exhibit V to the
Agreement.
"Termination Fee" means, for any Settlement Period during which a
Termination Day occurs, the amount, if any, by which: (a) the additional
Discount (calculated without taking into account any Termination Fee or any
shortened duration of such Settlement Period pursuant to the definition thereof)
that would have accrued during such Settlement Period on the reductions of
Capital relating to such Settlement Period had such reductions not been made,
exceeds (b) the income, if any, received by the Issuer from investing the
proceeds of such reductions of Capital, as determined by the Administrator,
which determination shall be binding and conclusive for all purposes, absent
manifest error.
"Total Reserves" means, at any time the sum of : (a) the Yield Reserve,
plus (b) the greater of (i) the sum of (A) Loss Reserve plus (B) the Dilution
Reserve and (ii) the Concentration Reserve.
"Transaction Documents" means the Agreement, the Lock-Box Agreements,
the Fee Letter, the Purchase and Sale Agreement and all other certificates,
instruments, UCC financing statements, reports, notices, agreements and
documents executed or delivered under or in connection with any of the
foregoing, in each case as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the Agreement.
"Turnover Rate" means, for any calendar month, an amount computed as of
the last day of such calendar month equal to: (a) the Outstanding Balance of all
Pool Receivables as of the last day of such calendar month divided by (b)(i) the
aggregate credit sales made by the Originator during the three calendar months
ended on or before the last day of such calendar month divided by (ii) 3.
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"UCC" means the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction.
"Unmatured Purchase and Sale Termination Event" means any event which,
with the giving of notice or lapse of time, or both, would become a Purchase and
Sale Termination Event.
"Unmatured Termination Event" means an event that, with the giving of
notice or lapse of time, or both, would constitute a Termination Event.
"Yield Reserve" means, on any date, an amount equal to: (a) the Capital
at the close of business of the Servicer on such date multiplied by (b)(i) the
Yield Reserve Percentage on such date divided by (ii) 100% minus the Yield
Reserve Percentage on such date.
"Yield Reserve Percentage" means at any time:
(PY + SFR) x 1.5 x TR
--------
12
where:
PY = the Base Rate as of the last day of the most
recent Settlement Period,
TR = the Turnover Rate, and
SFR = the Servicing Fee Rate
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.
Unless the context otherwise requires, "or" means "and/or," and "including" (and
with correlative meaning "include" and "includes") means including without
limiting the generality of any description preceding such term.
I-21
EXHIBIT II
CONDITIONS OF PURCHASES
1. Conditions Precedent to Initial Purchase. The Initial Purchase under
this Agreement is subject to the following conditions precedent that the
Administrator shall have received on or before the date of such purchase, each
in form and substance (including the date thereof) satisfactory to the
Administrator:
(a) A counterpart of the Agreement and the other Transaction Documents
executed by the parties thereto.
(b) Certified copies of: (i) the resolutions of the Board of Directors
of each of the Seller, each Originator and CSS authorizing the execution,
delivery and performance by the Seller, each Originator and CSS, as the case may
be, of the Agreement and the other Transaction Documents to which it is a party;
(ii) all documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to the Agreement and the other Transaction
Documents and (iii) the certificate of incorporation and by-laws of the Seller
and CSS.
(c) A certificate of the Secretary or Assistant Secretary of the
Seller, each Originator and CSS certifying the names and true signatures of its
officers who are authorized to sign the Agreement and the other Transaction
Documents. Until the Administrator receives a subsequent incumbency certificate
from the Seller, any Originator or CSS, as the case may be, the Administrator
shall be entitled to rely on the last such certificate delivered to it by the
Seller, such Originator or CSS, as the case may be.
(d) (i) evidence of proper financing statements, duly executed and
filed on or before the date of such initial purchase under the UCC of all
jurisdictions that the Administrator may deem necessary or desirable in order to
perfect the interests of the Seller, CSS and the Issuer contemplated by the
Agreement and the Purchase and Sale Agreement and (ii) evidence of the payment
of all taxes or filing fees by the Seller or Originator, and the making and/or
filing of such statements and affidavits by one or more Originators, that shall
be required in connection with the filing of such financing statements in the
Administrator's sole discretion.
(e) Proper financing statements (UCC-3), duly executed on or before the
date of such initial purchase suitable for filing under the UCC of all
jurisdictions that the Administrator may deem, if any, necessary or desirable to
release all security interests and other rights of any Person in the
Receivables, Contracts or Related Security previously granted by any Originator,
CSS or the Seller.
(f) Completed UCC search reports, dated on or shortly before the date
of the initial purchase hereunder, listing the financing statements filed in all
applicable jurisdictions referred to in subsection (e) above that name any
Originator or the Seller as debtor, together with copies of such other financing
statements, and similar search reports with respect to judgment liens, federal
tax
II-1
liens, liens of the Pension Benefit Guaranty Corporation in such jurisdictions,
as the Administrator may request, showing no Adverse Claims on any Pool Assets.
(g) Favorable opinions, in form and substance reasonably satisfactory
to the Administrator, of: (i) Morgan, Lewis & Bockius LLP, counsel for the
Seller, the Originators, and the Servicer, and (ii) [Richards] , special counsel
for the Seller.
(h) Satisfactory results of a review and audit (performed by the
Administrator) of the Servicer's collection, operating and reporting systems,
the Credit and Collection Policy of each Originator, historical receivables data
and accounts, including satisfactory results of a review of the Servicer's
operating location(s) and satisfactory review and approval of the Eligible
Receivables in existence on the date of the initial purchase under the
Agreement; provided, however, that within 90 days of the Closing Date such
review and audit shall be performed by a representative of the Administrator.
(i) A pro forma Information Package representing the performance of the
Receivables Pool for the calendar month before closing.
(j) Evidence of payment by the Seller of all accrued and unpaid fees
(including those contemplated by the Fee Letter), costs and expenses to the
extent then due and payable on the date thereof, including any such costs, fees
and expenses arising under or referenced in Section 5.4 of the Agreement and the
Fee Letter.
(k) The Fee Letter duly executed by the Seller and the Servicer.
(l) Good standing certificates with respect to each of the Seller, each
Originator and the Servicer issued by the Secretary of State (or similar
official) of the state of each such Person's organization or formation and
principal place of business.
(m) The Liquidity Agreement and all other Transaction Documents duly
executed by the parties thereto.
(n) A computer file containing all information with respect to the
Receivables as the Administrator or the Issuer may reasonably request.
(o) prior to the initial purchase by the Issuer hereunder, copies of
executed Lock-Box Agreements with each Lock-Box Bank.
