1
EXHIBIT 99.3
U.S. $200,000,000
TRADE RECEIVABLES
PURCHASE AND SALE AGREEMENT
Dated as of February 28, 1989
As AMENDED and RESTATED as of October 1, 1991
As FURTHER AMENDED and RESTATED as of March 9, 2001
Among
THE DETROIT EDISON COMPANY
as Seller
and
CORPORATE ASSET FUNDING COMPANY, INC.
and
CITIBANK, N.A.
and
CITICORP NORTH AMERICA, INC.
Individually and as Agent
2
TABLE OF CONTENTS
Section Page
- ------- ----
PRELIMINARY STATEMENTS. . . . . . . . . . . . . . . . . . 1
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms . . . . . . . . . 1
Adverse Claim . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . 2
Affiliated Obligor . . . . . . . . . . . . . . . 2
Agent's Account . . . . . . . . . . . . . . . . . 2
Alternate Base Rate . . . . . . . . . . . . . . . 2
Assessment Rate . . . . . . . . . . . . . . . . . 2
Assignee Rate . . . . . . . . . . . . . . . . . . 3
Average Maturity . . . . . . . . . . . . . . . . 4
Business Day . . . . . . . . . . . . . . . . . . 4
Capital . . . . . . . . . . . . . . . . . . . . . 4
CD Reserve Percentage . . . . . . . . . . . . . . 4
Certificate . . . . . . . . . . . . . . . . . . . 5
Citibank Agreement . . . . . . . . . . . . . . . 5
Collection Agent . . . . . . . . . . . . . . . . 5
Collection Agent Fee . . . . . . . . . . . . . . 5
Collection Agent Fee Reserve . . . . . . . . . . 5
Collections . . . . . . . . . . . . . . . . . . . 5
Concentration Account . . . . . . . . . . . . . . 5
Concentration Limit . . . . . . . . . . . . . . . 5
Contract . . . . . . . . . . . . . . . . . . . . 6
Credit and Collection Policy . . . . . . . . . . 6
Debt . . . . . . . . . . . . . . . . . . . . . . 6
Default Ratio . . . . . . . . . . . . . . . . . . 6
Defaulted Receivable . . . . . . . . . . . . . . 6
Default-to-Delinquency Ratio . . . . . . . . . . 7
Delinquency Ratio . . . . . . . . . . . . . . . . 7
Delinquent Receivable . . . . . . . . . . . . . . 7
Designated Account . . . . . . . . . . . . . . . 7
Designated Obligor . . . . . . . . . . . . . . . 7
Eligible Asset . . . . . . . . . . . . . . . . . 7
Eligible Receivable . . . . . . . . . . . . . . . 8
ERISA . . . . . . . . . . . . . . . . . . . . . . 10
Eurocurrency Liabilities . . . . . . . . . . . . 10
Eurodollar Rate . . . . . . . . . . . . . . . . . 10
Eurodollar Rate Reserve Percentage . . . . . . . 10
Event of Investment Ineligibility . . . . . . . . 10
i
3
Page
----
Event of Purchase Ineligibility . . . . . . . . . 10
Facility . . . . . . . . . . . . . . . . . . . . 10
Facility Termination Date . . . . . . . . . . . . 11
Fixed Period . . . . . . . . . . . . . . . . . . 11
Fixed Rate . . . . . . . . . . . . . . . . . . . 12
Investor . . . . . . . . . . . . . . . . . . . . 14
Investor Rate . . . . . . . . . . . . . . . . . . 14
Investor Report . . . . . . . . . . . . . . . . . 14
Liquidation Day . . . . . . . . . . . . . . . . . 15
Liquidation Fee . . . . . . . . . . . . . . . . . 15
Liquidation Yield . . . . . . . . . . . . . . . . 15
Loss Percentage . . . . . . . . . . . . . . . . . 15
Loss Reserve . . . . . . . . . . . . . . . . . . 15
Mortgage . . . . . . . . . . . . . . . . . . . . 16
Net Receivables Pool Balance . . . . . . . . . . 16
Obligor . . . . . . . . . . . . . . . . . . . . . 16
Origination Fee . . . . . . . . . . . . . . . . . 16
Original Agreement. . . . . . . . . . . . . . . . 16
Outstanding Balance . . . . . . . . . . . . . . . 16
Owner . . . . . . . . . . . . . . . . . . . . . . 16
Person . . . . . . . . . . . . . . . . . . . . . 16
Pool Receivable . . . . . . . . . . . . . . . . . 16
Provisional Liquidation Day . . . . . . . . . . . 16
Purchase . . . . . . . . . . . . . . . . . . . . 16
Purchase Limit . . . . . . . . . . . . . . . . . 17
Receivable . . . . . . . . . . . . . . . . . . . 17
Receivables Pool . . . . . . . . . . . . . . . . 17
Reinvestment Termination Date . . . . . . . . . . 17
Related Security . . . . . . . . . . . . . . . . 17
Settlement Period . . . . . . . . . . . . . . . . 17
Special Account . . . . . . . . . . . . . . . . . 18
Special Account Bank . . . . . . . . . . . . . . 18
Tariff . . . . . . . . . . . . . . . . . . . . . 18
Termination Date . . . . . . . . . . . . . . . . 18
UCC . . . . . . . . . . . . . . . . . . . . . . . 18
Yield . . . . . . . . . . . . . . . . . . . . . . 18
Yield Reserve . . . . . . . . . . . . . . . . . . 19
SECTION 1.02. Other Terms . . . . . . . . . . . . . . . . 19
SECTION 1.03. Computation of Time Periods . . . . . . . . 19
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Facility . . . . . . . . . . . . . . . . . 20
SECTION 2.02. Making Purchases . . . . . . . . . . . . . 20
SECTION 2.03. Termination or Reduction of the Purchase
Limit . . . . . . . . . . . . . . . . . . . . . . 20
ii
4
Page
----
SECTION 2.04. Eligible Asset . . . . . . . . . . . . . . 21
SECTION 2.05. Non-Liquidation Settlement Procedures . . . 21
SECTION 2.06. Liquidation Settlement Procedures . . . . . 22
SECTION 2.07. General Settlement Procedures . . . . . . . 23
SECTION 2.08. Payments and Computations, Etc . . . . . . 24
SECTION 2.09. Dividing or Combining of Eligible
Assets . . . . . . . . . . . . . . . . . . . . . 24
SECTION 2.10. Fees . . . . . . . . . . . . . . . . . . . 25
SECTION 2.11. Increased Costs . . . . . . . . . . . . . . 26
SECTION 2.12. Additional Yield on Eligible Assets
Bearing a Eurodollar Rate . . . . . . . . . . . . 27
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Purchase
. . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 3.02. Conditions Precedent to All Purchases
and Reinvestments . . . . . . . . . . . . . . . . 29
SECTION 3.03. Conditions Subsequent to Initial
Purchase . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the
Seller . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.01. Affirmative Covenants of the Seller . . . . 33
SECTION 5.02. Reporting Requirements of the Seller . . . 35
SECTION 5.03. Negative Covenants of the Seller . . . . . 36
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Collection Agent . . . . . . 37
SECTION 6.02. Duties of Collection Agent . . . . . . . . 37
SECTION 6.03. Rights of the Agent . . . . . . . . . . . . 39
SECTION 6.04. Responsibilities of the Seller . . . . . . 39
SECTION 6.05. Further Action Evidencing Purchases . . . . 40
ARTICLE VII
EVENTS OF INVESTMENT INELIGIBILITY
iii
5
Page
----
SECTION 7.01. Events of Investment Ineligibility . . . . 40
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action . . . . . . . . . 43
SECTION 8.02. Agent's Reliance, Etc. . . . . . . . . . . 43
SECTION 8.03. CNA and Affiliates . . . . . . . . . . . . 44
SECTION 8.04. Investor's Purchase Decision . . . . . . . 44
ARTICLE IX
ASSIGNMENT OF ELIGIBLE ASSETS
SECTION 9.01. Assignability . . . . . . . . . . . . . . . 44
SECTION 9.02. Authorization of Agent . . . . . . . . . . 45
ARTICLE X
INDEMNIFICATION
SECTION 10.01. Indemnities by the Seller . . . . . . . . 45
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments, Etc. . . . . . . . . . . . . 47
SECTION 11.02. Notices, Etc. . . . . . . . . . . . . . . 47
SECTION 11.03. No Waiver; Remedies . . . . . . . . . . . 47
SECTION 11.04. Binding Effect; Assignability . . . . . . 48
SECTION 11.05. Governing Law . . . . . . . . . . . . . . 48
SECTION 11.06. Costs, Expenses and Taxes . . . . . . . . 48
SECTION 11.07. No Proceedings . . . . . . . . . . . . . . 49
SECTION 11.08. Confidentiality . . . . . . . . . . . . . 49
SECTION 11.09. Execution in Counterparts . . . . . . . . 50
iv
6
LIST OF EXHIBITS
EXHIBIT A Form of Assignment
EXHIBIT B Form of Certificate
EXHIBIT C Form of Investor Report
EXHIBIT D Form of Opinion of Leon S. Cohan, General Counsel
for the Seller
EXHIBIT E Form of Notice of Purchase for a Fixed Period at a
Fixed Rate
SCHEDULE I List of Offices of the Seller where Records are
Kept
SCHEDULE II List of Special Account Banks
SCHEDULE III Description of Credit and Collection Policy
SCHEDULE IV Form(s) of Contracts
v
7
AMENDED AND RESTATED
TRADE RECEIVABLES
PURCHASE AND SALE AGREEMENT
Dated as of February 28, 1989
As AMENDED and RESTATED as of October 1, 1991
As FURTHER AMENDED and RESTATED as of March 9, 2001
THE DETROIT EDISON COMPANY, a Michigan corporation (the
"Seller"), CORPORATE ASSET FUNDING COMPANY, INC., a Delaware corporation (the
"Investor"), CITIBANK, N.A., a national banking association ("Citibank"), and
CITICORP NORTH AMERICA, INC., a Delaware corporation ("CNAI"), individually and
as agent for itself, the Owner and Citibank (the "Agent"), agree as follows:
PRELIMINARY STATEMENTS. (1) Certain terms which are
capitalized and used throughout this Agreement (in addition to those defined
above) are defined in Article I of this Agreement.
(2) The Seller has, and expects to have, Pool Receivables in
which the Seller intends to sell interests referred to herein as Eligible
Assets.
(3) The Investor desires to purchase Eligible Assets from the
Seller.
(4) In consideration of the reinvestment in Pool Receivables
of daily Collections (other than with regard to accrued Yield and Collection
Agent Fee) attributable to an Eligible Asset, the Seller will sell to the Owner
of such Eligible Asset additional interests in the Pool Receivables as part of
such Eligible Asset until such reinvestment is terminated. It is intended that
such daily reinvestment of Collections be effected by an automatic daily
adjustment to the Owner's Eligible Assets.
(5) CNAI has been requested and is willing to act as Agent.
(6) The Act and the Financing Order have become effective and
the Securitization Bonds have been issued, the effect of which is to require
several changes to the Original Agreement.
(7) This Agreement is an amendment and restatement of the
Trade Receivables Purchase and Sale Agreement, dated as of February 28, 1989, as
amended as of February 16, 1990, August 3,
8
1990 and June 14, 1991, as amended and restated as of October 1, 1991, and
further amended from time to time from February 28, 1994 through January 25,
2001, among the Seller, the Investor, Citibank and CNAI (the "Original
Agreement").
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Act" means the Michigan Customer Choice and Electric
Reliability Act, Enrolled Senate Bill No. 937, 2000 PA 141 and Enrolled
Senate Bill No. 1253, 2000 PA142, each enacted June 5, 2000 and shall
also include all rules, regulations and orders promulgated thereunder
or related thereto issued from time to time.
"Adjustment Request" has the meaning assigned to that term in
the Servicing Agreement and relates to and sets forth the recalculation
and adjustment of the SB Charges.
"Adverse Claim" means a lien, security interest, charge or
encumbrance, or other right or claim of any Person.
"Affiliate" when used with respect to a Person means any other
Person controlling, controlled by or under common control with such
Person.
"Affiliated Obligor" means any Obligor which is an Affiliate
of another Obligor.
"Agent's Account" means the special account (account number
4051-7549) of the Agent maintained at the office of Citibank at 399
Park Avenue, New York, New York.
"Alternate Base Rate" means a fluctuating interest rate per
annum as shall be in effect from time to time, which rate per annum
shall at all times be equal to the higher of:
(a) the rate of interest announced publicly by
Citibank in New York, New York, from time to time as
Citibank's base rate; or
2
9
(b) 1/2 of one percent above the latest three-week
moving average of secondary market morning offering rates in
the United States for three-month certificates of deposit of
major United States money market banks, such three-week moving
average being determined weekly by Citibank on the basis of
such rates reported by certificate of deposit dealers to and
published by the Federal Reserve Bank of New York or, if such
publication shall be suspended or terminated, on the basis of
quotations for such rates received by Citibank from three New
York certificate of deposit dealers of recognized standing, in
either case adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next higher 1/4
of one percent.
"Assessment Rate" for any Fixed Period means the annual
assessment rate per annum estimated by Citibank on the Business Day
immediately preceding the first day of such Fixed Period for
determining the then current annual assessment payable by Citibank to
the Federal Deposit Insurance Corporation (or any successor) for such
Corporation's (or such successor's) insuring U.S. dollar deposits of
Citibank in the United States.
