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TRANSFER AND ADMINISTRATION AGREEMENT
among
ENTERPRISE FUNDING CORPORATION,
as Company
and
BPS FINANCIAL SERVICES, INC.
as Transferor
and
BORG-WARNER SECURITY CORPORATION
as Collection Agent
Dated as of November 21, 1994
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
Page
----
SECTION 1.1 Certain Defined Terms..................................... 1
SECTION 1.2 Other Terms............................................... 23
SECTION 1.3 Computation of Time Periods............................... 23
ARTICLE II
PURCHASES AND SETTLEMENTS
SECTION 2.1 Facility................................................. 24
SECTION 2.2 Transfers; Company Certificate; Eligible Recievables..... 24
SECTION 2.3 Selection of Tranche Periods and Tranche Rates........... 27
SECTION 2.4 Discount, Fees and Other Costs and Expenses.............. 28
SECTION 2.6 Liquidation Settlement Procedures........................ 29
SECTION 2.7 Fees..................................................... 30
SECTION 2.8 Protection of Ownership Interest of the Company.......... 30
SECTION 2.9 Deemed Collections; Application of Payments.............. 32
SECTION 2.10 Payments and Computations, Etc........................... 33
SECTION 2.11 Reports.................................................. 33
SECTION 2.12 Collection Account....................................... 33
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Transferor......... 35
SECTION 3.2 Reaffirmation of Representations and Warranties by the
Transferor............................................. 38
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 Conditions to Closing.................................... 42
ARTICLE V
COVENANTS
SECTION 5.2 Negative Covenants....................................... 51
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ARTICLE VI
ADMINISTRATION AND COLLECTIONS
Page
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SECTION 6.1 Appointment of Collection Agent.......................... 53
SECTION 6.2 Duties of Collection Agent............................... 53
SECTION 6.3 Rights After Designation of New Collection Agent......... 55
SECTION 6.4 Responsibilities of the Transferor....................... 56
ARTICLE VII
TERMINATION EVENTS
SECTION 7.1 Termination Events....................................... 57
SECTION 7.2 Termination.............................................. 61
ARTICLE VIII
INDEMNIFICATION; EXPENSES; RELATED MATTERS
SECTION 8.1 Indemnities by the Transferor............................ 62
SECTION 8.2 Indemnity for Taxes, Reserves and Expenses............... 64
SECTION 8.3 Other Costs, Expenses and Related Matters................ 66
SECTION 8.4 Reconveyance Under Certain Circumstances................. 67
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Term of Agreement........................................ 68
SECTION 9.2 Waivers; Amendments...................................... 68
SECTION 9.3 Notices.................................................. 68
SECTION 9.4 Governing Law; Submission to Jurisdiction; Integration... 70
SECTION 9.5 Severability; Counterparts............................... 71
SECTION 9.6 Successors and Assigns................................... 71
SECTION 9.7 Waiver of Confidentiality................................ 71
SECTION 9.8 Confidentiality Agreement................................ 72
SECTION 9.9 No Bankruptcy Petition Against the Company............... 72
SECTION 9.10 No Recourse Against Stockholders, Officers or Directors.. 72
SECTION 9.11 Characterization of the Transactions Contemplated by the
Agreement; Assignment of Rights Under Receivables
Purchase Agreement..................................... 73
ii
EXHIBITS
EXHIBIT A [Reserved]
EXHIBIT B Credit and Collection Policies and Practices
EXHIBIT C List of Lock-Box Banks
EXHIBIT D Form of Lock-Box Agreement
EXHIBIT E Form of Investor Report
EXHIBIT F Form of Transfer Certificate
EXHIBIT G Form of Weekly Report
EXHIBIT H List of Actions and Suits
EXHIBIT I Location of Records and Chief Executive Offices
EXHIBIT J List of Subsidiaries, Divisions and Tradenames
EXHIBIT K Form of Opinion of Counsel for the Transferor
EXHIBIT L Form of Responsible Officer's Certificate
EXHIBIT M Form of Company Certificate
EXHIBIT N Certain Definitions
iii
TRANSFER AND ADMINISTRATION AGREEMENT
TRANSFER AND ADMINISTRATION AGREEMENT (this "Agreement"), dated as of
November 21, 1994, between BPS FINANCIAL SERVICES, INC., a Delaware corporation,
as transferor (in such capacity, the "Transferor"), BORG-WARNER SECURITY
CORPORATION, a Delaware corporation, as collection agent (in such capacity, the
"Collection Agent"), and ENTERPRISE FUNDING CORPORATION, a Delaware corporation
(the "Company").