(q) Such other approvals, opinions or documents as the Administrator or
the Issuer may reasonably request.
2. Conditions Precedent to All Purchases and Reinvestments. Each
purchase (except as to clause (a), including the initial purchase) and each
reinvestment shall be subject to the further conditions precedent that:
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(a) in the case of each purchase, the Servicer shall have delivered to
the Administrator on or before such purchase, in form and substance satisfactory
to the Administrator, a completed pro forma Information Package to reflect the
level of Capital and related reserves and the calculation of the Purchased
Interest after such subsequent purchase and a completed Purchase Notice in the
form of Annex B; and
(b) on the date of such purchase or reinvestment the following
statements shall be true (and acceptance of the proceeds of such purchase or
reinvestment shall be deemed a representation and warranty by the Seller that
such statements are then true):
(i) the representations and warranties contained in Exhibit
III to the Agreement are true and correct on and as of the date of such
purchase or reinvestment as though made on and as of such date (except
to the extent that such representations and warranties relate expressly
to an earlier date, and in which case such representations and
warranties shall be true and correct in all material respects as of
such earlier date);
(ii) no event has occurred and is continuing, or would result
from such purchase or reinvestment, that constitutes a Termination
Event or an Unmatured Termination Event; and
(iii) the Capital does not exceed the Purchase Limit.
II-3
EXHIBIT III
REPRESENTATIONS AND WARRANTIES
1. Representations and Warranties of the Seller. The Seller represents
and warrants as follows:
(a) The Seller is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware, and is
duly qualified to do business and is in good standing as a foreign limited
liability company in every jurisdiction where the nature of its business
requires it to be so qualified, except where the failure to be so qualified
would not have a Material Adverse Effect.
(b) The execution, delivery and performance by the Seller of the
Agreement and the other Transaction Documents to which it is a party, including
its use of the proceeds of purchases and reinvestments: (i) are within its
organizational powers; (ii) have been duly authorized by all necessary
organizational action; (iii) do not contravene or result in a default under or
conflict with: (A) its certificate of formation, limited liability company
agreement or any other organizational documents of the Seller, (B) any law, rule
or regulation applicable to it, (C) any indenture, loan agreement, mortgage,
deed of trust or other material agreement or instrument to which it is a party
or by which it is bound, or (D) any order, writ, judgment, award, injunction or
decree binding on or affecting it or any of its property; and (iv) do not result
in or require the creation of any Adverse Claim upon or with respect to any of
its properties. The Agreement and the other Transaction Documents to which it is
a party have been duly executed and delivered by the Seller.
(c) No authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or other Person is required for its due
execution, delivery and performance by the Seller of the Agreement or any other
Transaction Document to which it is a party, other than the Uniform Commercial
Code filings referred to in Exhibit II to the Agreement, all of which shall have
been delivered to the Administrator on or before the date of the first purchase
hereunder and such authorizations, approvals, actions, notices or filings the
failure to be obtained would not have a Material Adverse Effect.
(d) Each of the Agreement and the other Transaction Documents to which
the Seller is a party constitutes its legal, valid and binding obligation
enforceable against the Seller in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws from time to time in effect affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) There is no pending or, to Seller's best knowledge, threatened
action or proceeding affecting Seller or any of its properties before any
Governmental Authority or arbitrator.
III-1
(f) No proceeds of any purchase or reinvestment will be used to acquire
any equity security of a class that is registered pursuant to Section 12 of the
Securities Exchange Act of 1934.
(g) The Seller is the legal and beneficial owner of the Pool
Receivables and Related Security, free and clear of any Adverse Claim. Upon each
purchase or reinvestment, the Issuer shall acquire a valid and enforceable
perfected undivided percentage ownership or security interest, to the extent of
the Purchased Interest, in each Pool Receivable then existing or thereafter
arising and in the Related Security, Collections and other proceeds with respect
thereto, free and clear of any Adverse Claim. The Agreement creates a security
interest in favor of the Issuer in the Pool Assets, and the Issuer has a first
priority perfected security interest in the Pool Assets, free and clear of any
Adverse Claims. No effective financing statement or other instrument similar in
effect covering any Pool Asset is on file in any recording office, except those
filed in favor of the Seller pursuant to the Purchase and Sale Agreement and the
Issuer relating to the Agreement.
(h) Each Information Package (if prepared by the Seller or one of its
Affiliates, or to the extent that information contained therein is supplied by
the Seller or an Affiliate), information, exhibit, financial statement,
document, book, record or report furnished or to be furnished at any time by or
on behalf of the Seller to the Administrator in connection with the Agreement or
any other Transaction Document to which it is a party is or will be complete and
accurate in all material respects as of its date or (except as otherwise
disclosed to the Administrator at such time) as of the date so furnished,
(i) The Seller's principal place of business and chief executive office
(as such terms are used in the UCC) and the office where it keeps its records
concerning the Receivables are located at the address referred to in Sections
1(b) and 2(b) of Exhibit IV to the Agreement.
(j) The names and addresses of all the Lock-Box Banks, together with
the account numbers of the Lock-Box Accounts at such Lock-Box Banks, are
specified in Schedule II to the Agreement (or at such other Lock-Box Banks
and/or with such other Lock-Box Accounts as have been notified to the
Administrator in accordance with the Agreement) and all Lock-Box Accounts are
(as of and at all times after the initial purchase by the Issuer hereunder)
subject to Lock-Box Agreements. The Seller has not granted to any Person, other
than the Administrator as contemplated by the Lock-Box Agreements, dominion and
control of any Lock-Box Account, or the right to take control of any such
account at a future time or upon the occurrence of a future event.
(k) The Seller is not in violation of any order of any court,
arbitrator or Governmental Authority.
(l) Neither the Seller nor any of its Affiliates has any direct or
indirect ownership or other financial interest in the Issuer.
(m) No proceeds of any purchase or reinvestment will be used for any
purpose that violates any applicable law, rule or regulation, including
Regulations T, U or X of the Federal Reserve Board.
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(n) Each Pool Receivable included as an Eligible Receivable in the
calculation of the Net Receivables Pool Balance is an Eligible Receivable.
(o) No event has occurred and is continuing, or would result from a
purchase in respect of, or reinvestment in respect of, the Purchased Interest or
from the application of the proceeds therefrom, that constitutes a Termination
Event or an Unmatured Termination Event.
(p) Within 30 days of the Closing Date, and at all times thereafter,
the Issuer shall be a named beneficiary (as its interests may appear) on each
credit insurance policy covering any of the Receivables to the extent such
credit insurance is maintained from time to time.