"Assignee Rate" for any Fixed Period for any Eligible Asset
means an interest rate per annum equal to
(x) the sum of:
(a) the rate per annum obtained by dividing (i) the
consensus bid rate determined by Citibank (rounded upward to
the nearest whole multiple of 1/100 of 1% per annum, if such
consensus bid rate is not such a multiple) for the bid rates
per annum, at 9:00 A.M. (New York City time) (or as soon
thereafter as practicable) on the Business Day immediately
preceding the first day of such Fixed Period of New York
certificate of deposit dealers of recognized standing selected
by Citibank for the purchase at face value of certificates of
deposit of Citibank in New York City in an amount
approximately equal or comparable to the Capital of such
Eligible Asset on such first day and with a maturity equal to
such Fixed Period, by (ii) a percentage equal to 100% minus
the CD Reserve Percentage for such Fixed Period, plus (b) the
Assessment Rate for such Fixed Period, plus
3
10
(b) the Assessment Rate for such Fixed Period, plus
(c) at any time that any of the Seller's long-term
public senior debt securities shall be rated less than BBB- by
Standard & Poor's Corporation or less than Baa3 by Moody's
Investors Service, Inc. (or, if none of the Seller's long-term
public senior debt securities are publicly rated at such time,
the Agent shall have determined, in its sole discretion, that
any of such securities would receive such ratings if they were
publicly rated), a rate of 1% per annum;
or,
(y) at the option of the Agent, upon notice to the Seller,
0.875% per annum above the Eurodollar Rate for such Fixed
Period plus the amount set forth in clause (x)(c) above;
provided, however, that (i) for any Fixed Period on or prior to the
first day on which the Owner shall have notified the Agent that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for the Owner to fund such
Eligible Asset at the Assignee Rate set forth above (and the Owner
shall not have subsequently notified the Agent that such circumstances
no longer exist), (ii) in the case of any Fixed Period of one to (and
including) 29 days, (iii) in the case of any Fixed Period as to which
the Agent does not receive notice by 12:00 noon (New York City time) on
the third Business Day preceding the first day of such Fixed Period,
that the related Eligible Asset will not be funded by issuance of
commercial paper, and (iv) in the case of any Fixed Period for an
Eligible Asset the Capital of which allocated to the Owner is less than
$500,000, the "Assignee Rate" for such Fixed Period shall be an
interest rate per annum equal to the Alternate Base Rate in effect on
the first day of such Fixed Period; provided further that the Agent and
the Seller may agree in writing from time to time upon a different
"Assignee Rate".
4
11
"Average Maturity" means, on any day, that period (expressed
in days) equal to the average maturity of the Pool Receivables as shall
be calculated by the Collection Agent as set forth in the most recent
Investor Report in accordance with the provisions thereof; provided,
however, that, if the Agent shall disagree with any such calculation,
the Agent may recalculate the Average Maturity for such day.
"Bond Trustee" means The Bank of New York, a New York banking
corporation.
"Business Day" means any day on which (i) banks are not
authorized or required to close in New York City and (ii) if this
definition of "Business Day" is utilized in connection with the
Eurodollar Rate, dealings are carried out in the London interbank
market.
"Capital" of any Eligible Asset means the original amount paid
to the Seller for such Eligible Asset at the time of its acquisition by
the Investor pursuant to Sections 2.01 and 2.02, reduced from time to
time by Collections received and distributed on account of such Capital
pursuant to Section 2.06; provided, however, that such Capital of such
Eligible Asset shall not be reduced by any distribution of any portion
of Collections if at any time such distribution is rescinded or must
otherwise be returned for any reason.
"CD Reserve Percentage" for any Fixed Period is that
percentage which is specified on the Business Day immediately preceding
the first day of such Fixed Period under regulations issued from time
to time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including,
but not limited to, any emergency, supplemental or other marginal
reserve requirement) for Citibank with respect to liabilities
consisting of or including (among other liabilities) U.S. dollar
non-personal time deposits in the United States each in an amount of
$100,000 or more and with a maturity equal to such Fixed Period.
"Certificate" means a certificate of assignment, by the Seller
to the Agent, in the form of Exhibit B hereto, evidencing each Eligible
Asset.
"Citibank Agreement" means the Trade Receivables Purchase and
Sale Agreement, dated as of February 28, 1989, among the Seller,
Citibank and CNAI, individually and as
5
12
Agent, as the same may, from time to time, be amended, modified,
supplemented or restated.
"Collection Agent" means at any time the Person (including the
Agent) then authorized pursuant to Article VI to service, administer
and collect Pool Receivables.
"Collection Agent Fee" has the meaning assigned to that term
in Section 2.10.
"Collection Agent Fee Reserve" for any Eligible Asset at any
time means the unpaid Collection Agent Fee relating to such Eligible
Asset accrued to such time.
"Collections" means, with respect to any Pool Receivable all
cash collections and other cash proceeds of such Pool Receivable,
including, without limitation, all cash proceeds of Related Security
with respect to such Pool Receivable, and any Collection of such Pool
Receivable deemed to have been received pursuant to Section 2.07.
"Concentration Account" means the special account (account
number 1000-909620) of the Seller maintained at the office of Comerica
Bank at 500 Woodward Avenue, Detroit, MI 48226, or the special account
(account number 11028-23) of the Seller maintained at the office of
Bank One, Michigan at 611 Woodward, Detroit, MI 48226.
"Concentration Limit" for any Obligor means at any time an
amount equal to 4% of the Capital of all Eligible Assets, or such other
amount or percentage ("Special Concentration Limit") for any Obligor
designated by the Agent in a writing delivered to the Seller; provided,
however, that in the case of an Obligor with any Affiliated Obligor,
the Concentration Limit, the Receivables related thereto and the
Outstanding Balance thereof shall be calculated as if such Obligor and
such Affiliated Obligor are one Obligor; provided, however, that the
Agent may cancel any Special Concentration Limit upon three Business
Days' notice to the Seller.
"Contract" means (i) an agreement between the Seller and an
Obligor, in substantially the form of one of the forms of written
contract set forth in Schedule Iv hereto or otherwise approved by the
Agent, or in the case of an open account agreement, as evidenced by one
of the forms of invoices set forth in Schedule IV hereto or otherwise
approved by the Agent, pursuant to or under which such Obligor shall be
obligated to pay for merchandise, insurance or services from time to
time and (ii) the Tariff.
6
13
"CP Fixed Period Date" means, for any Eligible Asset, the date
of Purchase of such Eligible Asset and thereafter the last day of each
calendar month (or, if such day is not a Business Day, the immediately
succeeding Business Day) or any other day as shall have been agreed to
in writing by the Agent and the Seller prior to the first day of the
preceding Fixed Period for such Eligible Asset or, if there is no
preceding Fixed Period, prior to the first day of such Fixed Period.
"Credit and Collection Policy" means those credit and
collection policies and practices in effect on the date hereof relating
to Contracts and Receivables described in Schedule III hereto, as
modified in compliance with Section 5.03(c).
"Debt" means (i) indebtedness for borrowed money or for the
deferred purchase price of property or services, (ii) obligations as
lessee under leases which shall have been or should be, in accordance
with generally accepted accounting principles, recorded as capital
leases, (iii) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in
respect of, indebtedness or obligations of others of the kinds referred
to in clause (i) or (ii) above, and (iv) liabilities in respect of
unfunded vested benefits under plans covered by Title IV of ERISA. Debt
shall not include indebtedness under the Securitization Bonds.
"Default Ratio" means the ratio (expressed as a percentage)
computed as of the last day of each calendar month by dividing (i) the
aggregate Outstanding Balance of all Pool Receivables that were
Defaulted Receivables on such date or would have been Defaulted
Receivables on such date had they not been written off the books of the
Seller during such month by (ii) the aggregate Outstanding Balance of
all Pool Receivables on such date.
"Defaulted Receivable" means a Receivable: (i) as to which any
payment, or part thereof, remains unpaid for 69 days from the original
due date for such payment, (ii) as to which the Obligor thereof has
taken any action, or suffered any event to occur, of the type described
in Section 7.01(g), (iii) which, consistent with the Credit and
Collection Policy, would be written off the Seller's books as
uncollectible or (iv) as to which there is any failure by the Obligor
to timely and fully perform and comply with all
7
14
material provisions, covenants and other promises required to be
observed by it under any Contract related to the Receivable.
"Default-to-Delinquency Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each calendar month by
dividing (i) the aggregate Outstanding Balance of all Pool Receivables
that were Defaulted Receivables on such date or would have been
Defaulted Receivables on such date had they not been written off the
books of the Seller during such month by (ii) the aggregate Outstanding
Balance of all Pool Receivables that were Delinquent Receivables at the
end of such month.
"Delinquency Ratio" means the ratio (expressed as a
percentage) computed as of the last day of each calendar month by
dividing (i) the aggregate Outstanding Balance of all Pool Receivables
that were Delinquent Receivables at the end of such month by (ii) the
aggregate Outstanding Balance of all Pool Receivables on such date.
"Delinquent Receivable" means a Receivable:
(i) as to which any payment, or part thereof, remains
unpaid for 9 days from the original due date for such payment;
or
(ii) which, consistent with the Credit and Collection
Policy, would be classified as delinquent by the Seller.
"Designated Account" means an account in the name of, and
owned by, CNAI, as Agent, designated by the Agent for the purpose of
receiving Collections of Pool Receivables.
"Designated Obligor" means, at any time, all Obligors;
provided, however, that any Obligor shall cease to be a Designated
Obligor upon three Business Days' notice by the Agent to the Seller.
"Eligible Asset" means, at any time, an undivided percentage
ownership interest at such time in (i) all then outstanding Pool
Receivables arising prior to the time of the most recent computation or
recomputation of such undivided percentage interest pursuant to Section
2.04, (ii) all Related Security with respect to such Pool Receivables
and (iii) all Collections with respect to, and other proceeds of, such
Pool Receivables. Such undivided
8
15
percentage interest for such Eligible Asset shall be computed as
C + YR + LR + CAFR
------------------
NRPB
where:
C = the Capital of such Eligible Asset at the time of
such computation,
YR = the Yield Reserve of such Eligible Asset at the time
of such computation,
LR = the Loss Reserve of such Eligible Asset at the time
of such computation,
CAFR = the Collection Agent Fee Reserve of such Eligible
Asset at the time of such computation,
NRPB = the Net Receivables Pool Balance at the time of such
computation.
Each Eligible Asset shall be determined from time to time pursuant to
the provisions of Section 2.04.
"Eligible Receivable" means, at any time and with respect to
any Eligible Asset, a Receivable:
(i) the Obligor of which (A) is a United States
resident, (B) is not an Affiliate of any of the parties
hereto, and (C) is not the federal government or a federal
governmental subdivision or agency (except in the case of this
clause (C) for such Receivables as shall not, in the aggregate
for all federal governmental Obligors, have an Outstanding
Balance at such time in excess of $2,000,000);
(ii) the Obligor of which at the time of the initial
creation of an interest therein hereunder is a Designated
Obligor;
(iii) the Obligor of which at the time of the initial
creation of an interest therein hereunder is not the Obligor
of any Defaulted Receivables;
9
16
(iv) which at the time of the initial creation of an
interest therein hereunder is not a Defaulted Receivable;
(v) which, according to the Contract related thereto,
is required to be paid in full within 45 days of the original
billing date therefor;
(vi) which is an account receivable representing all
or part of the sales price of merchandise, insurance and
services within the meaning of Section 3(c)(5) of the
Investment Company Act of 1940, as amended;
(vii) a purchase of which with the proceeds of notes
would constitute a "current transaction" within the meaning of
Section 3(a)(3) of the Securities Act of 1933, as amended;
(viii) which is an "account" within the meaning of
Section 9-106 of the UCC of the State of Michigan;
(ix) which is denominated and payable only in United
States dollars in the United States;
(x) which (A) arises under a Contract which has been
duly authorized, (B) together with such Receivable, is in full
force and effect and constitutes the legal, valid and binding
obligation of the Obligor of such Receivable enforceable
against such Obligor in accordance with its terms, and (C) is
not subject to any dispute, offset, counterclaim or defense
whatsoever (except the discharge in bankruptcy of such
Obligor) unless the aggregate amount of all disputes, offsets,
counterclaims and defenses with respect to all Receivables
then in the Receivables Pool does not exceed $2,000,000;
(xi) which, together with the Contract related
thereto, does not contravene in any material respect any laws,
rules or regulations applicable thereto (including, without
limitation, laws, rules and regulations relating to truth in
lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and
privacy) and with respect to which no party to the Contract
related thereto is in violation of any such law, rule or
regulation in any material respect;
10
17
(xii) which (A) satisfies all applicable requirements
of the Credit and Collection Policy and (B) complies with such
other criteria and requirements (other than those relating to
the collectibility of such Receivable) as the Agent may from
time to time specify to the Seller upon 30 days' notice;
(xiii) which is free and clear of any Adverse Claim
except for the lien, if applicable, referred to in Section
4.01(h); and
(xiv) as to which, at or prior to the time of the
initial creation of an interest therein through a Purchase,
the Agent has not notified the Seller that the Agent has
determined, in its sole discretion, that such Receivable (or
class of Receivables) is not acceptable for purchase by the
Investor hereunder.
"ERISA" means the U.S. Employee Retirement Income Security Act
of 1974, as amended from time to time.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"Eurodollar Rate" means, for any Fixed Period, an interest
rate per annum equal to the rate per annum at which deposits in U.S.
dollars are offered by the principal office of Citibank, N.A. in
London, England to prime banks in the London interbank market at 11:00
A.M. (London time) two Business Days before the first day of such Fixed
Period in an amount substantially equal to the Capital associated with
such Fixed Period on such first day and for a period equal to such
Fixed Period.
"Eurodollar Rate Reserve Percentage" of any Owner for any
Fixed Period in respect of which Yield is computed by reference to the
Eurodollar Rate means the reserve percentage applicable two Business
Days before the first day of such Fixed Period under regulations issued
from time to time by the Board of Governors of the Federal Reserve
System (or any successor) (or if more than one such percentage shall be
applicable, the daily average of such percentages for those days in
such Fixed Period during which any such percentage shall be so
applicable) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal
reserve requirement) for such Owner with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities
11
18
(or with respect to any other category of liabilities that includes
deposits by reference to which the interest rate on Eurocurrency
Liabilities is determined) having a term equal to such Fixed Period.
"Event of Investment Ineligibility" has the meaning assigned
to that term in Section 7.01.
"Event of Purchase Ineligibility" means any failure to satisfy
the conditions set forth in Section 3.02(b)(iii) or (iv).
"Facility" means the willingness of the Investor to consider,
in its sole discretion pursuant to Article II, the purchase from the
Seller of undivided percentage interests in Pool Receivables by making
Purchases of Eligible Assets from time to time.
"Facility Termination Date" means the earlier of January 25,
2004 or the date of termination of the Facility pursuant to Section
2.03 or Section 7.01.