PRELIMINARY STATEMENTS
----------------------
WHEREAS, the Transferor may desire to convey, transfer and assign,
from time to time, undivided percentage ownership interests in a pool of certain
billed trade receivables, all monies due or to become due in payment of such
receivables, as well as monies on deposit in certain bank accounts established
under this Agreement, and the Company may desire to accept such conveyance,
transfer and assignment of such undivided percentage ownership interests,
subject to the terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Adverse Claim" means a lien, security interest, charge or
encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person.
"Administrative Agent" means NationsBank of North Carolina, N.A., as
administrative agent.
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. A Person shall be deemed to control another
Person if the controlling Person possesses, directly or indirectly, the power to
direct or cause the direction of the management or policies of the controlled
Person, whether through ownership of voting stock, by contract or otherwise.
"Affiliated Obligor" means any Obligor which is an Affiliate of
another Obligor.
"Aggregate Unpaids" means, at any time, an amount equal to the sum of
(i) the aggregate accrued and unpaid Discount with respect to all Tranche
Periods at such time, (ii) the Net Investment at such time, and (iii) all other
amounts owed (whether due or accrued) hereunder by Transferor to the Company at
such time.
"Arrangement Fee" means the fee payable by the Transferor to the
Administrative Agent pursuant to Section 2.7 hereof, the terms of which are set
forth in the Fee Letter.
"Average Collection Period" means at any time a period of days equal
to the product of (i) a fraction the numerator of which shall be the amount set
forth in the most recent Investor Report as the "Beginning Balance" of the
Receivables and the denominator of which shall be the Collections as set forth
in the most recent Investor Report and (ii) thirty (30).
"Base Rate" or "BR" means, a rate per annum equal to the greater of
(i) the prime rate of interest announced by the Liquidity Provider from time to
time, changing when and as said prime rate changes (such rate
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not necessarily being the lowest or best rate charged by the Liquidity Provider)
and (ii) the rate equal to the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or, if such day is not a
Business Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a Business
Day, the average of the quotations for such day for such transactions received
by the Liquidity Provider from three Federal funds brokers of recognized
standing selected by it plus 2%.
"Borg-Warner" shall mean Borg-Warner Security Corporation, a Delaware
corporation, and its successors.
"Business Day" means any day excluding Saturday, Sunday and any day on
which banks in New York, New York, Charlotte, North Carolina, Dallas, Texas or
Chicago, Illinois are authorized or required by law to close, and, when used
with respect to the determination of any Eurodollar Rate or any notice with
respect thereto, any such day which is also a day for trading by and between
banks in United States dollar deposits in the London interbank market.
"BR Tranche" means a Tranche as to which Discount is calculated at the
Base Rate.
"BR Tranche Period" means, with respect to a BR Tranche, prior to the
Termination Date, a period of up to 30 days requested by the Transferor and
agreed to by the Company or the Liquidity Provider , as the case may be,
commencing on a Business Day requested by the Transferor and agreed to by the
Company or the Liquidity Provider , as the case may be, and after the
Termination Date, a period of one day. If such BR Tranche Period would end on a
day which is not a Business Day, such BR Tranche Period shall end on the next
succeeding Business Day.