(q) The Seller has complied in all material respects with the Credit
and Collection Policies of each Originator with regard to each Receivable
originated by each Originator.
(r) The Seller has complied in all material respects with all of the
terms, covenants and agreements contained in the Agreement and the other
Transaction Documents that are applicable to it.
(s) The Seller's complete organizational name is set forth in the
preamble to the Agreement, and it does not use and has not during the last six
years used any other organizational name, trade name, doing-business name or
fictitious name, except as set forth on Schedule III to the Agreement and except
for names first used after the date of the Agreement and set forth in a notice
delivered to the Administrator pursuant to Section 1(l)(iv) of Exhibit IV to the
Agreement.
(t) The Seller is not an "investment company," or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. In addition, the Seller is not a "holding
company," a "subsidiary company" of a "holding company" or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(u) With respect to each Receivable transferred to the Seller under the
Purchase and Sale Agreement, Seller has given reasonably equivalent value to the
Originator thereof in consideration therefor and such transfer was not made for
or on account of an antecedent debt. No transfer by any Originator of any
Receivable under the Purchase and Sale Agreement is or may be voidable under any
section of the Bankruptcy Code.
(v) Each Contract with respect to each Receivable is effective to
create, and has created, a legal, valid and binding obligation of the related
Obligor to pay the Outstanding Balance of the Receivable created thereunder and
any accrued interest thereon, enforceable against the Obligor in accordance with
its terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws relating to or limiting
creditors' rights generally and by general principles of equity (regardless of
whether enforcement is sought in a proceeding in equity or at law).
III-3
(w) Since its most recent fiscal year end, there has been no change in
the business, operations, financial condition, properties or assets of the
Seller which would have a Material Adverse Effect on its ability to perform its
obligations under the Agreement or any other Transaction Document to which it is
a party or materially and adversely affect the transactions contemplated under
the Agreement or such other Transaction Documents.
2. Representations and Warranties of CSS (including in its capacity as
the Servicer). CSS, individually and in its capacity as the Servicer, represents
and warrants as follows:
(a) CSS is a corporation duly formed, validly existing and in good
standing under the laws of the State of Delaware, and is duly qualified to do
business and is in good standing as a foreign corporation in every jurisdiction
where the nature of its business requires it to be so qualified, except where
the failure to be so qualified would not have a Material Adverse Effect.
(b) The execution, delivery and performance by CSS of the Agreement and
the other Transaction Documents to which it is a party, including the Servicer's
use of the proceeds of purchases and reinvestments: (i) are within its corporate
powers; (ii) have been duly authorized by all necessary corporate action; (iii)
do not contravene or result in a default under or conflict with: (A) its
certificate of incorporation or bylaws, (B) any law, rule or regulation
applicable to it, (C) any indenture, loan agreement, mortgage, deed of trust or
other material agreement or instrument to which it is a party or by which it is
bound, or (D) any order, writ, judgment, award, injunction or decree binding on
or affecting it or any of its property; and (iv) do not result in or require the
creation of any Adverse Claim upon or with respect to any of its properties. The
Agreement and the other Transaction Documents to which CSS is a party have been
duly executed and delivered by CSS.
(c) No authorization, approval or other action by, and no notice to or
filing with any Governmental Authority or other Person, is required for the due
execution, delivery and performance by CSS of the Agreement or any other
Transaction Document to which it is a party other than such authorizations,
approvals, actions, notices of filings the failure to be obtained would not have
a Material Adverse Effect.
(d) Each of the Agreement and the other Transaction Documents to which
CSS is a party constitutes the legal, valid and binding obligation of CSS
enforceable against CSS in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization or other similar laws
from time to time in effect affecting the enforcement of creditors' rights
generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) The balance sheets of CSS and its consolidated Subsidiaries as at
December 31, 2000, and the related statements of income and retained earnings
for the fiscal year then ended, copies of which have been furnished to the
Administrator, fairly present the financial condition of CSS and its
consolidated Subsidiaries as at such date and the results of the operations of
CSS and its Subsidiaries for the period ended on such date, all in accordance
with generally accepted accounting
III-4
principles consistently applied, and since December 31, 2000 there has been no
event or circumstances which have had a Material Adverse Effect.
(f) Except as disclosed in the most recent audited financial statements
of CSS furnished to the Administrator, there is no pending or, to its best
knowledge, threatened action or proceeding affecting it or any of its
Subsidiaries before any Governmental Authority or arbitrator that could
reasonably be expected to have a Material Adverse Effect.
(g) No proceeds of any purchase or reinvestment will be used to acquire
any equity security of a class that is registered pursuant to Section 12 of the
Securities Exchange Act of 1934.
(h) Each Information Package (if prepared by CSS or one of its
Affiliates, or to the extent that information contained therein is supplied by
CSS or an Affiliate), information, exhibit, financial statement, document, book,
record or report furnished or to be furnished at any time by or on behalf of the
Servicer to the Administrator in connection with the Agreement is or will be
complete and accurate in all material respects as of its date or (except as
otherwise disclosed to the Administrator at such time) as of the date so
furnished.
(i) The principal place of business and chief executive office (as such
terms are used in the UCC) of CSS and the office where it keeps its records
concerning the Receivables are located at the address referred to in Section
2(b) of Exhibit IV to the Agreement.
(j) CSS is not in violation of any order of any court, arbitrator or
Governmental Authority, which could have a Material Adverse Effect.
(k) Neither CSS nor any of its Affiliates has any direct or indirect
ownership or other financial interest in the Issuer.
(l) CSS has complied in all material respects with the Credit and
Collection Policy of each Originator with regard to each Receivable originated
by each Originator.
(m) CSS has complied in all material respects with all of the terms,
covenants and agreements contained in the Agreement and the other Transaction
Documents that are applicable to it.
(n) CSS is not an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended. In addition, CSS is not a "holding company," a "subsidiary company"
of a "holding company," or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company" within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(o) Since its most recent fiscal year end, there has been no change in
the business, operations, financial condition, properties or assets of CSS which
would be reasonably likely to have a Material Adverse Effect on its ability to
perform its obligations under the Agreement or any
III-5
other Transaction Document to which it is a party or materially and adversely
affect the transactions contemplated under the Agreement or such other
Transaction Documents.