"Financing Order" means collectively, the orders of the MPSC
dated November 2, 2000 and January 4, 2001, issued in conjunction with
Case No. U-12478, captioned "In the matter of the application of The
Detroit Edison Company for a financing order.", as amended from time to
time.
"Fixed Period" means with respect to any Eligible Asset:
(a) in the case of any Fixed Period in respect of
which Yield is computed by reference to the Investor Rate
referred to in paragraph (a) of the definition of `Investor
Rate', each successive period commencing on each CP Fixed
Period Date for such Eligible Asset and ending on the next
succeeding CP Fixed Period Date for such Eligible Asset; and
(b) in the case of any Fixed Period in respect of
which Yield is computed by reference to the Assignee Rate,
each successive period of from one to and including 14 days,
or a period of 21, 30, 60, 90, or 180 days (or, if such
Assignee Rate is computed by reference to the Eurodollar Rate,
a period of one, two or three months), as the Seller shall
select and the Agent shall approve on notice by the Seller
received by the Agent (including notice by telephone,
confirmed in writing) not later than 11:00 A.M. (New York City
time)
12
19
on the day which occurs three Business Days before the first
day of such Fixed Period, each such Fixed Period for such
Eligible Asset to commence on the last day of the immediately
preceding Fixed Period for such Eligible Asset (or, if there
is no such Fixed Period, on the date of Purchase of such
Eligible Asset), except that if the Agent shall not have
received such notice or the Agent and the Seller shall not
have so mutually agreed before 11:00 A.M. (New York City time)
on such day, such Fixed Period shall be one day;
provided, that:
(i) Yield with respect to any Fixed Period at a Fixed
Rate shall be computed by reference to a monthly, quarterly,
or semi-annual interest period as the Seller may select and
the Agent shall approve on notice by the Seller received by
the Agent (including telephone, confirmed in writing) not
later then 11:00 A.M. on the day which occurs seven Business
Days before the first day of such Fixed Period;
(ii) any Fixed Period (other than of one day) which
would otherwise end on a day which is not a Business Day shall
be extended to the next succeeding Business Day, except that
if such Fixed Period relates to the Eurodollar Rate, and such
extension would cause the last day of such Fixed Period to
occur in the next succeeding month, the last day of such Fixed
Period shall occur on the immediately preceding Business Day;
(iii) in the case of Fixed Periods of one day for any
Eligible Asset, (a) if such Fixed Period is such Eligible
Asset's initial Fixed Period, such Fixed Period shall be the
day of the related Purchase; (b) any subsequently occurring
Fixed Period which is one day shall, if the immediately
preceding Fixed Period is more than one day, be the last day
of such immediately preceding Fixed Period, and, if the
immediately preceding Fixed Period is one day, be the day next
following such immediately preceding Fixed Period; and (c) if
such Fixed Period occurs on a day immediately preceding a day
which is not a Business Day, such Fixed Period shall be
extended to the next succeeding Business Day; and
(iv) in the case of any Fixed Period for such
Eligible Asset which commences before the Termination Date for
such Eligible Asset or the acceleration date
13
20
of any note the proceeds of which fund or maintain such
Eligible Asset and would otherwise end on a date occurring
after such Termination Date or such acceleration date, such
Fixed Period shall end on such Termination Date, or such
acceleration date, and the duration of each Fixed Period which
commences on or after the Termination Date for such Eligible
Asset or such acceleration date with respect to any note the
proceeds of which fund or maintain such Eligible Asset shall
be of such duration as shall be selected by the Agent.
"Fixed Rate" means for any Fixed Period the rate per annum
determined by the Agent for funding by the Owner of the Purchase or
maintenance of an Eligible Asset for such Fixed Period as agreed
between the Agent and the Seller; provided, however, if the rate as
agreed between the Agent and the Seller and the Owner with regard to
any Fixed Period for any Eligible Asset is a discount rate, the "Fixed
Rate" for such Fixed Period shall be the rate resulting from converting
such discount rate to an interest-bearing equivalent rate per annum.
The Seller understands that upon the agreement between the Seller and
Agent of a Fixed Rate for a Fixed Period, the Agent on behalf of the
Owner intends to enter into funding arrangements with third parties on
terms and conditions which could result in loss to the Owner if the
Capital with respect to such Fixed Period does not remain outstanding
at the Fixed Rate for the entire Fixed Period at the amount of Capital
paid to the Seller for such Eligible Asset at the time of its purchase.
Therefore, if (i) the Capital of such Eligible Asset paid to such
Seller with respect to such Eligible Asset at the time of its purchase
shall be reduced prior to the end of such Fixed Period or (ii) the
Termination Date for such Eligible Asset shall occur before the end of
such Fixed Period, the Seller shall indemnify and hold harmless the
Owner or the Agent for all losses, liabilities, costs and expenses
related thereto (including, but not limited to attorneys' fees and
expenses and the cost of interest rate swaps, collars, forward
agreements and futures contracts in connection with the Owner's funding
or maintenance of any Eligible Asset at a Fixed Rate) and shall pay two
(2) Business Days after the Fee Determination Date (as defined below),
to the Owner, as liquidated damages a fee equal to the product of
[CLA x (F-R)] x [1 - (1+R/f)-n]
----- -------------
f R/f
where:
14
21
CLA = Capital Liquidation Amount, as hereinafter defined.
F = Fixed Rate for such Eligible Asset for such Fixed
Period.
R = Redeployment Rate, as hereinafter defined.
f = Fixed Rate payment frequency per annum.
n = Number of interest payment periods remaining from Fee
Determination Date to end of Fixed Period.
The parties hereto acknowledge that the cost of any early termination
of any funding arrangement with third parties prior to the originally scheduled
termination date thereof, including, without limitation, interest rate swaps,
collars, forward agreement and futures contracts could result in a payment by
the Agent on behalf of the Owner to the third party providing such funding
arrangement. Any such breakage cost will be determined by such third party
providing such funding arrangement in its sole discretion, and such amount will
be included in the losses, liabilities, costs and expenses payable by the Seller
to the Owner or the Agent in connection with the occurrence of the events
described in the immediately preceding sentence or otherwise.
Redeployment Rate shall mean the rate of interest at which the Agent is
able to reinvest the Capital Liquidation Amount for a period comparable to the
period from the Fee Determination Date to the last day of such Fixed Period in
compliance with the Owner's investment policy. "Fee Determination Date" means
the date on which the Capital is not so maintained or the date on which an
amount of Capital of such Eligible Asset was paid. "Capital Liquidation Amount"
means, the total amount of Capital of such Eligible Asset not so maintained or
the total amount of Capital of such Eligible Asset paid. For purposes of this
definition of Fixed Rate, the Fixed Period shall be computed without regard to
clause (iv) of the definition of Fixed Period. The Agent's determination of the
Redeployment Rate shall be conclusive, absent manifest error. The
indemnification provided for herein shall be continuing and shall survive any
termination of the Agreement.
15
22
"Indenture" means that certain Indenture dated as of March ,
2001, between the Issuer and the Bond Trustee, as the same may, from
time to time, be amended, modified, supplemented or restated.
"Intercreditor Agreement" means that certain Intercreditor
Agreement dated March , 2001, among the Bond Trustee, the Seller (in
its capacities as the Seller under this Agreement and as the Servicer
under the Servicing Agreement), the Issuer, Citibank and the Agent, as
the same may from time to time, be amended, modified, supplemented or
restated.
"Investor" shall include Corporate Asset Funding Company, Inc.
and any successor or assign of the Investor that is a receivables
investment company which in the ordinary course of its business issues
commercial paper or other securities to fund its acquisition and
maintenance of receivables.
"Investor Rate" for any Fixed Period for any Eligible Asset
means:
(a) the per annum rate equivalent to the
weighted average of the per annum rates paid or
payable by the Owner from time to time as interest on
or otherwise (by means of interest rate hedges or
otherwise) in respect of those promissory notes
issued by the Owner that are allocated, in whole or
in part, by the Agent (on behalf of the Owner) to
fund the Purchase or maintenance of such Eligible
Asset during such Fixed Period, as determined by the
Agent (on behalf of the Owner) and reported to the
Seller and, if the Collection Agent is not the
Seller, the Collection Agent, which rates shall
reflect and give effect to the commissions of
placement agents and dealers in respect of such
promissory notes, to the extent such commissions are
allocated, in whole or in part, to such promissory
notes by the Agent (on behalf of the Owner); provided
that, if any component of such rate is a discount
rate, in calculating the `Investor Rate' for such
Fixed Period, the Agent shall for such component use
the rate resulting from converting such discount rate
to an interest-bearing equivalent rate per annum; and
16
23
(b) the rate equivalent to the Fixed Rate as
agreed between the Agent and the Seller; or
(c) if no Fixed Rate is agreed to between
the Agent and the Seller and such Owner is not able
to fund its Purchase or maintenance of such Eligible
Asset for such Fixed Period by issuing promissory
notes referred to in paragraph (a) above, a rate
equal to the Assignee Rate for such Fixed Period or
such other rate as the Agent and the Seller shall
agree to in writing;
provided that, if such Owner so requests and the Seller
consents thereto, the `Investor Rate' for any Fixed Period of
one day shall be the Assignee Rate for such Fixed Period.
"Investor Report" means a report, in substantially the form of
Exhibit C hereto, furnished by the Collection Agent to the Agent
pursuant to Section 2.07.
"Issuer" means The Detroit Edison Securitization Funding LLC,
a Michigan limited liability company.
"Liquidation Day" for any Eligible Asset means either (i) each
day during any Settlement Period for such Eligible Asset on which the
conditions set forth in Section 3.02 are not satisfied (or such failure
of conditions is not waived by the Agent), provided that such
conditions are also not satisfied (or such failure of conditions is not
waived by the Agent) on any succeeding day during such Settlement
Period, or (ii) each day which occurs on or after the Termination Date
for such Eligible Asset.
"Liquidation Fee" means, for each Eligible Asset for any Fixed
Period (computed without regard to clause (iv) of the definition of
"Fixed Period") during which any Liquidation Day or Termination Date
for such Eligible Asset occurs, the amount, if any, by which (i) the
additional Yield (calculated without taking into account any
Liquidation Fee) which would have accrued on the reductions of Capital
of such Eligible Asset during such Fixed Period (as so computed) if
such reductions had remained as Capital, exceeds (ii) the income, if
any, received by the Owner of such Eligible Asset from such Owner's
investing the proceeds of such reductions of Capital.
"Liquidation Yield" means, for any Eligible Asset at any date,
an amount equal to the product of (i) the Capital
17
24
of such Eligible Asset as at such date and (ii) the product of (a) the
Assignee Rate for such Eligible Asset for a Fixed Period deemed to
commence at such time for a period of 30 days and (b) a fraction having
as its numerator the Average Maturity (as in effect at such date) and
360 as its denominator.
"Loss Percentage" means, for any Eligible Asset at any date,
the greater of (i) three times the Default Ratio as of the last day of
the preceding month or (ii) 12%.
"Loss Reserve" means, for any Eligible Asset at any date, an
amount equal to
LP x (C)+ YR)
where:
LP = the Loss Percentage for such Eligible Asset at the
close of business of the Collection Agent on such
date,
C = the Capital of such Eligible Asset at the close of
business of the Collection Agent on such date,
YR = the Yield Reserve for such Eligible Asset at the
close of business of the Collection Agent on such
date.
"Mortgage" has the meaning assigned to that term in Section
4.01(h).
"MPSC" means the Michigan Public Service Commission.
"Net Receivables Pool Balance" means at any time the
Outstanding Balance of the Eligible Receivables in the Receivables Pool
at such time reduced by the sum of (i) the aggregate Outstanding
Balance of the Defaulted Receivables in the Receivables Pool at such
time and (ii) the aggregate amount by which the Outstanding Balance of
all Pool Receivables of each Obligor exceeds the Concentration Limit
for such Obligor at such time.
"Obligor" means a Person obligated to make payments pursuant
to a Contract.
18
25
"Original Agreement" means the Trade Receivables Purchase and
Sale Agreement dated as of February 28, 1989, as amended as of February
16, 1990, August 3, 1990 and June 14, 1991, as amended and restated as
of October 1, 1991, and further amended from time to time from February
28, 1994 through January 27, 2000, among the Seller, the Investor,
Citibank and CNAI.
"Outstanding Balance" of any Receivable at any time means the
then outstanding principal balance thereof.
"Owner" means the Investor and all other owners by assignment
or otherwise of an Eligible Asset and, to the extent of the undivided
interests so purchased, shall include any participants.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture or other entity.
"Pool Receivable" means a Receivable in the Receivables Pool.
"Provisional Liquidation Day" means any day which could be a
Liquidation Day but for the proviso in clause (i) of the definition of
"Liquidation Day".
"Purchase" means a purchase by the Investor of an Eligible
Asset from the Seller pursuant to Article II.
"Purchase Limit" means $200,000,000, as such amount may be
reduced pursuant to Section 2.03.
"Receivable" means the indebtedness (whether or not billed) of
any Obligor under a Contract arising from a sale by the Seller of
retail electric services, and includes the right to payment of any
interest or finance charges and other obligations of such Obligor with
respect thereto, but excludes the SB Charges.
"Receivables Pool" means at any time the aggregation of each
then outstanding Receivable in respect of which the Obligor is a
Designated Obligor or, as to any Receivable in existence on such date,
was a Designated Obligor on the date of any Purchase or reinvestment
pursuant to Section 2.05.
"Reinvestment Termination Date" for any Eligible Asset means
that Business Day which the Seller designates or, if the conditions
precedent in Section 3.02 are not satisfied,
19
26
such Business Day which the Agent designates, as the Reinvestment
Termination Date for such Eligible Asset by notice to the Agent (if the
Seller so designates) or to the Seller (if the Agent so designates) at
least one Business Day prior to such Business Day.
"Related Security" means with respect to any Receivable:
(i) all of the Seller's interest in the merchandise
(including returned merchandise), if any, relating to the sale
which gave rise to such Receivable;
(ii) 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 financing statements signed by an Obligor describing
any collateral securing such Receivable;
(iii) all guarantees, insurance and other agreements
or arrangements of whatever character from time to time
supporting or securing payment of such Receivable, whether
pursuant to the Contract related to such Receivable or
otherwise; and
(iv) all deposit accounts into which Collections are
deposited.