"Capitalized Lease" of a Person means any lease of property by such
Person as lessee which would be capitalized on a balance sheet of such Person
prepared in accordance with generally accepted accounting principles.
"CD Rate" shall mean, with respect to any CD Tranche Period, a rate
which is .75% in excess of a rate
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per annum equal to the sum (rounded upward to the nearest 1/100 of 1%) of (A)
the rate obtained by dividing (x) the Certificate of Deposit Rate for such CD
Tranche Period by (y) a percentage equal to 100% minus the stated maximum rate
for all reserve requirements as specified in Regulation D (including without
limitation any marginal, emergency, supplemental, special or other reserves)
that would be applicable during such Tranche Period to a negotiable certificate
of deposit in excess of $100,000, with a maturity approximately equal to such
Tranche Period, of any member bank of the Federal Reserve System plus (B) the
then daily net annual assessment rate (rounded upward, if necessary, to the
nearest 1/100 of 1%) as estimated by the Liquidity Provider for determining the
current annual assessment payable by the Liquidity Provider to the Federal
Deposit Insurance Corporation for insuring such certificates of deposit.
"CD Tranche" means a Tranche as to which Discount is calculated at the
CD Rate.
"CD Tranche Period" means, with respect to a CD Tranche, prior to the
Termination Date, a period of up to one month requested by the Transferor and
agreed to by the Company or the Liquidity Provider, as the case may be,
commencing on a Business Day requested by the Transferor and agreed to by the
Company or the Liquidity Provider, as the case may be, and after the
Termination Date, a period of one day. If such CD Tranche Period would end on a
day which is not a Business Day, such CD Tranche Period shall end on the next
succeeding Business Day.
"Certificate of Deposit Rate" means, with respect to any CD Tranche
Period, the average of the bid rates determined by the Liquidity Provider to be
bid rates per annum, at approximately 10:00 a.m. (New York City time) on the
Business Day before the first day of the CD Tranche Period for which such CD
Rate is to be applicable, of two or more New York certificate of deposit dealers
of recognized standing selected by the Liquidity Provider for the purchase in
New York from the Liquidity Provider at face value of certificates of deposit of
the Liquidity Provider in an aggregate amount approximately comparable to the
amount of the CD Tranche to which such CD Rate is to be applicable and with a
maturi-
4
ty approximately equal to the applicable CD Tranche Period.
"Closing Date" means November 21, 1994.
"Collateral Agent" means NationsBank of North Carolina, N.A., as
collateral agent for any Liquidity Provider, any Credit Support Provider, the
holders of Commercial Paper and certain other parties.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all Finance Charges, if any, and cash proceeds of Related Security
with respect to such Receivable.
"Collection Account" means the account, established by the Collateral
Agent, for the benefit of the Company, pursuant to Section 2.12.
"Collection Agent" means at any time the Person then authorized
pursuant to Section 6.1 to service, administer and collect Receivables.
"Commercial Paper" means the promissory notes of the Company issued by
the Company in the commercial paper market.
"Company Certificate" means the certificate issued to the Company
pursuant to Section 2.2 hereof.
"Concentration Factor" means at any time for any Designated Obligor,
(a) 2% of the Outstanding Balance of the Eligible Receivables, or (b) 3% of the
Outstanding Balance of the Eligible Receivables, if the Obligor's senior
unsecured long term debt is rated at least "BBB-" by S&P and "Baa3" by Moody's,
or (c) such other amount determined by the Company in the reasonable exercise of
its good faith judgment and disclosed in a written notice delivered to the
Transferor.
"Consolidated Net Worth" shall have the meaning specified in
Exhibit N.
"Contract" means an agreement, instrument or invoice, pursuant to or
under which an Obligor shall be obligated to pay the Seller for services
rendered.