III-6
EXHIBIT IV
COVENANTS
1. Covenants of the Seller. Until the latest of the Facility
Termination Date, the date on which no Capital of or Discount in respect of the
Purchased Interest shall be outstanding or the date all other amounts owed by
the Seller under the Agreement to the Issuer, the Administrator and any other
Indemnified Party or Affected Person shall be paid in full:
(a) Compliance with Laws, Etc. The Seller shall comply in all material
respects with all applicable laws, rules, regulations and orders, and preserve
and maintain its organizational existence, rights, franchises, qualifications
and privileges, except to the extent that the failure so to comply with such
laws, rules and regulations or the failure so to preserve and maintain such
rights, franchises, qualifications and privileges would not have a Material
Adverse Effect.
(b) Offices, Records and Books of Account, Etc. The Seller: (i) shall
keep its principal place of business and chief executive office (as such terms
or similar terms are used in the UCC) and the offices where it keeps its records
concerning the Receivables at the address of the Seller set forth under its name
on the signature page to the Agreement (and, in the case of records, at the
addresses of each Originator set forth under its name on the signature page to
the Purchase and Sale Agreement) or, pursuant to clause (l)(v) below, at any
other locations in jurisdictions where all actions reasonably requested by the
Administrator to protect and perfect the interest of the Issuer in the
Receivables and related items (including the Pool Assets) have been taken and
completed and (ii) shall provide the Administrator with at least 30 days'
written notice before making any change in the Seller's name or making any other
change in the Seller's identity or organizational structure (including a Change
in Control) that could render any UCC financing statement filed in connection
with this Agreement "seriously misleading" as such term (or similar term) is
used in the UCC; each notice to the Administrator pursuant to this sentence
shall set forth the applicable change and the effective date thereof. The Seller
also will maintain and implement (or cause the Servicer to maintain and
implement) administrative and operating procedures (including an ability to
recreate records evidencing Receivables and related Contracts in the event of
the destruction of the originals thereof), and keep and maintain (or cause the
Servicer to keep and maintain) the Required Servicing Data and all other
documents, books, records, computer tapes and disks and other information
reasonably necessary or advisable for the collection of all Receivables
(including records adequate to permit the daily identification of each
Receivable and all Collections of and adjustments to each existing Receivable).
Notwithstanding the above, in no event shall the Seller have or maintain, or be
a partner in any partnership that has or maintains, its jurisdiction of
organization, principal place of business or principal assets in any of the
states of Colorado, Kansas, New Mexico, Oklahoma, Utah or Wyoming.
(c) Performance and Compliance with Contracts and Credit and Collection
Policy. The Seller shall (and shall cause the Servicer to), at its expense,
timely and fully perform and comply generally with provisions, covenants and
other promises required to be observed by it under the Contracts related to the
Receivables to the extent necessary to prevent an adverse impact on the
IV-1
Receivables Pool generally and timely and fully comply in all material respects
with the applicable Credit and Collection Policies with regard to each
Receivable and the related Contract.
(d) Ownership Interest, Etc. The Seller shall (and shall cause the
Servicer to), at its expense, take all action necessary or desirable to
establish and maintain a valid and enforceable undivided percentage ownership or
security interest, to the extent of the Purchased Interest, in the Pool
Receivables, the Related Security and Collections with respect thereto, and a
first priority perfected security interest in the Pool Assets, in each case free
and clear of any Adverse Claim, in favor of the Issuer, including taking such
action to perfect, protect or more fully evidence the interest of the Issuer as
the Issuer, through the Administrator, may reasonably request.
(e) Sales, Liens, Etc. The Seller shall not 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, any or all of its right, title or
interest in, to or under any Pool Assets (including the Seller's undivided
interest in any Receivable, Related Security or Collections, or upon or with
respect to any account to which any Collections of any Receivables are sent), or
assign any right to receive income in respect of any items contemplated by this
paragraph; provided that the Seller may assign any Insured Receivable to the
applicable insurance provider after the deposit of the proceeds of the insurance
policy in relation to such Insured Receivable in a Lock-Box Account.
(f) Extension or Amendment of Receivables. Except as provided in the
Agreement (including Section 4.2), the Seller shall not, and shall not permit
the Servicer to, extend the maturity or adjust the Outstanding Balance or
otherwise modify the terms of any Pool Receivable in any material respect, or
amend, modify or waive, in any material respect, any term or condition of any
related Contract (which term or condition relates to payments under, or the
enforcement of, such Contract).
(g) Change in Business or Credit and Collection Policy. The Seller
shall not make (or permit any Originator to make) any material change in the
character of its business or in any Credit and Collection Policy, or any change
in any Credit and Collection Policy that would have a Material Adverse Effect
with respect to the Receivables. The Seller shall not make (or permit any
Originator to make) any other material change in any Credit and Collection
Policy without giving prior written notice thereof to the Administrator.
(h) Audits. The Seller shall (and shall cause the Originator to), from
time to time during regular business hours as reasonably requested in advance
(unless a Termination Event or an Unmatured Termination Event exists) by the
Administrator, permit the Administrator, or its agents or representatives: (i)
to examine and make copies of and abstracts from all books, records and
documents (including computer tapes and disks) in the possession or under the
control of the Seller (or each Originator) relating to Receivables and the
Related Security, including the related Contracts, (ii) to visit the offices and
properties of the Seller and each Originator for the purpose of examining such
materials described in clause (i) above, and to discuss matters relating to
Receivables and the Related Security or the Seller's, CSS's or any Originator's
performance under the Transaction Documents or under the Contracts with any of
the officers, employees, agents or
IV-2
contractors of the Seller, CSS or any Originator having knowledge of such
matters and (iii) without limiting the clauses (i) and (ii) above, no more than
once annually (unless a Termination Event or an Unmatured Termination Event
exists or there shall be a material variance in the performance of the
Receivables) to engage certified public accountants or other auditors acceptable
to the Seller and the Administrator to conduct, at the Seller's expense, a
review of the Seller's books and records with respect to such Receivables.
(i) Change in Lock-Box Banks, Lock-Box Accounts and Payment
Instructions to Obligors. The Seller shall not, and shall not permit the
Servicer or any Originator to, add or terminate any bank as a Lock-Box Bank or
any account as a Lock-Box Account from those listed in Schedule II to the
Agreement, or make any change in its instructions to Obligors regarding payments
to be made to the Seller, any Originator, the Servicer or any Lock-Box Account
(or related post office box), unless the Administrator shall have consented
thereto in writing and the Administrator shall have received copies of all
agreements and documents (including Lock-Box Agreements) that it may request in
connection therewith.