"Sale Agreement" means the Securitization Property Sale
Agreement dated March 9, 2001, between the Seller, as the seller, and
the Issuer, as the purchaser, as the same may, from time to time, be
amended, modified, supplemented or restated.
"SB Charges" has the meaning assigned to that term in the Act
to securitization charges and which are permitted to be charged by the
Financing Order except that it will be used herein to refer to the
combined securitization bond charge and the securitization bond tax
charge as set forth in footnote 3 on Page 5 of the Financing Order
including, in the case of special contract customers, the portion of
the contract charges allocated to SB Charges, and, as used herein, SB
Charges shall include the revenues, collections, payments, money and
proceeds arising out of the SB Charges.
20
27
"Securitization Bonds" means that certain bond series
designated "The Detroit Edison Securitization Funding LLC
$1,750,000,000 Securitization Bonds, Series 2000-1" issued pursuant to
the Indenture.
"Securitization Property" has the meaning assigned to that
term in the Sale Agreement.
"Servicing Agreement" means the Securitization Property
Servicing Agreement dated March 9, 2001, between the Issuer and the
Seller, as servicer, as the same may, from time to time, be amended,
modified, supplemented or restated.
"Settlement Period" for any Eligible Asset means each period
commencing on the first day of each Fixed Period for such Eligible
Asset and ending on the last day of such Fixed Period or in the case of
a Fixed Period for a Fixed Rate on such other day as the Owner and the
Agent may mutually agree; and, on and after the Termination Date for
such Eligible Asset, such period (including, without limitation, a
daily period) as shall be selected from time to time by the Agent or,
in the absence of any selection, each period of thirty days from the
last day of the immediately preceding Settlement Period.
"Special Account" means an account maintained at a Special
Account Bank for the purpose of receiving Collections.
"Special Account Bank" means any of the banks holding one or
more Special Accounts.
"Tariff" means the tariff pursuant to which the Seller shall
provide service to certain Obligors from time to time and pursuant to
which such Obligors shall be obligated to pay for such service from
time to time.
"Termination Date" for any Eligible Asset means the earlier of
(i) the Reinvestment Termination Date for such Eligible Asset and (ii)
the Facility Termination Date.
"UCC" means the Uniform Commercial Code as from time to time
in effect in the specified jurisdiction.
"Yield" means:
(i) for each Eligible Asset for any Fixed Period to
the extent the Owner will be funding such
21
28
Eligible Asset on the first day of such Fixed Period through
the issuance of commercial paper or through the issuance of
notes at a Fixed Rate,
IR x C x ED + LF
---
360
(ii) for each Eligible Asset for any Fixed Period to
the extent the Owner will not be funding such Eligible Asset
on the first day of such Fixed Period through the issuance of
commercial paper or notes,
AR x C x ED + LF
---
360
where:
AR = the Assignee Rate for such Eligible Asset for such
Fixed Period.
C = the Capital of such Eligible Asset during such Fixed
Period.
IR = the Investor Rate for such Eligible Asset for such
Fixed Period.
ED = the actual number of days elapsed during (a) such
Fixed Period or (b) in the case of Fixed Period at a
Fixed Rate the fraction shall be adjusted to
correspond to the calculation of interest on any note
the proceeds of which fund or maintain the Capital of
such Eligible Asset.
LF = the Liquidation Fee, if any, for such Eligible Asset
for such Fixed Period;
provided, however, with respect to any Fixed Period in respect of which
Yield is computed by reference to a Fixed Rate, Yield shall be the
aggregate of all such computations for such Fixed Period for the
applicable monthly, quarterly, or semi-annual interest period as the
Seller may have selected and the Agent shall have approved; and
provided, further, that no provision of this Agreement or the
Certificate shall require the payment or permit the collection of Yield
in excess of the maximum permitted by applicable law; and provided,
further, that Yield for any Eligible Asset shall not be considered paid
by any distribution if at any time such distribution is rescinded
22
29
or must otherwise be returned for any reason; and provided, further,
that, without limiting the obligation of the Seller to pay the costs,
expenses, commissions, taxes, fees and other amounts specified in
Section 11.06 (the "Costs, Expenses and Taxes"), certain of the Costs,
Expenses and Taxes may, subject to the approval of the Seller and the
Agent, be added to, and included in, the Yield for any Eligible Asset.
"Yield Reserve" for any Eligible Asset at any time means the
sum of (i) the Liquidation Yield at such time for such Eligible Asset,
and (ii) the accrued and unpaid Yield for such Eligible Asset.
SECTION 1.02. Other Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles. All terms used in Article 9 of the UCC in the
State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.
SECTION 1.03. Computation of Time Periods. Unless otherwise
stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding".
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.01. Facility. On the terms and conditions
hereinafter set forth, the Investor may, in its sole discretion, make Purchases
from time to time during the period from the date hereof to the Facility
Termination Date. Under no circumstances shall the Investor make any Purchase
if, after giving effect to such Purchase, the aggregate outstanding Capital of
Eligible Assets, together with the aggregate outstanding "Capital" of "Eligible
Assets" under the Citibank Agreement, would exceed the Purchase Limit. The Owner
of each Eligible Asset shall, with the proceeds of Collections attributable to
such Eligible Asset, reinvest, pursuant to Section 2.05, in additional undivided
percentage interests in the Pool Receivables by marking an
23
30
appropriate readjustment of such Eligible Asset. Nothing in this Agreement shall
be deemed to be or construed as a commitment by the Investor (or CNAI or
Citibank) to purchase any Eligible Asset at any time.
SECTION 2.02. Making Purchases. Each Purchase shall be made on
at least three Business Days' notice (and in the case of a Fixed Period at a
Fixed Rate seven (7) Business Days' written notice) from the Seller to the
Agent. Each such notice of a Purchase for a Fixed Period at a Fixed Rate shall
be substantially in the form of Exhibit E hereto and shall be by telecopier,
telex or cable and confirmed in writing. Each such notice of a proposed Purchase
shall specify the desired amount (which shall not be less than $1,000,000), date
and duration of the initial Fixed Period for the Eligible Asset to be purchased.
The Investor shall promptly notify the Agent whether it has determined to make
such Purchase. The Agent shall promptly thereafter notify the Seller whether the
Investor has determined to make such Purchase and whether the desired duration
of the initial Fixed Period for the Eligible Asset to be purchased is
acceptable. On the date of each Purchase, the Investor shall, upon satisfaction
of the applicable conditions set forth in Article III, make available to the
Agent the amount of its Purchase by deposit of such amount in same day funds to
the Agent's Account, and, after receipt by the Agent of such funds, the Agent
will cause such funds to be made immediately available to the Seller at
Citibank's office at 399 Park Avenue, New York, New York. The Investor shall on
the date of each Purchase, and the Owner of each Eligible Asset shall on the
first day of each Fixed Period (other than the initial Fixed Period) for such
Eligible Asset, notify the Agent of the Investor Rate for such Fixed Period.
SECTION 2.03. Termination or Reduction of the Purchase Limit.
The Seller may, upon at least five Business Days' notice to the Agent, terminate
in whole or reduce in part the unused portion of the Purchase Limit; provided,
however, that each partial reduction shall be in an amount equal to $1,000,000
or an integral multiple thereof.
SECTION 2.04. Eligible Asset. (a) Each Eligible Asset shall be
initially computed as of the opening of business of the Collection Agent on the
date of Purchase of such Eligible Asset. Thereafter until the Termination Date
for such Eligible Asset, such Eligible Asset shall be automatically recomputed
as of the close of business of the Collection Agent on each day (other than a
Liquidation Day). Such Eligible Asset shall remain constant from the time as of
which any such computation or recomputation is made until the time as of which
the next such
24
31
recomputation, if any, shall be made. Any Eligible Asset, as computed as of the
day immediately preceding the Termination Date for such Eligible Asset, shall
remain constant at all times on and after such Termination Date. Such Eligible
Asset shall become zero at such time as the Owner of such Eligible Asset shall
have received the accrued Yield for such Eligible Asset and shall have recorded
the Capital of such Eligible Asset, and the Collection Agent shall have received
the accrued Collection Agent Fee for such Eligible Asset.
(b) If any Eligible Asset would otherwise be reduced on any
day on account of Receivables arising as or becoming Pool Receivables, the Owner
of such Eligible Asset may prevent such reduction by giving notice to the
Collection Agent, before the close of business of the Collection Agent on such
day, that such Eligible Asset's interest in such Receivables is to be limited so
as to prevent such reduction. If such notice is given for any day for any
Eligible Asset, the Receivables Pool for such Eligible Asset, and the Net
Receivables Pool Balance for such Eligible Asset, will include, with respect to
Receivables arising as or becoming Pool Receivables on such day, only such
number of such Receivables or such portion of such Receivables as shall cause
such Eligible Asset to remain constant, such Receivables or portion thereof
being included in the Receivables Pool for such Eligible Asset in the order of
the Seller's account numbers for such Receivables up to an aggregate amount so
as to cause such Eligible Asset to remain constant, and the remainder of such
Receivables or portion thereof shall be treated as Receivables arising on the
next succeeding Business Day.
SECTION 2.05. Non-Liquidation Settlement Procedures. On each
day (other than a Liquidation Day or a Provisional Liquidation Day) during each
Settlement Period for each Eligible Asset, the Collection Agent shall: (i) out
of Collections of Pool Receivables attributable to such Eligible Asset received
on such day, set aside and hold in trust for the Owner of such Eligible Asset an
amount equal to the Yield and Collection Agent Fee accrued through such day for
such Eligible Asset and not so previously set aside and (ii) reinvest the
remainder of such Collections, for the benefit of such Owner, by recomputation
of such Eligible Asset pursuant to Section 2.04 as of the end of such day and
the payment of such remainder to the Seller; provided, however, that, to the
extent that the Agent or any Owner shall be required for any reason to pay over
any amount of Collections which shall have been previously reinvested for the
account of such Owner pursuant hereto, such amount shall be deemed not to have
been so applied but rather to have been retained by the Seller and paid over for
the account of such Owner and, notwithstanding any provision hereof to the
contrary,
25
32
such Owner shall have a claim for such amount. On the last day of each
Settlement Period for each Eligible Asset, the Collection Agent shall deposit to
the Agent's Account for the account of the Owner of such Eligible Asset the
amounts set aside as described in clause (i) of the first sentence of this
Section 2.05. Upon receipt of such funds by the Agent, the Agent shall
distribute them to the Owner of such Eligible Asset in payment of the accrued
Yield for such Eligible Asset and to the Collection Agent in payment of the
accrued Collection Agent Fee payable with respect to such Eligible Asset. If
there shall be insufficient funds on deposit for the Agent to distribute funds
in payment in full of the aforementioned amounts, the Agent shall distribute
funds, first, in payment of the accrued Yield for such Eligible Asset, and
second, in payment of the accrued Collection Agent Fee payable with respect to
such Eligible Asset.
SECTION 2.06. Liquidation Settlement Procedures. On each
Liquidation Day and on each Provisional Liquidation Day during each Settlement
Period for each Eligible Asset, the Collection Agent shall set aside and hold in
trust for the Owner of such Eligible Asset the Collections of Pool Receivables
attributable to such Eligible Asset received on such Day. On the last day of
each Settlement Period for each Eligible Asset, the Collection Agent shall
deposit to the Agent's Account for the account of the Owner of such Eligible
Asset the amounts set aside pursuant to the preceding sentence but not to exceed
the sum of (i) the accrued Yield for such Eligible Asset, (ii) the Capital of
such Eligible Asset, (iii) the accrued Collection Agent Fee payable with respect
to such Eligible Asset and (iv) the aggregate amount of other amounts owed
hereunder by the Seller to the Owner of such Eligible Asset. Any amounts set
aside pursuant to the first sentence of this Section 2.06 and not required to be
deposited to the Agent's Account pursuant to the preceding sentence shall be
paid to the Seller by the Collection Agent; provided, however, that if amounts
are set aside pursuant to the first sentence of this Section 2.06 on any
Provisional Liquidation Day which is subsequently determined not to be a
Liquidation Day, such amounts shall be applied pursuant to clause (ii) of the
first sentence of Section 2.05 on the day of such subsequent determination. Upon
receipt of funds deposited to the Agent's Account pursuant to the preceding
sentence, the Agent shall distribute them (i) to the Owner of such Eligible
Asset (a) in payment of the accrued Yield for such Eligible Asset, (b) in
reduction (to zero) of the Capital of such Eligible Asset and (c) in payment of
any other amounts owed by the Seller hereunder to such Owner and (ii) to the
Collection Agent in payment of the accrued Collection Agent Fee payable with
respect to such Eligible Asset. If there shall be insufficient funds on deposit
for the Agent to distribute funds in payment in full of the
26
33
aforementioned amounts, the Agent shall distribute funds, first, in payment of
the accrued Yield for such Eligible Asset, second, in reduction of Capital of
such Eligible Asset, third, in payment of other amounts payable to such Owner,
and fourth, in payment of the accrued Collection Agent Fee payable with respect
to such Eligible Asset.
SECTION 2.07. General Settlement Procedures. If on any day the
Outstanding Balance of a Pool Receivable is either (a) reduced as a result of
any defective, rejected or returned merchandise, insurance or services, any
cash discount, or any adjustment by the Seller, or (b) reduced or cancelled as
a result of a setoff in respect of any claim by the Obligor thereof against the
Seller (whether such claim arises out of the same or a related transaction or
an unrelated transaction), the Seller shall be deemed to have received on such
day a Collection of such Receivable in the amount of such reduction or
cancellation. If on any day any of the representations or warranties in Section
4.01(h) are no longer true with respect to a Pool Receivable, the Seller shall
be deemed to have received on such day a Collection in full of such Pool
Receivable. Except as stated in the preceding sentences of this Section 2.07
and except as required by the Financing Order and as provided in the Servicing
Agreement (with respect to the application of partial payments) or as otherwise
required by law or the underlying Contract, all Collections received from an
Obligor of any Receivable shall be applied to Receivables then outstanding of
such Obligor in the order of the age of such Receivables, starting with the
oldest such Receivable, except if payment is designated by such Obligor for
application to specific Receivables. Prior to the twentieth day of each month,
the Collection Agent shall prepare and forward to the Agent (i) an Investor
Report, relating to each Eligible Asset, as of the close of business of the
Collection Agent on the last day of the immediately preceding month, and (ii)
upon the request of the Agent, a listing by Obligor of all Pool Receivables,
together with an analysis as to the aging of such Receivables. On or prior to
the day the Collection Agent is required to make a deposit with respect to a
Settlement Period pursuant to Section 2.05 or 2.06, the Seller will advise the
Agent of each Liquidation Day and each Provisional Liquidation Day occurring
during such Settlement Period and of the allocation of the amount of such
deposit to each outstanding Eligible Asset; provided, however, that, if the
Seller is not the Collection Agent, the Seller shall advise the Collection
Agent of the occurrence of each such Liquidation Day and each Provisional
Liquidation Day occurring during such Settlement Period on or prior to such
day.