5
"CP Rate" means, with respect to any CP Tranche Period, the rate
equivalent to the rate (or if more than one rate, the weighted average of the
rates) at which Commercial Paper having a term equal to such CP Tranche Period
may be sold by any placement agent or commercial paper dealer selected by the
Company, provided, however, that if the rate (or rates) as agreed between any
such agent or dealer and the Company is a discount rate, then the rate (or if
more than one rate, the weighted average of the rates) resulting from the
Company's converting such discount rate (or rates) to an interest-bearing
equivalent rate per annum.
"CP Tranche" means a Tranche as to which Discount is calculated at a
CP Rate.
"CP Tranche Period" means, with respect to a CP Tranche, a period of
days not to exceed 120 days commencing on a Business Day requested by the
Transferor and agreed to by the Company pursuant to Section 2. If such CP
Tranche Period would end on a day which is not a Business Day, such CP Tranche
Period shall end on the next succeeding Business Day.
"Credit and Collection Policy" shall mean the credit and collection
policies and practices, relating to Contracts and Receivables existing on the
date hereof and referred to in Exhibit B attached hereto, as modified from time
to time in compliance with Section 5.2(d).
"Credit Support Agreement" means the agreement between the Company and
the Credit Support Provider evidencing the obligation of the Credit Support
Provider to provide credit support to the Company in connection with the
issuance by the Company of Commercial Paper.
"Credit Support Provider" means the Person or Persons who will provide
credit support to the Company in connection with the issuance by the Company of
Commercial Paper.
"Dealer Fee" means the fee payable by the Transferor to the Collateral
Agent, pursuant to Section 2.4 hereof, the terms of which are set forth in the
Fee Letter.
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"Deemed Collections" means any Collections on any Receivable deemed to
have been received pursuant to Section 2.9(a) or (b).
"Defaulted Receivable" means a Receivable: (i) as to which any
payment, or part thereof, remains unpaid for 120 days or more from the billing
date for such Receivable; (ii) as to which an Event of Bankruptcy has occurred
with respect to the Obligor thereof; (iii) which has been identified by the
Transferor or the Collection Agent as uncollectible; or (iv) which, consistent
with the applicable Credit and Collection Policy, should be written off the
Transferor's books as uncollectible.
"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 Delinquent Receivables as of such date by (ii) the
aggregate Outstanding Balance of all Receivables as of such date less Defaulted
Receivables as of such date.
"Delinquent Receivable" means a Receivable: (i) as to which any
payment, or part thereof, remains unpaid for more than 60 days from the billing
date for such Receivable and (ii) which is not a Defaulted Receivable.
"Designated Financial Officer" means, with respect to any Person, the
controller, treasurer, assistant treasurer or chief financial officer of such
Person.
"Designated Obligor" means, at any time, each Obligor; provided,
however, that any Obligor shall cease to be a Designated Obligor effective three
Business Days following the giving of notice to the Transferor from the Company,
which notice shall contain an explanation in reasonable detail of the reason for
such cessation.
"Dilution Ratio" means, the ratio (expressed as a percentage) computed
as of the last day of each calendar month by dividing (i) the aggregate amount
of credits, rebates, discounts, disputes, warranty claims, repossessed or
returned goods, charge back allowances and other dilutive factors, and any other
billing or other adjustment by the Transferor or the Collection Agent, provided
to Obligors in respect of Receivables during
7
such calendar month by (ii) the aggregate Outstanding Balance of all Receivables
which arose during the preceding calendar month.
"Discount" means, with respect to any Tranche Period:
(TR x TNI x AD)
--
360
Where:
TR = the Tranche Rate applicable to such Tranche Period.
TNI = the portion of the Net Investment allocated to such Tranche Period.
AD = the actual number of days during such Tranche Period.
provided, however, that no provision of this Agreement shall require the payment
or permit the collection of Discount in excess of the maximum permitted by
applicable law; and provided, further, that Discount shall not be considered
paid by any distribution if at any time such distribution is rescinded or must
be returned for any reason.