(j) Deposits to Lock-Box Accounts. The Seller shall (or shall cause the
Servicer to): (i) instruct all Obligors to make payments of all Receivables to
one or more Lock-Box Accounts or to post office boxes to which only Lock-Box
Banks have access (and shall instruct the Lock-Box Banks to cause all items and
amounts relating to such Receivables received in such post office boxes to be
removed and deposited into a Lock-Box Account on a daily basis), and (ii)
deposit, or cause to be deposited, any Collections received by it, the Servicer
or any Originator into Lock-Box Accounts not later than two Business Days after
receipt thereof. Each Lock-Box Account (other than Lock-Box Accounts that solely
receive Collections not denominated in United States dollars) shall at all times
on or after the initial purchase by the Issuer hereunder be subject to a
Lock-Box Agreement. The Seller will not (and will not permit the Servicer to)
deposit or otherwise credit, or cause or permit to be so deposited or credited,
to any Lock-Box Account cash or cash proceeds other than Collections.
(k) Marking of Records. At its expense, the Seller shall: (i) mark (or
cause the Servicer to mark) its master data processing records relating to Pool
Receivables and related Contracts, including with a legend evidencing that the
undivided percentage ownership interests with regard to the Purchased Interest
related to such Receivables and related Contracts have been sold in accordance
with the Agreement, and (ii) cause each Originator so to mark its master data
processing records pursuant to the Purchase and Sale Agreement.
(l) Reporting Requirements. The Seller will provide to the
Administrator (in multiple copies, if requested by the Administrator) the
following:
(i) as soon as available and in any event within 50 days after
the end of the first three quarters of each fiscal year of the Seller,
balance sheets of the Seller as of the end of such quarter and
statements of income of the Seller for the period commencing at the end
of the previous fiscal year and ending with the end of such quarter,
certified by the chief financial officer or treasurer of such Person;
IV-3
(ii) as soon as available and in any event within 105 days
after the end of each fiscal year of the Seller, a copy of the balance
sheet and statement of income for such year certified as to accuracy by
the chief financial officer or treasurer of the Seller;
(iii) as soon as possible and in any event within five
Business Days after becoming aware of the occurrence of each
Termination Event or Unmatured Termination Event, a statement of the
chief financial officer or treasurer of the Seller setting forth
details of such Termination Event or Unmatured Termination Event and
the action that the Seller has taken and proposes to take with respect
thereto;
(iv) promptly after the filing or receiving thereof, copies of
all reports and notices that the Seller or any Affiliate files under
ERISA with the Internal Revenue Service, the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or that the Seller or any
Affiliate receives from any of the foregoing or from any multiemployer
plan (within the meaning of Section 4001(a)(3) of ERISA) to which the
Seller or any of its Affiliates is or was, within the preceding five
years, a contributing employer, in each case in respect of the
assessment of withdrawal liability or an event or condition that could,
in the aggregate, result in the imposition of liability on the Seller
and/or any such Affiliate which liability would be reasonably likely to
have a Material Adverse Effect;
(v) at least thirty days before any change in the Seller's
name or any other change requiring the amendment of UCC financing
statements, a notice setting forth such changes and the effective date
thereof;
(vi) promptly after the Seller obtains knowledge thereof,
notice of any: (A) material litigation, investigation or proceeding
that may exist at any time between the Seller and any Person or (B)
material litigation or proceeding relating to any Transaction Document;
(vii) promptly after becoming aware of the occurrence thereof,
notice of a material adverse change in the business, operations,
property or financial or other condition of the Seller, the Servicer or
any Originator; and
(viii) such other information respecting the Receivables or
the condition or operations, financial or otherwise, of the Seller or
any of its Affiliates as the Administrator may from time to time
reasonably request.
(m) Certain Agreements. Without the prior written consent of the
Administrator, the Seller will not (and will not permit any Originator to)
amend, modify, waive, revoke or terminate any Transaction Document to which it
is a party or any provision of Seller's certificate of formation, limited
liability company agreement or other organizational document of the Seller.
(n) Restricted Payments. (i) Except pursuant to clause (ii) below, the
Seller will not: (A) purchase or redeem any shares of its capital stock, (B)
declare or pay any dividend or set aside any funds for any such purpose, (C)
prepay, purchase or redeem any Debt, (D) lend or advance any
IV-4
funds or (E) repay any loans or advances to, for or from any of its Affiliates
(the amounts described in clauses (A) through (E) being referred to as
"Restricted Payments").
(ii) Subject to the limitations set forth in clause (iii)
below, the Seller may make Restricted Payments in the form of
dividends.
(iii) The Seller may make Restricted Payments only out of the
funds it receives pursuant to Sections 1.4(b)(ii) and (iv) of the
Agreement. Furthermore, the Seller shall not pay, make or declare: (A)
any distribution if, after giving effect thereto, the Seller's tangible
net worth would be less than the greater of (x) $1,000,000 and (y) 10%
of the Net Receivables Pool Balance, or (B) any Restricted Payment
(including any dividend) if, after giving effect thereto, any
Termination Event or Unmatured Termination Event shall have occurred
and be continuing.
(o) Other Business. The Seller will not: (i) engage in any business
other than the transactions contemplated by the Transaction Documents; (ii)
create, incur or permit to exist any Debt of any kind (or cause or permit to be
issued for its account any letters of credit or bankers' acceptances) other than
pursuant to this Agreement; or (iii) form any Subsidiary or make any investments
in any other Person; provided, however, that the Seller shall be permitted to
incur minimal obligations to the extent necessary for the day-to-day operations
of the Seller (such as expenses for stationery, audits, maintenance of legal
status, etc.).
(p) Use of Seller's Share of Collections. The Seller shall apply the
Seller's Share of Collections to make payments in the following order of
priority: (i) the payment of its expenses (including all obligations payable to
the Issuer and the Administrator under the Agreement and under the Fee Letter)
and (ii) other legal and valid corporate purposes.
(q) Tangible Net Worth. The Seller will not permit its tangible net
worth, at any time, to be less than the greater of [(i) $1,000,000 and (ii) 10%
of the Net Receivables Pool Balance.
2. Covenants of the Servicer and CSS. Until the latest of the Facility
Termination Date, the date on which no Capital of or Discount in respect of the
Purchased Interest shall be outstanding or the date all other amounts owed by
the Seller under the Agreement to the Issuer, the Administrator and any other
Indemnified Party or Affected Person shall be paid in full:
(a) Compliance with Laws, Etc. The Servicer and, to the extent that it
ceases to be the Servicer, CSS shall comply (and shall cause each Originator to
comply) in all material respects with all applicable laws, rules, regulations
and orders, and preserve and maintain its corporate existence, rights,
franchises, qualifications and privileges, except to the extent that the failure
so to comply with such laws, rules and regulations or the failure so to preserve
and maintain such existence, rights, franchises, qualifications and privileges
would not have a Material Adverse Effect.