27
34
SECTION 2.08. Payments and Computations, Etc. All amounts to
be paid or deposited by the Seller hereunder shall be paid or deposited in
accordance with the terms hereof no later than 11:00 A.M. (New York City time)
on the day when due in lawful money of the United States of America in same day
funds to the Agent's Account. The Seller shall, to the extent permitted by law,
pay to the Agent interest on all amounts not paid or deposited when due
hereunder at 2% per annum above the Alternate Base Rate, payable on demand;
provided, however, that such interest rate shall not at any time exceed the
maximum rate permitted by applicable law. Such interest shall be retained by the
Agent except to the extent that such failure to make a timely payment or deposit
has continued beyond the date for distribution by the Agent of such overdue
amount to an Owner of an Eligible Asset, in which case such interest accruing
after such date shall be for the account of, and distributed by the Agent to,
the Owners ratably in accordance with their respective interests in such overdue
amount. All computations of interest and all computations of Yield, Liquidation
Yield and fees hereunder shall be made on the basis of a year of 360 days for
the actual number of days (including the first but excluding the last day)
elapsed.
SECTION 2.09. Dividing or Combining of Eligible Assets. The
Seller may, on notice received by the Agent not later than 11:00 A.M. (New York
City time) three Business Days before the last day of any Fixed Period for any
then existing Eligible Asset ("Existing Eligible Asset"), divide such Existing
Eligible Asset on such last day into two or more new Eligible Assets, each such
new Eligible Asset having Capital as designated in such notice and all such new
Eligible Assets collectively having aggregate Capital equal to the Capital of
such Existing Eligible Asset. The Seller may, on notice received by the Agent
not later than 11:00 A.M. (New York City time) three Business Days before the
last day of any Fixed Periods ending on the same day for two or more Existing
Eligible Assets owned by the same Owner or the date of any proposed Purchase (if
the last day of such Fixed Period is the date of such proposed Purchase), either
(i) combine such Existing Eligible Assets or (ii) combine such Existing Eligible
Asset or Eligible Assets, if owned by the Owner, and such proposed Eligible
Asset to be purchased, on such last day into one new Eligible Asset, such new
Eligible Asset having Capital equal to the aggregate Capital of such Existing
Eligible Assets, or such Existing Eligible Asset or Eligible Assets and such
proposed Eligible Asset, as the case may be. On and after any division or
combination of Eligible Assets as described above, each of the new Eligible
Assets resulting from such division, or the new Eligible Asset resulting from
such combination, as the case may be, shall be a separate Eligible Asset having
Capital as set forth above, and shall take the place
28
35
of such Existing Eligible Asset or Eligible Assets or proposed Eligible Asset,
as the case may be, in each case under and for all purposes of this Agreement,
and the Agent shall annotate the Certificate accordingly.
SECTION 2.10. Fees. (a) The Seller shall pay fees pursuant to
a letter agreement.
(b) Each Owner shall pay to the Collection Agent a collection
fee (the "Collection Agent Fee") of 1/4 of 1% per annum on the average daily
amount of Capital of each Eligible Asset owned by such Owner, from the date
thereof until the later of the Facility Termination Date or the date on which
such Capital is reduced to zero, payable on the last day of each Settlement
Period for such Eligible Asset; provided, however, that, upon three Business
Days' notice to the Agent, the Collection Agent may (if not the Seller) elect to
be paid, as such fee, another percentage per annum on the average daily amount
of Capital of each such Eligible Asset, but in no event in excess of 110% of the
costs and expenses referred to in Section 6.02(b); and provided, further, that
such fee shall be payable only from Collections pursuant to, and subject to the
priority of payment set forth in, Sections 2.05 and 2.06.
SECTION 2.11. Increased Costs. (a) If CNAI, the Owner, any
entity which enters into a commitment to purchase Eligible Assets or interests
therein, or any of their respective Affiliates (each an "Affected Person")
determines that compliance with any law or regulation or any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law) affects or would affect the amount of the 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 or interests therein related to this
Agreement or to the funding thereof and other commitments of the same type,
then, upon demand by such Affected Person (with a copy to the Agent), the Seller
shall immediately pay to the Agent, for the account of such Affected Person (as
a third-party beneficiary), 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; provided, however, that with respect to Affected Persons other
than Citibank, CNAI, the Investor or their respective Affiliates, payment will
be provided only for increases in capital resulting from changes in laws,
regulations
29
36
or guidelines from and after June 14, 1991. A certificate as to such amounts
submitted to the Seller and the Agent 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
(other than any change by way of imposition or increase of reserve requirements
referred to in Section 2.12) in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any
central bank or other governmental authority (whether or not having the force
of law), there shall be any increase in the cost to the Owner of agreeing to
purchase or purchasing, or maintaining the ownership of Eligible Assets in
respect of which Yield is computed by reference to the Eurodollar Rate, then,
upon demand by the Owner (with a copy to the Agent), the Seller shall
immediately pay to the Agent, for the account of the Owner (as a third-party
beneficiary), from time to time as specified, additional amounts sufficient to
compensate for such increased costs. A certificate as to such amounts submitted
to the Seller and the Agent shall be conclusive and binding for all purposes,
absent manifest error.
SECTION 2.12. Additional Yield on Eligible Assets Bearing a
Eurodollar Rate. The Seller shall pay to the Owner, so long as the Owner shall
be required under regulations of the Board of Governors of the Federal Reserve
System to maintain reserves with respect to liabilities or assets consisting of
or including Eurocurrency Liabilities, additional Yield on the unpaid Capital of
each Eligible Asset of the Owner during each Fixed Period in respect of which
Yield is computed by reference to the Eurodollar Rate, for such Fixed Period, at
a rate per annum equal at all times during such Fixed Period to the remainder
obtained by subtracting (i) the Eurodollar Rate for such Fixed Period from (ii)
the rate obtained by dividing such Eurodollar Rate referred to in clause (i)
above by that percentage equal to 100% minus the Eurodollar Rate Reserve
Percentage of the Owner for such Fixed Period, payable on each date on which
Yield is payable on such Eligible Asset. Such additional Yield shall be
determined by the Owner and notified to the Seller through the Agent within 60
days after any Yield payment is made with respect to which such additional Yield
is requested. A certificate as to such additional Yield submitted to the Seller
and the Agent shall be conclusive and binding for all purposes, absent manifest
error.
30
37
ARTICLE III
CONDITIONS OF PURCHASES
SECTION 3.01. Conditions Precedent to Initial Purchase. The
initial Purchase under the Original Agreement of an Eligible Asset was subject
to the conditions precedent that the Agent shall have (i) completed a review,
satisfactory to it in its sole discretion, of the Seller's billing, collection
and reporting systems relating to the Receivables, including without limitation
the Credit and Collection Policy, and (ii) received on or before the date of
such Purchase the following, each (unless otherwise indicated) dated such date,
in form and substance satisfactory to the Agent:
(a) The Certificate;
(b) A copy of the resolutions adopted by the Board of
Directors of the Seller approving the Original Agreement, the
Certificate and the other documents to be delivered by it hereunder and
the transactions contemplated hereby, certified by its Secretary or
Assistant Secretary;
(c) A certificate of the Secretary or Assistant Secretary of
the Seller certifying the names and true signatures of the officers
authorized on its behalf to sign the Original Agreement, the
Certificate and the other documents to be delivered by it hereunder (on
which certificate the Agent and each Owner may conclusively rely until
such time as the Agent shall receive from the Seller a revised
certificate meeting the requirements of this subsection (c));
(d) Secured Party's copies of proper Financing
Statements (Form UCC-1), dated a date reasonably near to the date of
the initial Purchase, naming the Seller as the assignor of Receivables
and CNAI, as Agent, as assignee, or other, similar instruments or
documents, as may be necessary or, in the opinion of the Agent,
desirable under the UCC of all appropriate jurisdictions or any
comparable law to perfect the ownership interests in all Receivables in
which an interest may be assigned hereunder;
(e) Secured Party's copies of proper Financing Statements
(Form UCC-3), if any, necessary to release all security interests and
other rights, except the lien, if applicable, referred to in Section
4.01(h), of any person in the Receivables previously granted by the
Seller;
31
38
(f) A favorable opinion of Leon S. Cohan, General Counsel for
the Seller, in substantially the form of Exhibit D hereto and as to
such other matters as the Agent may reasonably request;
(g) A favorable opinion of Shearman & Sterling, counsel for
the Agent, as the Agent may reasonably request; and
(h) An opinion of Shearman & Sterling, counsel for the Agent,
addressed to the Investor and the dealer for the commercial paper of
the Investor, as to the correctness of the representation and warranty
of the Seller set forth in Section 4.01(m), in substantially the form
previously delivered by the Agent to such counsel.
SECTION 3.02. Conditions Precedent to All Purchases and
Reinvestments. Each Purchase (including the initial Purchase) hereunder and the
right of the Collection Agent to reinvest in Pool Receivables those Collections
attributable to an Eligible Asset pursuant to Sections 2.05 or 2.06 shall be
subject to the further conditions precedent that (a) with respect to any such
Purchase, on or prior to the date of such Purchase, the Collection Agent shall
have delivered to the Agent, in form and substance satisfactory to the Agent, a
completed Investor Report, dated within 20 days prior to the date of such
Purchase and, upon the request of the Agent, a listing by Obligor of all Pool
Receivables and such additional information as may be reasonably requested by
the Agent, and (b) on the date of such Purchase or reinvestment the following
statements shall be true (and the Seller by accepting the amount of such
Purchase or by receiving the proceeds of such reinvestment shall be deemed to
have certified that):
(i) The representations and warranties contained in Section
4.01 are correct on and as of such date as though made on and as of
such date,
(ii) No event has occurred and is continuing, or would result
from such Purchase or reinvestment, which constitutes an Event of
Investment Ineligibility or would constitute an Event of Investment
Ineligibility but for the requirement that notice be given or time
elapse or both,
(iii) The Agent shall not have delivered to the Seller a
notice that the Investor shall not make any further Purchases hereunder
and/or that the Collection Agent shall not reinvest in any Pool
Receivables on behalf of the Owner, and
32
39
(iv) On such date, all of the Seller's long-term public senior
debt securities are rated at least BBB- by Standard & Poor's Rating
Service, a division of McGraw-Hill Companies, Inc., and Baa3 by Moody's
Investors Service, Inc., or, if such debt securities are not publicly
rated on such date, the Agent has determined, in its sole discretion,
that such debt securities would receive such ratings if they were
publicly rated,
and (c) the Agent shall have received such other approvals, opinions or
documents as the Agent may reasonably request.
SECTION 3.03. Conditions Subsequent to Initial Purchase. The
Seller agreed that not later than 45 days after the date of the initial
Purchase, it would deliver to the Agent, in form and substance satisfactory to
the Agent:
(a) Certified copies of Requests for Information or Copies
(Form UCC-11) (or a similar search report certified by a party
acceptable to the Agent), listing all effective financing statements
(including those referred to in Section 3.01(d)) which name the Seller
(under its present name and any previous name) as debtor and which are
filed in the jurisdictions in which filings were made pursuant to
Section 3.01(d), together with copies of such financing statements
(none of which (except those filed pursuant to Section 3.01(f)) shall
cover any Receivables or Contracts); and
(b) Acknowledgment copies of proper Financing Statements (Form
UCC-3), if any, necessary to release all security interests and other
rights, except the lien, if applicable, referred to in Section 4.01(h),
of any Person in the Receivables previously granted by the Seller; and
(c) Acknowledgment copies of proper Financing
Statements (Form UCC-1), dated a date reasonably near to the date of
the initial Purchase, naming the Seller as the assignor of Receivables
and CNAI, as Agent, as assignee, or other, similar instruments or
documents, as may be necessary or, in the opinion of the Agent,
desirable under the UCC of all appropriate jurisdictions or any
comparable law to perfect the ownership interests in all Receivables in
which an interest may be assigned hereunder.
SECTION 3.04. Conditions Precedent to the Restatement. The
restatement of the Original Agreement is subject to the condition precedent
that the Agent shall have received on or before the date of the effective date
of such restatement the
33
40
following, each (unless otherwise indicated) dated such date, in form and
substance satisfactory to the Agent:
(a) A copy of the resolutions adopted by the Board of
Directors of the Seller approving this Agreement; and the other
documents to be delivered by it hereunder and the transactions
contemplated hereby, certified by its Secretary or Assistant Secretary;
(b) A certificate of the Secretary or Assistant Secretary of
the Seller certifying the names and true signatures of the officers
authorized on its behalf to sign this Agreement; and the other
documents to be delivered by it hereunder (on which certificate the
Agent and each Owner may conclusively rely until such time as the Agent
shall receive from the Seller a revised certificate meeting the
requirements of this subsection (b));
(c) Acknowledgment copies of proper Financing Statements (Form
UCC-3) amending the existing Financing Statements filed in 1989
pursuant to subsection (d) of Section 3.01 of the predecessor to the
Original Agreement to reflect the exclusion of SB Charges, in all
jurisdictions where the original forms UCC-1 were filed.
(d) Copies of the Basic Documents (as defined in the
Indenture, certified as true by an appropriate officer of the Seller.
(e) The Intercreditor Agreement.
(f) Copies of the Tariff and the Credit and Collection Policy
which, in the case of the Credit and Collection Policy will become
Schedules III and IV to this Agreement and replace the current
Schedules III and IV.