"Discount Reserve" means, at any time, an amount equal to:
TD + LY
Where:
TD = the sum of the unpaid Discount and Program Fee for all Tranche
Periods.
LY = the Liquidation Yield
"Early Collection Fee" means, for any Tranche Period (such Tranche
Period to be determined without regard to the last sentence in Section 2.3(a))
during which the portion of the Net Investment that was allocated to such
Tranche Period is reduced, the excess, if any, of (i) the additional Discount
that would have accrued
8
during such Tranche Period if such reductions had not occurred, minus (ii) the
income, if any, received by the Company from investing the proceeds of such
reductions.
"Eligible Investments" shall mean (a) negotiable instruments or
securities represented by instruments in bearer or registered or in book-entry
form which evidence (i) obligations fully guaranteed by the United States of
America; (ii) time deposits in, or bankers acceptances issued by, any depositary
institution or trust company incorporated under the laws of the United States of
America or any state thereof and subject to supervision and examination by
Federal or state banking or depositary institution authorities; provided,
however, that at the time of investment or contractual commitment to invest
therein, the certificates of deposit or short-term deposits, if any, or long-
term unsecured debt obligations (other than such obligation whose rating is
based on collateral or on the credit of a Person other than such institution or
trust company) of such depositary institution or trust company shall have a
credit rating from Moody's and S&P of at least "P-1" and "A-1", respectively, in
the case of the certificates of deposit or short-term deposits, or a rating not
lower than one of the two highest investment categories granted by Moody's and
by S&P; (iii) certificates of deposit having, at the time of investment or
contractual commitment to invest therein, a rating from Moody's and S&P of at
least "P-1" and "A-1", respectively; (iv) investments in money market funds
rated in the highest investment category or otherwise approved in writing by the
applicable rating agencies, (b) demand deposits in any depositary institution or
trust company referred to in (a)(ii) above, (c) commercial paper (having
original or remaining maturities of no more than 30 days) having, at the time of
investment or contractual commitment to invest therein, a credit rating from
Moody's and S&P of at least "P-1" and "A-1", respectively, (d) Eurodollar time
deposits having a credit rating from Moody's and S&P of at least "P-1" and "A-
1", respectively, and (e) repurchase agreements involving any of the Eligible
Investments described in clauses (a)(i), (a)(iii) and (d) hereof so long as the
other party to the repurchase agreement has at the time of investment therein, a
rating from Moody's and S&P of at least "P-1" and "A-1", respectively.
9
"Eligible Receivable" means, at any time, any Receivable:
(i) which has been originated by a Seller and as to which the
Seller which originated such Receivable has sold, assigned and
conveyed all of its right title and interest therein the Transferor
pursuant to the Receivables Purchase Agreement and as to which the
Transferor has good title thereto, free and clear of all Adverse
Claims;
(ii) as to which the Transferor or a Seller has satisfied all
obligations to be fulfilled thereunder;
(iii) the Obligor of which is a United States resident, is a
Designated Obligor at the time of the initial creation of an interest
therein hereunder, and is not an Affiliate of any of the parties
hereto (for the avoidance of doubt it is acknowledged that neither
NationsBank Corporation nor Merrill Lynch & Co. or any of their
affiliates should be considered an Affiliate of any of the parties
hereto);
(iv) which, if the Obligor is a government or a governmental
subdivision or agency, no more than (i) 15% of aggregate Outstanding
Balance of Eligible Receivables may be Receivables payable by
municipal governments and (ii) 5% of aggregate Outstanding Balance of
Eligible Receivables may be Receivables payable by the federal
government;
(v) which is not a Defaulted Receivable at the time of the
initial creation of an interest of the Company therein;
(vi) which is not a Delinquent Receivable at the time of the
initial creation of an interest of the Company therein;
(vii) which relates to services which have been performed and