(b) Offices, Records and Books of Account, Etc. The Servicer and, to
the extent that it ceases to be the Servicer, CSS, shall keep (and shall cause
each Originator to keep) its principal place of
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business and chief executive office (as such terms or similar terms are used in
the applicable UCC) and the office where it keeps its records concerning the
Receivables at the address of the Servicer set forth under its name on the
signature page to the Agreement (and, in the case of records, at the addresses
of each Originator set forth under its name on the signature page to the
Purchase and Sale Agreement) or, upon at least 30 days' prior written notice of
a proposed change to the Administrator, at any other locations in jurisdictions
where all actions reasonably requested by the Administrator to protect and
perfect the interest of the Issuer in the Receivables and related items
(including the Pool Assets) have been taken and completed. The Servicer and, to
the extent that it ceases to be the Servicer, CSS, also will (and will cause
each Originator to) maintain and implement administrative and operating
procedures (including an ability to recreate records evidencing Receivables and
related Contracts in the event of the destruction of the originals thereof), and
keep and maintain the Required Servicing Data and all other documents, books,
records, computer tapes and disks and other information reasonably necessary or
advisable for the collection of all Receivables (including records adequate to
permit the daily identification of each Receivable and all Collections of and
adjustments to each existing Receivable).
(c) Performance and Compliance with Contracts and Credit and Collection
Policy. The Servicer and, to the extent that it ceases to be the Servicer, CSS,
shall (and shall cause each Originator to), at its expense, timely and fully
perform and comply with all material provisions, covenants and other promises
required to be observed by it under the Contracts related to the Receivables,
and timely and fully comply in all material respects with the Credit and
Collection Policy with regard to each Receivable and the related Contract.
(d) Extension or Amendment of Receivables. Except as provided in the
Agreement (including Section 4.2), the Servicer and, to the extent that it
ceases to be the Servicer, CSS, shall not extend (and shall not permit any
Originator to extend), the maturity or adjust the Outstanding Balance or
otherwise modify the terms of any Pool Receivable in any material respect, or
amend, modify or waive, in any material respect, any term or condition of any
related Contract (which term or condition relates to payments under, or the
enforcement of, such Contract).
(e) Change in Business or Credit and Collection Policy. The Servicer
and, to the extent that it ceases to be the Servicer, CSS, shall not make (and
shall not permit any Originator to make) any material change in the character of
its business or in any Credit and Collection Policy, or any change in any Credit
and Collection Policy that would have a Material Adverse Effect. The Servicer
and, to the extent that it ceases to be the Servicer, CSS, shall not make (and
shall not permit any Originator to make) any other material change in any Credit
and Collection Policy without giving prior written notice thereof to the
Administrator.
(f) Audits. The Servicer and, to the extent that it ceases to be the
Servicer, CSS, shall (and shall cause each Originator to), from time to time
during regular business hours as reasonably requested in advance (unless a
Termination Event or an Unmatured Termination Event exists) by the
Administrator, permit the Administrator, or its agents or representatives: (i)
to examine and make copies of and abstracts from all books, records and
documents (including computer tapes and disks) in its possession or under its
control relating to Receivables and the Related Security,
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including the related Contracts; (ii) to visit its offices and properties for
the purpose of examining such materials described in clause (i) above, and to
discuss matters relating to Receivables and the Related Security or its
performance hereunder or under the Contracts with any of its officers,
employees, agents or contractors having knowledge of such matters and (iii),
without limiting the clauses (i) and (ii) above, no more than once annually
(unless a Termination Event or an Unmatured Termination Event exists or there
shall be a material variance in the performance of the Receivables) to engage
certified public accountants or other auditors acceptable to the Servicer and
the Administrator to conduct, at the Servicer's expense, a review of the
Servicer's books and records with respect to such Receivables.
(g) Change in Lock-Box Banks, Lock-Box Accounts and Payment
Instructions to Obligors. The Servicer and, to the extent that it ceases to be
the Servicer, CSS, shall not (and shall not permit any Originator to) add or
terminate any bank as a Lock-Box Bank or any account as a Lock-Box Account from
those listed in Schedule II to the Agreement, or make any change in its
instructions to Obligors regarding payments to be made to the Servicer or any
Lock-Box Account (or related post office box), unless the Administrator shall
have consented thereto in writing and the Administrator shall have received
copies of all agreements and documents (including Lock-Box Agreements) that it
may request in connection therewith.
(h) Deposits to Lock-Box Accounts. The Servicer shall: (i) instruct all
Obligors to make payments of all Receivables to one or more Lock-Box Accounts or
to post office boxes to which only Lock-Box Banks have access (and shall
instruct the Lock-Box Banks to cause all items and amounts relating to such
Receivables received in such post office boxes to be removed and deposited into
a Lock-Box Account on a daily basis); and (ii) deposit, or cause to be
deposited, any Collections received by it into Lock-Box Accounts not later than
two Business Days after receipt thereof. Each Lock-Box Account (other than
Lock-Box Accounts that solely receive Collections not denominated in United
States dollars) shall at all times on and after the initial purchase by the
Issuer hereunder be subject to a Lock-Box Agreement.
(i) Marking of Records. At its expense, the Servicer shall mark its
master data processing records relating to Pool Receivables and related
Contracts, including with a legend evidencing that the undivided percentage
ownership interests with regard to the Purchased Interest related to such
Receivables and related Contracts have been sold in accordance with the
Agreement.