(g) An amendment to the Citibank Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Seller.
The Seller represents and warrants as follows:
(a) The Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Michigan
and is duly qualified to do business, and
34
41
is in good standing, in every jurisdiction where the nature of its
business requires it to be so qualified.
(b) The execution, delivery and performance by the Seller of
this Agreement, the Certificate and all other instruments and documents
to be delivered hereunder (including the use by the Seller of the
proceeds of Purchases), and the transactions contemplated hereby and
thereby, are within the Seller's corporate powers, have been duly
authorized by all necessary corporate action, do not contravene (i) the
Seller's charter or by-laws or (ii) law or any contractual restriction
binding on or affecting the Seller and do not result in or require the
creation of any lien, security interest or other charge or encumbrance
upon or with respect to any of its properties; and no transaction
contemplated hereby requires compliance with any bulk sales act or
similar law.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
is required for the due execution, delivery and performance by the
Seller of this Agreement, the Certificate or any other document or
instrument to be delivered hereunder except for the filing of the UCC
Financing Statements referred to in Article III, all of which, at the
time required in Article III, shall have been duly made and shall be in
full force and effect.
(d) This Agreement constitutes, and the Certificate when
delivered hereunder shall constitute, the legal, valid and binding
obligation of the Seller enforceable against the Seller in accordance
with their respective terms.
(e) The consolidated balance sheet of the Seller and its
consolidated subsidiaries as at December 31, 1999, and the related
consolidated statements of income and retained earnings of the Seller
and its consolidated subsidiaries for the fiscal year then ended,
certified by Deloitte & Touche LLP, independent public accountants, a
copy of which has been furnished to the Agent, fairly presents the
consolidated financial condition of the Seller and its consolidated
subsidiaries as at such date and the consolidated results of the
operations of the Seller and its consolidated subsidiaries for the
period ended on such date, all in accordance with generally accepted
accounting principles, and since December 31, 1999, there has been no
material adverse change in the business, condition (financial or
otherwise), results of operations or
35
42
properties of the Seller or of the Seller and its consolidated
subsidiaries.
(f) There are no actions, suits or proceedings pending, or to
the knowledge of the Seller threatened, against or affecting the Seller
or any subsidiary, or the property of the Seller or of any subsidiary,
in any court, or before any arbitrator of any kind, or before or by any
governmental body, which may materially adversely affect the financial
condition of the Seller or the Seller and its consolidated subsidiaries
taken as a whole (except to the extent specifically described in the
Seller's Consolidated Financial Statements for the year ended December
31, 1999) or which may materially adversely affect the ability of the
Seller to perform its obligations under this Agreement or the
Certificate; neither the Seller nor any subsidiary is in default with
respect to any order of any court, arbitrator or governmental body
except for defaults with respect to orders of governmental agencies
which defaults are not material to the business or operations of the
Seller or any subsidiary.
(g) No proceeds of any Purchase will be used by the Seller to
acquire any security in any transaction which is subject to Sections 13
and 14 of the Securities Exchange Act of 1934.
(h) Each Pool Receivable is (i) together with the Contract
related thereto owned by the Seller free and clear of any Adverse Claim
except as provided for herein and (ii) an Eligible Receivable; upon
each Purchase or reinvestment, the Owner making such Purchase or
reinvestment will acquire a valid and perfected first priority
undivided percentage ownership interest, subject only to the lien, if
applicable, of the Mortgage and Deed of Trust, dated as of October 1,
1924, as amended, between the Seller and First Chicago Trust Company of
New York, as successor Trustee (the "Mortgage"), to the extent of the
pertinent Eligible Asset in each Pool Receivable then existing or
thereafter arising and in the Related Security and Collections with
respect thereto free and clear of any Adverse Claim except as provided
hereunder; and no effective financing statement or other instrument
similar in effect covering any Pool Receivable or the Related Security
or Collections with respect thereto is on file in any recording office
except for the financing statement, if applicable, filed with respect
to the Mortgage, and except such as may be filed in favor of CNAI, as
Agent, in accordance with this Agreement.
36
43
(i) Each Investor Report (if prepared by the Seller, or to the
extent that information contained therein is supplied by the Seller),
information, exhibit, financial statement, document, book, record or
report (including descriptions of the Seller's credit and collection
policies, billing systems and reporting systems) furnished at any time
by the Seller to the Agent or any Owner in connection with this
Agreement is accurate in all material respects as of its date or
(except as otherwise disclosed to the Agent or such Owner, as the case
may be, at such time) as of the date so furnished, and no such document
contains any material misstatement of fact or omits to state a material
fact or any fact necessary to make the statements contained therein not
materially misleading.
(j) The chief place of business and chief executive office of
the Seller are located at the address of the Seller referred to in
Section 11.02 hereof and the offices where the Seller keeps all its
books, records and documents evidencing Pool Receivables or the related
Contracts are located at the addresses specified in Schedule I hereto
(or at such other locations, notified to the Agent in accordance with
Section 5.01(f), in jurisdictions where all action required by Section
6.05 has been taken and completed).
(k) The names and addresses of all the Special Account Banks,
together with the account numbers of the Special Accounts of the Seller
at such Special Account Banks, are specified in Schedule II hereto (or
at such other Special Account Banks and/or with such other Special
Accounts as have been notified to the Agent in accordance with Section
5.03(d)).
(l) Neither the Seller nor any Affiliate of the Seller has any
direct or indirect ownership or other financial interest in any
Obligor.
(m) Each purchase of an Eligible Asset hereunder, and each
reinvestment of Collections in Pool Receivables made hereunder, will
constitute (i) a "current transaction" within the meaning of Section
3(a)(3) of the Securities Act of 1933, as amended, and (ii) a purchase
or other acquisition of notes, drafts, acceptances, open accounts
receivable or other obligations representing part or all of the sales
price of merchandise, insurance or services within the meaning of
Section 3(c)(5) of the Investment Company Act of 1940, as amended.
37
44
ARTICLE V
GENERAL COVENANTS OF THE SELLER
SECTION 5.01. Affirmative Covenants of the Seller. Until the
later of the Facility Termination Date and the date upon which no Capital for
any Eligible Asset shall be existing, the Seller will, unless the Agent shall
otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects
with all applicable laws, rules, regulations and orders with respect to
it, its business and properties and all Pool Receivables and related
Contracts.
(b) Preservation of Corporate Existence. Preserve and maintain
its corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify and remain qualified in
good standing as a foreign corporation in each jurisdiction where the
failure to preserve and maintain such existence, rights, franchises,
privileges and qualification would materially adversely affect the
interests of the Owner or the Agent hereunder or in the Pool
Receivables, or the ability of the Seller or the Collection Agent to
perform their respective obligations hereunder.
(c) Audits. At any time and from time to time during regular
business hours, permit the Agent, or its agents or representatives, (i)
to examine and make copies of and abstracts from all books, records and
documents (including, without limitation, computer tapes and disks) in
the possession or under the control of the Seller relating to Pool
Receivables, including, without limitation, the related Contracts, and
(ii) to visit the offices and properties of the Seller for the purpose
of examining such materials described in clause (i) above, and to
discuss matters relating to Pool Receivables or the Seller's
performance hereunder with any of the officers or employees of the
Seller having knowledge of such matters.
(d) Keeping of Records and Books of Account. Maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Pool Receivables
in the event of the destruction of the originals thereof), and keep and
maintain, all documents, books, records and other information
reasonably necessary or advisable for the collection of all Pool
Receivables (including, without
38
45
limitation, records adequate to permit the daily identification of each
new Pool Receivable and all Collections of and adjustments to each
existing Pool Receivable).
(e) Performance and Compliance with Receivables and Contracts.
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 Pool Receivables.
(f) Location of Records. Keep its chief place of business and
chief executive office, and the offices where it keeps its records
concerning the Pool Receivables and all Contracts related thereto (and
all original documents relating thereto), at the address(es) of the
Seller referred to in Section 4.01(j) or, upon 30 days' prior written
notice to the Agent, at such other locations in a jurisdiction where
all action required by Section 6.05 shall have been taken and
completed.
(g) Credit and Collection Policies. Comply in all material
respects with its Credit and Collection Policy in regard to each Pool
Receivable and the related Contract.
(h) Collections. Upon the request of the Agent after the
occurrence of an Event of Investment Ineligibility, (i) instruct all
Obligors to cause all Collections to be deposited directly either to a
Special Account or to a Concentration Account, (ii) deposit, or cause
to be deposited, all Collections in the Special Accounts to the
Concentration Accounts, and (iii) at all times after receipt of a
written request from the Agent to such effect, deposit, or cause to be
deposited, all Collections in the Concentration Accounts to the
Designated Account. At all times, segregate collections received on
account of SB Charges and on account of any other charges from
Collections within 48 hours after the receipt thereof.
SECTION 5.02. Reporting Requirements of the Seller. Until the
later of the Facility Termination Date and the date upon which no Capital for
any Eligible Asset shall be existing, the Seller will, unless the Agent shall
otherwise consent in writing, furnish to the Agent:
(a) as soon as available and in any event within 60 days after
the end of each of the first three quarters of each fiscal year of the
Seller, consolidated balance sheets of the Seller and its consolidated
subsidiaries as of the
39
46
end of such quarter, and consolidated statements of income and retained
earnings of the Seller and its consolidated subsidiaries each 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 chief accounting officer of the Seller;
(b) as soon as available and in any event within 120 days
after the end of each fiscal year of the Seller, a copy of the
consolidated balance sheets of the Seller and its consolidated
subsidiaries as of the end of such year and the related consolidated
statements of income and retained earnings of the Seller and its
consolidated subsidiaries for such year, each reported on by Deloitte &
Touche LLP or any other nationally recognized independent public
accountants of similar standing;
(c) promptly after the sending or filing thereof, copies of
all reports which the Seller sends to any of its security holders and
copies of all reports and registration statements which the Seller
files with the Securities and Exchange Commission or any national
securities exchange, other than registration statements relating to
employee benefit plans and to registrations of securities for selling
security holders;
(d) promptly after the filing or receiving thereof, copies of
all reports and notices with respect to any Reportable Event defined in
Article IV of ERISA which the Seller or any subsidiary files under
ERISA with the Internal Revenue Service or the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or which the Seller or any
subsidiary receives from such Corporation;
(e) as soon as possible and in any event within five days
after the occurrence of each Event of Investment Ineligibility or each
event which, with the giving of notice or lapse of time or both, would
constitute an Event of Investment Ineligibility, the statement of the
chief financial officer or chief accounting officer of the Seller
setting forth details of such Event of Investment Ineligibility or
event and the action which the Seller proposes to take with respect
thereto; and
(f) promptly, from time to time, such other information,
documents, records or reports respecting the Receivables or the
conditions or operations, financial or otherwise, of the Seller, or any
subsidiary as the Agent may from time to time request in order to
protect the Owner's or
40
47
the Agent's interests under or contemplated by this Agreement or the
Certificate.
(g) promptly, upon the delivery thereof pursuant to the
Servicing Agreement, a copy of each Adjustment Request and each notice
of a Servicer Default (as that term is defined in the Servicing
Agreement) and notice of its intention to assign its servicing
obligations pursuant to Section 6.04 of the Servicing Agreement;
(h) promptly, upon the request of the Agent, copies of all
reports and certificates to be furnished pursuant to the Servicing
Agreement;
(i) not less than 30 days before it becomes final and
unappealable, furnish the Agent with a copy of each amendment to the
Financing Order issued pursuant to the Act; and
(j) not less than 30 days before it shall occur, furnish the
Agent in detail reasonably acceptable to the Agent with notice of the
commencement by a Person other than the Seller of the billing and/or
collecting on behalf of the Seller of charges which constitute
Receivables.
SECTION 5.03. Negative Covenants of the Seller. Until the
later of the Facility Termination Date and the date upon which no Capital for
any Eligible Asset shall be existing, the Seller will not, without the written
consent of the Agent:
(a) Sales, Liens, Etc. Except as otherwise provided herein
(including Section 4.01(h)), or pursuant to the Citibank Agreement or
(with respect to receivables to the extent subsumed therein) the sale
of SB Charges with relation to the Securitization Bonds, sell, assign
(by operation of law or otherwise) or otherwise dispose of, or create
or suffer to exist any Adverse Claim upon or with respect to, the
Seller's undivided interest in any Pool Receivable, related Contract,
Related Security or Collections, or upon or with respect to the
Concentration Account or to any Designated Account or Special Account,
or assign any right to receive income in respect thereof.
(b) Extension or Amendment of Receivables. Except as otherwise
permitted in Section 6.02, extend, amend or otherwise modify the terms
of any Pool Receivable, or amend, modify or waive any term or condition
of any Contract related thereto.
41
48
(c) Change in Business or Credit and Collection Policy. Make
any change in the character of its business or in the Credit and
Collection Policy, which change would, in either case, impair the
collectibility of any Pool Receivable.
(d) Change in Payment Instructions to Obligors. Add or
terminate any bank as a Special Account Bank from those listed in
Schedule II hereto or make any change in its instructions to Obligors
regarding payments to be made to the Seller or payments to be made to
any Special Account Bank or to the Concentration Account, unless the
Agent shall have received notice of such addition, termination or
change, or, in the case such a change in instructions relates to
actions taken in conjunction with the Securitization Bonds, the Agent
shall have consented thereto.
(e) Deposits to Special Accounts, Concentration Account and
Designated Accounts. Deposit or otherwise credit, or cause or permit to
be so deposited or credited, to the Designated Account (or, if
instructed by the Agent, to the Special Accounts or the Concentration
Accounts) cash or cash proceeds other than Collections of Pool
Receivables.
(f) Servicing Agreement and Sale Agreement. Amend any
provision of the Servicing Agreement or the Sale Agreement in a manner
that will have a material adverse effect on the collectibility of the
Receivables or the ability of the Seller to perform hereunder.