have been billed and which, according to the Contract related
thereto, are required to be paid in full upon receipt by the Obligor
of the billing notice therefor;
10
(viii) which is an "eligible asset" as defined in Rule 3a-7
under the Investment Company Act of 1940, as amended;
(ix) a purchase of which with the proceeds of Commercial Paper
would constitute a "current transaction" within the meaning of
Section 3(a)(3) of the Securities Act of 1933, as amended;
(x) which is an "account" or "general intangible" within the
meaning of Article 9 of the UCC of all applicable jurisdictions;
(xi) which is denominated and payable only in United States
dollars in the United States;
(xii) which, arises under a Contract that together with the
Receivable related thereto, is in full force and effect and
constitutes the legal, valid and binding obligation of the related
Obligor enforceable against such Obligor in accordance with its terms
and is not subject to any offset, counterclaim or other defense at
such time;
(xiii) 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 part of the
Contract related thereto is in violation of any such law, rule or
regulation in any material respect if such violation would impair the
collectibility of such Receivable or would adversely affect the
Company's interest in such Receivable;
(xiv) which (A) satisfies all applicable requirements of the
Credit and Collection Policy and (B) complies with such other non-
arbitrary credit related criteria and requirements as the Company may
from time to time specify to the Transferor following five days'
notice;
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(xv) which was generated in the ordinary course of a Seller's
business and which is subject to a valid sale and assignment from the
Seller to the Transferor under the Receivables Purchase Agreement;
and
(xvi) the Obligor of which has been directed to make all
payments to a specified account with respect to which there shall be
a Lock-Box Agreement in effect.
"Estimated Maturity Period" means, at any time, the period, rounded
upward to the nearest whole number of days, equal to the weighted average days
until due of the Receivables as calculated by the Collection Agent in good faith
and set forth in the most recent Investor Report, such calculation to be based
on the assumptions that (a) each Receivable within a particular aging category,
(as set forth in the Investor Report) will be paid on the last day of such aging
category and (b) the last day of the last such aging category coincides with the
last date on which any Outstanding Balance of any Receivables would be written
off as uncollectible or charged against any applicable reserve or similar
account in accordance with the objective requirements of the Credit and
Collection Policy and the Transferor's normal accounting practices applied on a
basis consistent with those reflected in the Transferor's financial statements,
provided, however, that if the Company shall reasonably disagree with any such
calculation, the Company may recalculate the Estimated Maturity Period, and such
recalculation, in the absence of manifest error, shall be conclusive.
"Eurodollar Rate" means, with respect to any Eurodollar Tranche Period, a
rate which is .625% in excess of a rate per annum equal to the sum (rounded
upwards, if necessary, to the next higher 1/100 of 1%) of (A) the rate obtained
by dividing (i) the applicable LIBOR Rate by (ii) a percentage equal to 100%
minus the reserve percentage used for determining the maximum reserve
requirement as specified in Regulation D (including, without limitation, any
marginal, emergency, supplemental, special or other reserves) that is applicable
to the Liquidity Provider during such Eurodollar Tranche Period in respect of
eurocurrency or eurodollar funding, lending or liabilities (or, if more than one
percentage shall be so applicable, the daily average of such per-
12
centage for those days in such Eurodollar Tranche Period during which any such
percentage shall be applicable) plus (B) the then daily net annual assessment
rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) as estimated by
the Liquidity Provider for determining the current annual assessment payable by
the Liquidity Provider to the Federal Deposit Insurance Corporation in respect
of eurocurrency or eurodollar funding, lending or liabilities.
"Eurodollar Tranche" means a Tranche as to which Discount is
calculated at the Eurodollar Rate.