(j) Reporting Requirements. CSS shall provide to the Administrator (in
multiple copies, if requested by the Administrator) the following:
(i) as soon as available and in any event within 50 days after
the end of the first three quarters of each fiscal year of CSS, balance
sheets of CSS and its consolidated Subsidiaries as of the end of such
quarter and statements of income, retained earnings and cash flow of
CSS and its consolidated Subsidiaries for the period commencing at the
end of the previous fiscal year and ending with the end of such
quarter, certified by the chief financial officer or Vice-President of
Finance of such Person;
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(ii) as soon as available and in any event within 105 days
after the end of each fiscal year of such Person, a copy of the annual
report for such year for such Person and its consolidated Subsidiaries,
containing financial statements for such year audited by independent
certified public accountants of nationally recognized standing;
(iii) as to the Servicer only, as soon as available and in any
event not later than two Business Days prior to the Settlement Date, an
Information Package as of the most recently completed calendar month
or, if in the opinion of the Administrator reasonable grounds for
insecurity exist with respect to the collectibility of the Pool
Receivables or with respect to the Seller or Servicer's performance or
ability to perform its obligations under the Agreement, within six
Business Days of a request by the Administrator, an Information Package
for such periods as is specified by the Administrator (but in no event
more frequently than weekly);
(iv) as soon as possible and in any event within five Business
Days after becoming aware of the occurrence of each Termination Event
or Unmatured Termination Event, a statement of the chief financial
officer of CSS setting forth details of such Termination Event or
Unmatured Termination Event and the action that such Person has taken
and proposes to take with respect thereto;
(v) promptly after the sending or filing thereof, copies of
all reports that CSS sends to its stockholders, and copies of all
reports and registration statements that CSS or any Subsidiary files
with the Securities and Exchange Commission; provided, that any filings
with the Securities and Exchange Commission that have been granted
"confidential" treatment shall be provided promptly after such filings
have become publicly available;
(vi) promptly after the filing or receiving thereof, copies of
all reports and notices that CSS or any of its Affiliate files under
ERISA with the Internal Revenue Service, the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or that such Person or any
of its Affiliates receives from any of the foregoing or from any
multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA)
to which such Person or any of its Affiliate is or was, within the
preceding five years, a contributing employer, in each case in respect
of the assessment of withdrawal liability or an event or condition that
could, in the aggregate, result in the imposition of liability on CSS
and/or any such Affiliate which liability would be reasonably likely to
have a Material Adverse Effect;
(vii) at least thirty days before any change in CSS's or any
Originator's name or any other change requiring the amendment of UCC
financing statements, a notice setting forth such changes and the
effective date thereof;
(viii) promptly after CSS obtains knowledge thereof, notice of
any: (A) litigation, investigation or proceeding that may exist at any
time between CSS or any of its Subsidiaries and any Governmental
Authority that, if not cured or if adversely determined, as the case
may be, would have a Material Adverse Effect; (B) litigation or
proceeding adversely
IV-8
affecting such Person or any of its Subsidiaries in which the amount
involved is not covered by insurance or in which injunctive or similar
relief is sought and that, if not cured or if adversely determined, as
the case may be, would have a Material Adverse Effect; or (C)
litigation or proceeding relating to any Transaction Document;
(ix) promptly after becoming aware of the occurrence thereof,
notice of a material adverse change in the business, operations,
property or financial or other condition of CSS or any of its
Subsidiaries; and
(x) such other information respecting the Receivables or the
condition or operations, financial or otherwise, of CSS or any of its
Affiliates as the Administrator may from time to time reasonably
request.
3. Separate Existence. Each of the Seller and CSS hereby acknowledges
that the Purchasers, the Issuer and the Administrator are entering into the
transactions contemplated by this Agreement and the other Transaction Documents
in reliance upon the Seller's identity as a legal entity separate from CSS and
its Affiliates. Therefore, from and after the date hereof, each of the Seller
and CSS shall take all steps specifically required by the Agreement or
reasonably required by the Administrator to continue the Seller's identity as a
separate legal entity and to make it apparent to third Persons that the Seller
is an entity with assets and liabilities distinct from those of CSS and any
other Person, and is not a division of CSS, its Affiliates or any other Person.
Without limiting the generality of the foregoing and in addition to and
consistent with the other covenants set forth herein, each of the Seller and CSS
shall take such actions as shall be required in order that:
(a) The Seller will be a limited purpose limited liability
company whose primary activities are restricted in its limited
liability company agreement to: (i) purchasing or otherwise acquiring
from the Originators (or their Affiliates), owning, holding, granting
security interests or selling interests in Pool Assets (or other
receivables originated by any Originator or its Affiliates, and certain
related assets), (ii) entering into agreements for the selling and
servicing of the Receivables Pool (or other receivables pools
originated by any Originator or its Affiliates), and (iii) conducting
such other activities as it deems necessary or appropriate to carry out
its primary activities;
(b) The Seller shall not engage in any business or activity,
or incur any indebtedness or liability, other than as expressly
permitted by the Transaction Documents;
(c) Not less than one member of the Seller's Members (the
"Independent Member") shall be an individual who is not a direct,
indirect or beneficial stockholder, officer, director, employee,
affiliate, associate or supplier of CSS or any of its Affiliates. The
limited liability company agreement of the Seller shall provide that:
(i) the Seller's Members shall not approve, or take any other action to
cause the filing of, a voluntary bankruptcy petition with respect to
the Seller unless the Independent Member shall approve the taking of
such action in writing before the taking of such action, and (ii) such
provision cannot be amended without the prior written consent of the
Independent Member;
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(d) The Independent Member shall not at any time serve as a
trustee in bankruptcy for the Seller, CSS or any Affiliate thereof;
(e) Any employee, consultant or agent of the Seller will be
compensated from the Seller's funds for services provided to the
Seller. The Seller will not engage any agents other than its attorneys,
auditors and other professionals, and a servicer and any other agent
contemplated by the Transaction Documents for the Receivables Pool,
which servicer will be fully compensated for its services by payment of
the Servicing Fee, and a manager, which manager will be fully
compensated from the Seller's funds;
(f) The Seller will contract with the Servicer to perform for
the Seller all operations required on a daily basis to service the
Receivables Pool. The Seller will pay the Servicer the Servicing Fee
pursuant hereto. The Seller will not incur any material indirect or
overhead expenses for items shared with CSS (or any other Affiliate
thereof) that are not reflected in the Servicing Fee. To the extent, if
any, that the Seller (or any Affiliate thereof) shares items of
expenses not reflected in the Servicing Fee or the manager's fee, such
as legal, auditing and other professional services, such expenses will
be allocated to the extent practical on the basis of actual use or the
value of services rendered, and otherwise on a basis reasonably related
to the actual use or the value of services rendered; it being
understood that CSS shall pay all expenses relating to the preparation,
negotiation, execution and delivery of the Transaction Documents,
including legal, agency and other fees;
(g) The Seller's operating expenses will not be paid by CSS or
any other Affiliate thereof;
(h) All of the Seller's business correspondence and other
communications shall be conducted in the Seller's own name and on its
own separate stationery;
(i) The Seller's books and records will be maintained
separately from those of CSS and any other Affiliate thereof;
(j) All financial statements of CSS or any Affiliate thereof
that are consolidated to include Seller will contain detailed notes
clearly stating that: (i) a special purpose limited liability company
exists as a Subsidiary of CSS, and (ii) each Originator has sold
receivables and other related assets to such special purpose Subsidiary
that, in turn, has obtained financing based on undivided interests
therein to certain financial institutions and other entities;
(k) The Seller's assets will be maintained in a manner that
facilitates their identification and segregation from those of CSS or
any Affiliate thereof;
(l) The Seller will strictly observe organizational
formalities in its dealings with CSS or any Affiliate thereof, and
funds or other assets of the Seller will not be commingled with those
of CSS or any Affiliate thereof except as permitted by the Agreement in
connection
IV-10
with servicing the Pool Receivables. The Seller shall not maintain
joint bank accounts or other depository accounts to which CSS or any
Affiliate thereof has independent access. Except in connection with the
policies issued with respect to the Insured Receivables, the Seller is
not named, and has not entered into any agreement to be named, directly
or indirectly, as a direct or contingent beneficiary or loss payee on
any insurance policy with respect to any loss relating to the property
of CSS or any Subsidiary or other Affiliate of CSS other than Seller.