ARTICLE VI
ADMINISTRATION AND COLLECTION
SECTION 6.01. Designation of Collection Agent. The servicing,
administering and collection of the Pool Receivables shall be conducted by such
Person (the "Collection Agent") so designated from time to time in accordance
with this Section 6.01. Until the Agent gives notice to the Seller of a
designation of a new Collection Agent, the Seller is hereby designated as, and
hereby agrees to perform the duties and obligations of, the Collection Agent
pursuant to the terms hereof. The Agent may at any time after the occurrence of
an Event of Investment Ineligibility designate as Collection Agent any Person
(including itself) to succeed the Seller or any successor Collection Agent, on
the condition in each case that any such Person so designated shall agree to
perform the duties and obligations of the Collection Agent pursuant to the terms
42
49
hereof. The Collection Agent may, with the prior consent of the Agent,
subcontract with any other Person for servicing, administering or collecting the
Pool Receivables, provided that the Collection Agent shall remain liable for the
performance of the duties and obligations of the Collection Agent pursuant to
the terms hereof.
SECTION 6.02. Duties of Collection Agent. (a) The Collection
Agent shall take or cause to be taken all such actions as may be necessary or
advisable to collect each Pool Receivable from time to time, all in accordance
with applicable laws, rules and regulations, with reasonable care and diligence,
and in accordance with the Credit and Collection Policy. Each of the Seller, the
Owner, Citibank, CNAI and the Agent hereby appoints as its agent the Collection
Agent, from time to time designated pursuant to Section 6.01, to enforce its
respective rights and interests in and under the Pool Receivables, the Related
Security and the Contracts. The Collection Agent shall set aside and hold in
trust for the account of the Seller and each Owner their respective allocable
shares of the Collections of Pool Receivables in accordance with Sections 2.05
and 2.06 but shall not be required (unless otherwise requested by the Agent) to
segregate the funds constituting such portion of such Collections prior to the
remittance thereof in accordance with said Sections. If instructed by the Agent,
the Collection Agent shall segregate and deposit with a bank (which may be
Citibank) designated by the Agent such allocable share of Collections of Pool
Receivables, set aside for each Owner, on the first Business Day following
receipt by the Collection Agent of such Collections. Provided no Event of
Investment Ineligibility or Event of Purchase Ineligibility shall have occurred
and be continuing, the Seller, while it is the Collection Agent, may, in
accordance with the Credit and Collection Policy, extend the maturity or adjust
the Outstanding Balance of any Defaulted Receivable as the Seller may determine
to be appropriate to maximize Collections thereof. The Seller shall deliver to
the Collection Agent, and the Collection Agent shall hold in trust for the
Seller and each Owner in accordance with their respective interests, all
documents, instruments and records (including, without limitation, computer
tapes or disks) which evidence or relate to Pool Receivables.
(b) The Collection Agent shall, as soon as practicable
following receipt, turn over to the Seller (i) that portion of Collections of
Pool Receivables representing its undivided interest therein, less, in the event
the Seller is not the Collection Agent, all reasonable and appropriate
out-of-pocket costs and expenses of such Collection Agent of servicing,
collecting and administering the Pool Receivables to the extent not covered by
the Collection Agent Fee received by it and (ii)
43
50
the Collections of any Receivable which is not a Pool Receivable. The Collection
Agent, if other than the Seller, shall as soon as practicable upon demand
deliver to the Seller all documents, instruments and records in its possession
which evidence or relate to Receivables of the Seller other than Pool
Receivables, and copies of documents, instruments and records in its possession
which evidence or relate to Pool Receivables. The Collection Agent's
authorization under this Agreement shall terminate, after the Facility
Termination Date, upon receipt by each Owner of an Eligible Asset of an amount
equal to the Capital plus accrued Yield for such Eligible Asset plus all other
amounts owed to the Agent, each Owner and the Seller and (unless otherwise
agreed by the Agent and the Collection Agent) the Collection Agent under this
Agreement.
SECTION 6.03. Rights of the Agent. (a) After the occurrence of
an Event of Investment Ineligibility, the Agent is hereby authorized at any time
to instruct the Obligors of Pool Receivables, or any of them, to make payment of
all amounts payable under any Pool Receivable to a Designated Account or the
Seller shall, promptly at the Agent's request, send notices to the Obligors of
Pool Receivables, or any of them, instructing them to make payment in the manner
requested by the Agent. Further, the Agent may notify at any time and at the
Seller's expense the Obligors of Pool Receivables, or any of them, of the
ownership of Eligible Assets by the Owner.
(b) At any time following the designation of a Collection
Agent other than the Seller pursuant to Section 6.01:
(i) The Agent may direct the Obligors of Pool Receivables, or
any of them, that payment of all amounts payable under any Pool
Receivable be made directly to the Agent or its designee.
(ii) The Seller shall, at the Agent's request and at the
Seller's expense, give notice of such ownership to each said Obligor
and direct that payments be made directly to the Agent or its designee.
(iii) The Seller shall, at the Agent's request, (A) assemble
all of the documents, instruments and other records (including, without
limitation, computer tapes and disks) which evidence the Pool
Receivables, and the related Contracts and Related Security, or which
are otherwise necessary or desirable to collect such Pool Receivables,
and shall make the same available to the Agent at a place selected by
the Agent or its designee, and (B) segregate all cash, checks and other
instruments received by it from time
44
51
to time constituting Collections of Pool Receivables in a manner
acceptable to the Agent and shall, promptly upon receipt, remit all
such cash, checks and instruments, duly endorsed or with duly executed
instruments of transfer, to the Agent or its designee.
(iv) Each of the Seller and the Owner, Citibank and CNAI
hereby authorizes the Agent to take any and all steps in the Seller's
name and on behalf of the Seller, and the Owner necessary or desirable,
in the determination of the Agent, to collect all amounts due under any
and all Pool Receivables, including, without limitation, endorsing the
Seller's name on checks and other instruments representing Collections
and enforcing such Pool Receivables and the Related Contracts.
SECTION 6.04. Responsibilities of the Seller. Anything herein
to the contrary notwithstanding:
(a) The Seller shall perform all of its obligations under the
Contracts related to the Pool Receivables to the same extent as if
Eligible Assets had not been sold hereunder and the exercise by the
Agent of its rights hereunder shall not relieve the Seller from such
obligations or its obligations with respect to Pool Receivables; and
(b) Neither the Agent nor the Owner shall have any obligation
or liability with respect to any Pool Receivables or related Contracts,
nor shall either of them be obligated to perform any of the obligations
of the Seller thereunder.
SECTION 6.05. Further Action Evidencing Purchases. The Seller
agrees that from time to time, at its expense, it will promptly execute and
deliver all further instruments and documents, and take all further action that
the Agent may reasonably request in order to perfect, protect or more fully
evidence the Eligible Assets purchased by the Investor hereunder, or to enable
the Owner or the Agent to exercise or enforce any of their respective rights
hereunder or under the Certificate. Without limiting the generality of the
foregoing, the Seller will upon the request of the Agent: (i) execute and file
such financing or continuation statements, or amendments thereto or assignments
thereof, and such other instruments or notices, as may be necessary or
appropriate; (ii) mark conspicuously each invoice evidencing each Pool
Receivable and the related Contract with a legend, acceptable to the Agent,
evidencing that such Eligible Assets have been sold in accordance with this
Agreement; and (iii) mark its master data processing records evidencing such
Pool Receivables and related Contracts with such legend. The
45
52
Seller hereby authorizes the Agent to file one or more financing or
continuation statements, and amendments thereto and assignments thereof,
relative to all or any of the Pool Receivables and the Related Security now
existing or hereafter arising without the signature of the Seller where
permitted by law. If the Seller fails to perform any of its agreements or
obligations under this Agreement, the Agent may (but shall not be required to)
itself perform, or cause performance of, such agreement or obligation, and the
expenses of the Agent incurred in connection therewith shall be payable by the
Seller as provided in Section 10.01.
ARTICLE VII
EVENTS OF INVESTMENT INELIGIBILITY
SECTION 7.01. Events of Investment Ineligibility. If any of
the following events ("Events of Investment Ineligibility") shall occur and be
continuing:
(a) The Collection Agent (if other than the Agent) (i) shall
fail to perform or observe any term, covenant or agreement hereunder
(other than as referred to in clause (ii) of this Section 7.01(a)) and
such failure shall remain unremedied for three Business Days or (ii)
shall fail to make any payment or deposit to be made by it hereunder
when due; or
(b) The Seller shall fail to perform or observe any term,
covenant or agreement contained in Section 5.03(e) or Section 6.03(a);
or
(c) Any representation or warranty made or deemed to be made
by the Seller (or any of its officers) under or in connection with this
Agreement, the Original Agreement or any Investor Report or other
information or report delivered pursuant hereto or to the Original
Agreement shall prove to have been false or incorrect in any material
respect when made; or
(d) The Seller shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement on its part to
be performed or observed and any such failure shall remain unremedied
for ten Business Days after written notice thereof shall have been
given by the Agent to the Seller; or
(e) The Seller shall fail to pay any Debt, or any interest or
premium thereon, when due (whether by scheduled
46
53
maturity, required prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Debt; or any
other default under any agreement or instrument relating to any such
Debt, or any other event, shall occur and shall continue after the
applicable grace period, if any, specified in such agreement or
instrument, if the effect of such default or event is to accelerate, or
to permit the acceleration of, the maturity of such Debt; or any such
Debt shall be declared to be due and payable or required to be prepaid
(other than by a regularly scheduled required prepayment), prior to the
stated maturity thereof; or
(f) Any Purchase or any reinvestment pursuant to Section 2.05
shall for any reason, except to the extent permitted by the terms
hereof (including Section 4.01(h)), cease to create, or any Eligible
Asset shall for any reason cease to be, a valid and perfected first
priority undivided percentage ownership interest to the extent of the
pertinent Eligible Asset in each applicable Pool Receivable and the
Related Security and Collections with respect thereto or the
Certificate shall for any reason cease to evidence in the Owner of such
Eligible Asset legal and equitable title to, and ownership of, an
undivided percentage ownership interest in Pool Receivables and Related
Security to the extent of such Eligible Asset; or
(g) (i) The Seller 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 seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee, or other similar official for it or for any
substantial part of its property and, if instituted against the Seller,
either such proceeding shall not be stayed or dismissed for 45 days or
any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against it or the
appointment of a receiver, trustee, custodian or other similar official
for it or for any substantial part of its property) shall occur; or
(ii) the Seller shall take any corporate action to
47
54
authorize any of the actions set forth in clause (i) above in this
subsection (g); or
(h) The Delinquency Ratio as at the last day of any calendar
month shall exceed 45% or the Default-to-Delinquency Ratio as at the
last day of any calendar month shall exceed 50%; or
(i) The Net Receivables Pool Balance shall for a period of
five consecutive Business Days be less than 115% of the sum of the
aggregate outstanding Capital of all Eligible Assets and of the
aggregate outstanding "Capital" of all "Eligible Assets" under the
Citibank Agreement; or
(j) There shall have been any material adverse change in the
financial condition or operations of the Seller since December 31,
1999, or there shall have occurred any event which materially adversely
affects the collectibility of the Pool Receivables, or there shall have
occurred any other event which materially adversely affects the ability
of the Seller to collect Pool Receivables or the ability of the Seller
to perform hereunder; or
(k) The sum of the Eligible Assets plus the "Eligible Assets"
under the Citibank Agreement shall for a period of five consecutive
Business Days be greater than 100%; or
(l) A "Servicer Default" shall occur under the Servicing
Agreement; or the Seller exercises its right to assign its servicing
obligations pursuant to Section 6.04 of the Servicing Agreement; or the
Seller shall resign as servicer pursuant to Section 6.06 of the
Servicing Agreement; or
(m) The Seller shall be required to pay indemnity payments
under Section 5.01(c) of the Sale Agreement; or
(n) The Bond Trustee commences action to enforce the security
interest under the Indenture; or, the Bond Trustee requests the MPSC to order
the sequestration and payment to the holders of the Securitization Bonds of all
revenues arising with respect to the securitization property; or
(o) The Act or the Financing Order is amended in a manner
which materially affects the ability of the Seller to collect Pool Receivables
or the ability of the Seller to perform hereunder.
48
55
then, and in any such event, the Agent may, by notice to the Seller declare the
Facility Termination Date to have occurred, except that, in the case of any
event described above in clause (i) of subsection (g) or described above in
subsection (f), the Facility Termination Date shall be deemed to have occurred
automatically upon the occurrence of such event. Upon any such termination of
the Facility, the Agent and the Owner shall have, in addition to all other
rights and remedies under this Agreement or otherwise, all other rights and
remedies provided under the UCC of the applicable jurisdiction and other
applicable laws, which rights shall be cumulative. Without limiting the
foregoing or the general applicability of Article IX hereof, any Owner may
elect to assign any Eligible Asset owned by such Owner pursuant to Section 9.01
following the occurrence of any Event of Investment Ineligibility.
ARTICLE VIII
THE AGENT
SECTION 8.01. Authorization and Action. Each of the Owner,
Citibank and CNAI hereby appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under this Agreement as are
delegated to the Agent by the terms hereof, together with such powers as are
reasonably incidental thereto.
SECTION 8.02. Agent's Reliance, Etc. Neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them as Agent under or in connection with
this Agreement (including, without limitation, the Agent's servicing,
administering or collecting Pool Receivables as Collection Agent pursuant to
Section 6.01), except for its or their own gross negligence or willful
misconduct. Without limiting the foregoing, the Agent: (i) may consult with
legal counsel (including counsel for the Seller), independent public accountants
and other experts selected by it and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts; (ii) makes no warranty or representation to the
Owner and shall not be responsible to the Owner for any statements, warranties
or representations made in or in connection with this Agreement; (iii) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement on the part of the
Seller or to inspect the property (including the books and records) of the
Seller; (iv) shall not be responsible to the
49
56
Owner for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, the Certificate or any other instrument
or document furnished pursuant hereto; and (v) shall incur no liability under or
in respect of this Agreement by acting upon any notice (including notice by
telephone), consent, certificate or other instrument or writing (which may be by
telex) believed by it to be genuine and signed or sent by the proper party or
parties.
SECTION 8.03. CNAI and Affiliates. With respect to any
Eligible Asset owned by CNAI, CNAI shall have the same rights and powers under
this Agreement as would the Owner and may exercise the same as though it were
not the Agent. CNAI and its Affiliates may generally engage in any kind of
business with the Seller or any Obligor, any of their respective affiliates and
any Person who may do business with or own securities of the Seller or any
Obligor or any of their respective Affiliates, all as if CNAI were not the Agent
and without any duty to account therefor to the Owner.