"Eurodollar Tranche Period" means, with respect to a Eurodollar
Tranche, prior to the Termination Date, a period of up to one month requested by
the Transferor and agreed to by the Company or the Liquidity Provider , as the
case may be, commencing on a Business Day requested by the Transferor and agreed
to by the Company; provided, however, that if such Eurodollar Tranche Period
would expire on a day which is not a Business Day, such Eurodollar Tranche
Period shall expire on the next succeeding Business Day; provided, further, that
if such Eurodollar Tranche Period would expire on (a) a day which is not a
Business Day but is a day of the month after which no further Business Day
occurs in such month, such Eurodollar Tranche Period shall expire on the next
preceding Business Day or (b) a Business Day for which there is no numerically
corresponding day in the applicable subsequent calendar month, such Eurodollar
Tranche Period shall expire on the last Business Day of such month.
"Event of Bankruptcy", with respect to any Person, shall mean (i) that
such Person 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 such Person seeking to adjudicate it as 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 any substantial part of its property
or (ii) if such Person is a corporation, such Person or
13
any Subsidiary shall take any corporate action to authorize any of the
actions set forth in the preceding clause (i).
"Fee Letter" means the letter agreement dated the date hereof between
the Transferor and the Company, as amended, modified or supplemented from time
to time.
"Finance Charges" means, with respect to a Contract, any finance,
interest, late or similar charges owing by an Obligor pursuant to
such Contract.
"Guaranty" of a Person means any agreement by which such Person
assumes, guarantees, endorses, contingently agrees to purchase or provide funds
for the payment of, or otherwise becomes liable upon, the obligation of any
other Person, or agrees to maintain the net worth or working capital or other
financial condition of any other Person or otherwise assures any other creditor
of such other Person against loss, including, without limitation, any comfort
letter, operating agreement or take-or-pay contract and shall include, without
limitation, the contingent liability of such Person in connection with any
application for a letter of credit.
"Incremental Transfer" means a Transfer which is made pursuant to
Section 2.2(a).
"Indebtedness" of a Person means such Person's (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase price of
property other than accounts payable arising in the ordinary course of such
Person's business on terms customary in the trade, (iii) obligations, whether or
not assumed, secured by liens or payable out of the proceeds or production from
property now or hereafter owned or acquired by such Person, (iv) obligations
which are evidenced by notes, acceptances, or other instruments, (v) Capitalized
Lease obligations and (vi) obligations for which such Person is obligated
pursuant to a Guaranty.
"Indemnified Amounts" has the meaning specified in Section 8.1.
"Indemnified Parties" has the meaning specified in Section 8.1.
14
"Interest Coverage Ratio" shall have the meaning specified in Section
7.1(n).
"Investor Report" means a report, in substantially the form of Exhibit
E or in such other form as is mutually agreed to by the Transferor and the
Company, furnished by the Collection Agent to the Company and the Administrative
Agent pursuant to Section 2.11.
"Law" shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or
award of any Official Body.
"Leverage Ratio" shall have the meaning specified in Section 5.3.
"LIBOR Rate" shall mean, with respect to any Eurodollar Tranche
Period, the rate at which deposits in dollars are offered to the Liquidity
Provider in the London interbank market at approximately 11:00 a.m. (London
time) two Business Days before the first day of such Eurodollar Tranche Period
in an amount approximately equal to the Eurodollar Tranche to which the
Eurodollar Rate is to apply and for a period of time approximately equal to the
applicable Eurodollar Tranche Period.
"Liquidation Yield" means, at any time, an amount equal to:
(RVF x LBR x NI) x (EM x 1.5)
----------
360
Where:
RVF = the Rate Variance Factor.
LBR = the Base Rate which is applicable to the liquidation period
of the Net Investment at such time.
NI = the Net Investment.
EM = the Estimated Maturity Period of the Receivables.
15
"Liquidity Provider Agreement" means the agreement between the Company
and the Liquidity Provider evidencing the obligation of the Liquidity Provider
to provide liquidity support to the Company in connection with the issuance by
the Company of Commercial Paper.
"Liquidity Provider" means the Person or Persons who will provide
liquidity support to the Company in connection with the issuance by the Company
of Commercial Paper.