The Seller will pay to the appropriate Affiliate the marginal increase
or, in the absence of such increase, the market amount of its portion
of the premium payable with respect to any insurance policy that covers
the Seller and such Affiliate;
(m) The Seller will maintain arm's-length relationships with
CSS (and any Affiliate thereof). Any Person that renders or otherwise
furnishes services to the Seller will be compensated by the Seller at
market rates for such services it renders or otherwise furnishes to the
Seller. Neither the Seller nor CSS will be or will hold itself out to
be responsible for the debts of the other or the decisions or actions
respecting the daily business and affairs of the other. The Seller and
CSS will immediately correct any known misrepresentation with respect
to the foregoing, and they will not operate or purport to operate as an
integrated single economic unit with respect to each other or in their
dealing with any other entity; and
(n) CSS shall not pay the salaries of Seller's employees, if
any.
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EXHIBIT V
TERMINATION EVENTS
Each of the following shall be a "Termination Event":
(a)(i) the Seller, CSS, any Originator or the Servicer (if CSS or any
of its Affiliates) shall fail to perform or observe any term, covenant or
agreement under the Agreement or any other Transaction Document and, except as
otherwise provided herein, such failure shall continue for thirty days after
knowledge or notice thereof, (ii) the Seller or the Servicer shall fail to make
when due any payment or deposit to be made by it under the Agreement and such
failure shall continue unremedied for two (2) Business Days or (iii) CSS shall
resign as Servicer, and no successor Servicer reasonably satisfactory to the
Administrator shall have been appointed;
(b) CSS (or any Affiliate thereof) shall fail to transfer to any
successor Servicer when required any rights pursuant to the Agreement that CSS
(or such Affiliate) then has as Servicer;
(c) any representation or warranty made or deemed made by the Seller,
CSS or any Originator (or any of their respective officers) under or in
connection with the Agreement or any other Transaction Document, or any
information or report delivered by the Seller, CSS or any Originator or the
Servicer pursuant to the Agreement or any other Transaction Document, shall
prove to have been incorrect or untrue in any material respect when made or
deemed made or delivered, and shall remain incorrect or untrue for 30 days after
notice to the Seller or the Servicer of such inaccuracy;
(d) the Seller or the Servicer shall fail to deliver the Information
Package pursuant to the Agreement, and such failure shall remain unremedied for
two Business Days;
(e) the Agreement or any purchase or reinvestment pursuant to the
Agreement shall for any reason: (i) cease to create, or the Purchased Interest
shall for any reason cease to be, a valid and enforceable perfected undivided
percentage ownership or security interest to the extent of the Purchased
Interest in each Pool Receivable, the Related Security and Collections with
respect thereto, free and clear of any Adverse Claim, or (ii) cease to create
with respect to the Pool Assets, or the interest of the Issuer with respect to
such Pool Assets shall cease to be, a valid and enforceable first priority
perfected security interest, free and clear of any Adverse Claim,
(f) the Seller, CSS or any Originator 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 the Seller, CSS
or any Originator 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, custodian or other
V-1
similar official for it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a period of 60
days, or any of the actions sought in such proceeding (including the entry of an
order for relief against, 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 the Seller, CSS or any Originator shall take any corporate
action to authorize any of the actions set forth above in this paragraph;
(g)(i) the (A) Default Ratio shall exceed 7.25% or (B) for any of the
month of September, October, November and December the Delinquency Ratio shall
exceed 4.8% or (ii) the average for three consecutive calendar months of: (A)
the Default Ratio shall exceed 4.65%, or (B) the Dilution Ratio shall exceed
5.0% or (iii) the average Delinquency Ratio over the months of September,
October, November and December shall exceed 4.8%.
(h) a Change in Control shall occur,
(i) at any time (i) the sum of (A) the Capital plus (B) the Total
Reserves, exceeds (ii) the sum of (A) the Net Receivables Pool Balance at such
time plus (B) the Issuer's Share of the amount of Collections then on deposit in
the Lock-Box Accounts (other than amounts set aside therein representing
Discount and fees), and such circumstance shall not have been cured within five
(5) Business Days,
(j) (i) CSS or any of its Subsidiaries shall fail to pay any principal
of or premium or interest on any of its Debt that is outstanding in a principal
amount of at least $2,000,000 in the aggregate when the same becomes due and
payable (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, mortgage, indenture or instrument
relating to such Debt (and shall have not been waived); or (ii) any other event
shall occur or condition shall exist under any agreement, mortgage, indenture or
instrument relating to any such Debt and shall continue after the applicable
grace period, if any, specified in such agreement, mortgage, indenture or
instrument (and shall have not been waived), if, in either case: (a) the effect
of such non-payment, event or condition is to give the applicable debtholders
the right (whether acted upon or not) to accelerate the maturity of such Debt,
or (b) any such Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), redeemed,
purchased or defeased, or an offer to repay, redeem, purchase or defease such
Debt shall be required to be made, in each case before the stated maturity
thereof;
(k) either: (i) a contribution failure shall occur with respect to any
Benefit Plan sufficient to give rise to a lien under Section 302(f) of ERISA,
(ii) the Internal Revenue Service shall file a notice of lien asserting a claim
or claims pursuant to the Internal Revenue Code with regard to any of the assets
of Seller, any Originator, CSS or any ERISA Affiliate and such lien shall have
been filed and not released within 10 days, or (iii) the Pension Benefit
Guaranty Corporation shall, or shall indicate its intention in writing to the
Seller, any Originator, CSS or any ERISA Affiliate to, either file a notice of
lien asserting a claim pursuant to ERISA with regard to any assets of the
Seller, any
V-2
Originator, CSS or any ERISA Affiliate or terminate any Benefit Plan that has
unfunded benefit liabilities, or any steps shall have been taken to terminate
any Benefit Plan subject to Title IV of ERISA so as to result in any liability
and such lien shall have been filed and not released within 10 days.
V-3