SECTION 8.04. Investor's Purchase Decision. The Investor
acknowledges that it has, independently and without reliance upon the Agent, any
of its Affiliates or the Owner and based on such documents and information as it
has deemed appropriate, made its own evaluation and decision to enter into this
Agreement and, if it so determines, to purchase an undivided ownership interest
in Pool Receivables hereunder. Each Owner also acknowledges that it will,
independently and without reliance upon the Agent, any of its Affiliates or any
other Owner and based on such documents and information as it shall deem
appropriate at the time, continue to make its own decisions in taking or not
taking action under this Agreement.
ARTICLE IX
ASSIGNMENT OF ELIGIBLE ASSETS
SECTION 9.01. Assignability. (a) This Agreement and the
Owner's rights and obligations herein (including ownership of each Eligible
Asset) shall be assignable by the Owner and its successors and assigns to
Citibank, CNAI, any of their Affiliates, any person managed by Citibank, CNAI or
any of their Affiliates or any financial or other institution acceptable to the
Agent and approved by the Seller, which approval shall not be unreasonably
withheld.
50
57
(b) The amount being assigned pursuant to each assignment
shall in no event be less than the lesser of 5% of outstanding Capital and the
assignor's remaining balance.
(c) Each assignor of an Eligible Asset or any interest therein
shall notify the Agent and the Seller of any such assignment.
SECTION 9.02. Authorization of Agent. Each of the Owner,
Citibank and CNAI authorizes the Agent, and the Agent agrees that it shall,
annotate the Certificate to reflect any assignments made pursuant to Section
9.01 or otherwise.
ARTICLE X
INDEMNIFICATION
SECTION 10.01. Indemnities by the Seller. Without limiting any
other rights which the Agent, the Owner, Citibank or CNAI or any Affiliate
thereof may have hereunder or under applicable law, the Seller hereby agrees to
indemnify each of the Agent, the Owner, Citibank and CNAI and each Affiliate
thereof from and against any and all damages, losses, claims, liabilities and
related costs and expenses, including reasonable attorneys' fees and
disbursements (all of the foregoing being collectively referred to as
"Indemnified Amounts"), awarded against or incurred by any of them arising out
of or as a result of this Agreement or the ownership of Eligible Assets or in
respect of any Receivable or any Contract, excluding, however, (i) Indemnified
Amounts to the extent resulting from gross negligence or willful misconduct on
the part of the Agent, the Owner, Citibank or CNAI or any such Affiliate or (ii)
recourse (except as otherwise specifically provided in this Agreement) for
uncollectible Receivables. Without limiting the foregoing, the Seller shall pay
on demand to the Agent, the Owner, Citibank or CNAI or any Affiliate thereof any
and all amounts necessary to indemnify the Agent, the Owner, Citibank and CNAI
and each Affiliate thereof for Indemnified Amounts relating to or resulting
from:
(i) the creation of an undivided percentage ownership interest
in any Receivable which is not at the date of the creation of such
interest an Eligible Receivable or which thereafter ceases to be an
Eligible Receivable;
(ii) reliance on any representation or warranty made by the
Seller (or any of its officers) under or in connection with this
Agreement, the Original Agreement, any Investor
51
58
Report or any other information or report delivered by the Seller
pursuant hereto or to the Original Agreement, which shall have been
false or incorrect in any material respect when made or deemed 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 nonconformity of any Pool Receivable or the
related Contract with any such applicable law, rule or regulation;
(iv) the failure to vest in the Owner of an Eligible Asset an
undivided percentage ownership interest, to the extent of such Eligible
Asset, in the Receivables in, or purporting to be in, the Receivables
Pool, free and clear of any Adverse Claim except for the lien, if
applicable, referred to in Section 4.01(h);
(v) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of
any applicable jurisdiction or other applicable laws with respect to
any Receivables in, or purporting to be in, the Receivables Pool,
whether at the time of any Purchase or reinvestment or at any
subsequent time;
(vi) any failure by the Seller to timely and duly perform and
comply with all material provisions, covenants and other promises
required to be observed by it under any Contract related to the Pool
Receivables;
(vii) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable in, or purporting to be in, the Receivables Pool
(including, without limitation, a defense based on such Receivable or
the related Contract not being a legal, valid and binding obligation of
such Obligor enforceable against it in accordance with its terms), or
any other claim resulting from the sale of the merchandise or services
related to such Receivable or the furnishing or failure to furnish such
merchandise or services;
(viii) any failure of the Seller, as Collection Agent or
otherwise, to perform its duties or obligations in accordance with the
provisions of Article VI;
(ix) any products liability claim arising out of or in
connection with merchandise, insurance or services which are the
subject of any Contract;
52
59
(x) the commingling of Collections of Pool Receivables at any
time with other funds;
(xi) the enforcement or legal recognition of any prior
interest under the Mortgage in or to any Receivables or the proceeds
thereof; or
(xii) any breakage and other expenses, if any, of the Investor
or the Owner (including, without limitation, attorneys' fees,
disbursements and accrued interest) of interest rate swaps, collars,
forward agreements and future contracts in connection with the funding
or maintenance of any Eligible Asset and the costs and expenses
specifically set forth in the definition of Fixed Rate; or
(xii) any claim brought by any Swap Counterparty (as that term
is defined in the Indenture) arising out of or in connection with the
Intercreditor Agreement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or consent to any departure by the Seller therefrom,
shall in any event be effective unless the same shall be in writing and signed
by the Agent, as agent for the Owner, Citibank and CNAI, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. This Agreement contains a final
and complete integration of all prior expressions by the parties hereto with
respect to the subject matter hereof and shall constitute the entire agreement
among the parties hereto with respect to the subject matter hereof, superseding
all prior oral or written understandings.
SECTION 11.02. Notices, Etc. All notices and other
communications provided for hereunder shall, unless otherwise stated herein, be
in writing (including telex communication) and mailed or telexed or delivered,
as to each party thereto, at its address set forth under its name on the
signature pages hereof or at such other address as shall be designated by such
party in a written notice to the other parties hereto. All such notices and
communications shall be effective, in the case of notice by mail, when deposited
in the mails, and, in the case of notice by telex, when telexed, in each case
addressed as aforesaid, except that notices and communications to the Agent
pursuant to Article II shall not be effective until received.
53
60
SECTION 11.03. No Waiver; Remedies. No failure on the part of
the Agent, Citibank, the Owner or CNAI to exercise, and no delay in exercising,
any right hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right hereunder preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law. Without limiting
the foregoing, Citibank is hereby authorized by the Seller at any time and from
time to time, to the fullest extent permitted by law, to set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by Citibank to or for the
credit or the account of the Seller against any and all of the obligations of
the Seller, now or hereafter existing under this Agreement to the Agent, the
Owner, Citibank or CNAI or their respective successors and assigns, irrespective
of whether or not any demand shall have been made under this Agreement and
although such obligations may be unmatured. Citibank agrees promptly to notify
the Seller after any such set-off and application; provided, however, that the
failure to give such notice shall not affect the validity of such set-off and
application.
SECTION 11.04. Binding Effect; Assignability. This Agreement
shall be binding upon and inure to the benefit of the Seller, the Agent, the
Owner, Citibank, CNAI and their respective successors and assigns; provided,
however, that the Seller may not assign its rights or obligations hereunder or
any interest herein without the prior written consent of the Agent. This
Agreement shall create and constitute the continuing obligations of the parties
hereto in accordance with its terms, and shall remain in full force and effect
until such time, after the Facility Termination Date, as no Capital of any
Eligible Asset shall be outstanding; provided, however, that rights and remedies
with respect to any breach of any representation and warranty made by the Seller
pursuant to Article IV and the provisions of Article X and Sections 11.06, 11.07
and 11.08 shall be continuing and shall survive any termination of this
Agreement.
SECTION 11.05. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York, except
to the extent that the validity or perfection of the interests of the Owner in
the Receivables, or remedies hereunder, in respect thereof, are governed by the
laws of a jurisdiction other than the State of New York.
SECTION 11.06. Costs, Expenses and Taxes. (a) In addition to
the rights of indemnification granted to the Agent, the Owner, Citibank, CNAI
and their respective Affiliates under
54
61
Article X hereof, the Seller agrees to pay on demand all costs and expenses in
connection with the preparation, execution, delivery and administration
(including periodic auditing) of this Agreement, the Certificate and the other
documents to be delivered hereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Agent, the
Investor, Citibank, CNAI and their respective Affiliates with respect thereto
and with respect to advising the Agent, the Investor, Citibank, CNAI and their
respective Affiliates as to their respective rights and remedies under this
Agreement, and all costs and expenses, if any (including reasonable counsel fees
and expenses), of the Agent, the Owner, Citibank, CNAI and their respective
Affiliates in connection with the enforcement of this Agreement, the Certificate
and the other documents to be delivered hereunder.
(b) In addition, the Seller shall pay any and all commissions
of placement agents and commercial paper dealers in respect of commercial paper
notes of the Investor issued to fund the Purchase or maintenance of any Eligible
Asset and any and all stamp and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing and recording of this
Agreement, the Certificate or the other documents to be delivered hereunder, and
agrees to indemnify the Agent, the Owner, Citibank, CNAI and their respective
Affiliates against any liabilities with respect to or resulting from any delay
in paying or omission to pay such taxes and fees; provided, however, that the
aggregate amount of the Seller's liability for commissions of placement agents
and commercial paper dealers shall not exceed in any year (commencing on the
date hereon and commencing on each anniversary thereof) 8/100 of 1% of the
amount of the entire Purchase Limit (whether used or unused) as in effect at the
commencement of such year.
(c) In addition, the Seller shall pay on demand all other
costs, expenses and taxes (excluding income taxes) incurred by the Investor or
any shareholder of the Investor ("Other Costs"), including, without limitation,
the cost of auditing the Investor's books by certified public accountants, the
cost of rating the Investor's commercial paper by independent financial rating
agencies, the taxes (excluding income taxes) resulting from the Investor's
operations, and the reasonable fees and out-of-pocket expenses of counsel for
the Investor or any counsel for any shareholder of the Investor with respect to
(i) advising the Investor or shareholder as to its rights and remedies under
this Agreement, (ii) the enforcement of this Agreement, the Certificate and the
other documents to be delivered hereunder, or (iii) advising the Investor or
such shareholder as to matters relating to the Investor's operations; provided,
however, that if
55
62
the Investor enters into agreements for the purchase of interests in receivables
from one or more other Persons ("Other Sellers"), the Seller and such Other
Sellers shall each be liable for such Other Costs ratably in accordance with the
usage under the respective facilities of the Investor to purchase receivables or
interests therein from the Seller and each Other Seller; and provided, further,
that if such Other Costs are attributable to the Seller and not attributable to
any Other Seller, the Seller shall be solely liable for such Other Costs.
SECTION 11.07. No Proceedings. Each of the Seller, the Agent,
Citibank, CNAI and each assignee of an Eligible Asset or any interest therein
and each entity which enters into a commitment to purchase Eligible Assets or
interests therein hereby agrees that it will not institute against the Investor
any proceeding of the type referred to in clause (i) of Section 7.01(g) so long
as any commercial paper issued by the Investor shall be outstanding or there
shall not have elapsed one year plus one day since the last day on which any
such commercial paper shall have been outstanding.
SECTION 11.08. Confidentiality. Except to the extent otherwise
required by applicable law, the Seller agrees to maintain the confidentiality of
this Agreement (and all drafts thereof) in communications with third parties and
otherwise; provided, however, that the Agreement may be disclosed to third
parties to the extent such disclosure is (i) required in connection with a sale
of securities of the Seller, (ii) made solely to persons who are legal counsel
for the purchaser or underwriter of such securities, (iii) limited in scope to
the provisions of Articles V, VII, X and, to the extent defined terms are used
in Articles V, VII and X, such terms defined in Article I of this Agreement and
(iv) made pursuant to a written agreement of confidentiality in form and
substance reasonably satisfactory to the Agent; provided, further, however, that
the Agreement may be disclosed to the Seller's legal counsel pursuant to an
agreement of the type referred to in clause (iv), above; and provided, further,
however, that the Seller shall have no obligation of confidentiality in respect
of any information which may be generally available to the public or becomes
available to the public through no fault of the Seller. The Agent, Citibank,
CNAI and each assignee of an Eligible Asset or any interest therein and each
entity which enters into a commitment to purchase Eligible Assets or interests
therein may, in connection with any assignment or participation or proposed
assignment or participation disclose to the assignee or participant or proposed
assignee or participant any information relating to the Seller furnished to such
entity by or on behalf of the Seller or by the Agent; provided, that prior to
any such disclosure, the assignee
56
63
or participant or proposed assignee or participant agrees to preserve the
confidentiality of any confidential information relating to the Seller received
by it from any of the foregoing entities.
SECTION 11.09. Execution in Counterparts. This Agreement may
be executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
57
64
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
THE DETROIT EDISON COMPANY
By /s/ Christopher C. Arvani
------------------------------
Title: Assistant Treasurer -
Banking
2000 Second Avenue
Detroit, MI 48226
CORPORATE ASSET FUNDING
COMPANY, INC.,
By: Citicorp North America, Inc.
as Attorney-in-Fact
By /s/ Joseph A. Farina
-------------------------
Vice President
450 Mamaroneck Avenue
Harrison, N.Y. 10528
Attention: President
(Telex No. 127001 Route to
Citiswitch Terminal NYEQF)
CITICORP NORTH AMERICA, INC.
Individually and as Agent
By /s/ Joseph A. Farina
-------------------------
Vice President
450 Mamaroneck Avenue
Harrison, N.Y. 10528
Attention: Corporate Asset
Funding
Department
(Telex No. 127001 Route to
Citiswitch Terminal NYEQF)
58
65
CITIBANK, N.A.
By /s/ Joseph A. Farina
-----------------------
Vice President
450 Mamaroneck Avenue
Harrison, N.Y. 10528
Attention: Corporate Asset
Funding
Department
(Telex No. 127001 Route to
Citiswitch Terminal NYEQF)
59