"Lock-Box Account" means an account maintained by the Collection Agent
at a Lock-Box Bank for the purpose of receiving Collections from Receivables.
"Lock-Box Agreement" means an agreement among the Collateral Agent,
the Collection Agent and a Lock-Box Bank in substantially the form of Exhibit D
hereto.
"Lock-Box Bank" means each of the banks set forth in Exhibit C hereto
and such banks as may be added thereto or deleted therefrom pursuant to Section
2.8.
"Loss/Dilution Percentage" means, on any day, the greater of (i) the
sum of (a) 6 times the highest Loss-to-Liquidation Ratio for any calendar month
over the 12 calendar months preceding the then current month, and (b) 2 times
the highest Dilution Ratio for any calendar month over the preceding 12 calendar
months, and (c) 10% and (ii) 22 percent.
"Loss/Dilution Reserve" means, on any day, an amount equal to:
LP x (NI + DR + SFR)
Where:
LP = the Loss/Dilution Percentage at the close of
business of the Collection Agent on such day.
NI = the Net Investment at the close of business of
the Collection Agent on such day.
DR = the Discount Reserve at the close of business
of the Collection Agent on such day.
16
SFR = the Servicing Fee Reserve at the close of business of
the Collection Agent on such day.
Notwithstanding the foregoing, the Loss/Dilution Reserve shall at all times be
at least equal to $16,000,000.
"Loss-to-Liquidation 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 Receivables which became Defaulted
Receivables during such period by (ii) the aggregate amount of Collections
received by the Collection Agent during such period.
"Maximum Net Investment" means $130,000,000.
"Maximum Percentage Factor" means 100%.
"Moody's" means Moody's Investors Service, Inc.
"Net Investment" means the sum of the amounts paid to the Transferor
for each Incremental Transfer less the aggregate amount of Collections received
and applied by the Company to reduce such Net Investment pursuant to Section 2.6
or Section 2.9; provided that the Net Investment shall be restored in the amount
of any Collections so received and applied if at any time the distribution of
such Collections is rescinded or must otherwise be returned for any reason.
"Net Receivables Balance" means at any time the Outstanding Balance of
the Eligible Receivables at such time reduced by the sum of (i) the aggregate
amount by which the Outstanding Balance of all Eligible Receivables of each
Designated Obligor exceeds the Concentration Factor for such Designated Obligor,
plus (ii) the aggregate Outstanding Balance of all Eligible Receivables which
are Defaulted Receivables, plus (iii) the aggregate Outstanding Balance of all
Eligible Receivables which are Delinquent Receivables, plus (iv) the aggregate
Outstanding Balance of all Eligible Receivables due from each of the top ten
Obligors (that is, those Obligors which together with their Affiliates have the
ten largest Eligible Receivable balances) with respect to which 15% or more of
such Obligor's Receivables are Defaulted Receivables.
17
"Obligor" means a Person obligated to make payments for the provision
of goods and services pursuant to a Contract.
"Official Body" shall mean any government or political subdivision or
any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"Other Transferor" means any Person other than the Transferor that has
entered into a receivables purchase agreement or transfer and administration
agreement with the Company.
"Outstanding Balance" of any Receivable at any time means the then
outstanding principal amount thereof including any accrued and outstanding
Finance Charges related thereto.
"Percentage Factor" means the percentage computed at any time of
determination as follows:
NI + LR + DR + SFR
-------------------
NRB
Where:
NI = the Net Investment at the time of such computation.
LR = the Loss/Dilution Reserve at the time of such computation.
DR = the Discount Reserve at the time of such computation.
SFR = the Servicing Fee Reserve at the time of such computation.
NRB = the Net Receivables Balance at the time of such computation.
Notwithstanding the foregoing computation, the Percentage Factor shall
not exceed one hundred percent (100%).
18
"Person" means any corporation, natural person, firm, joint venture,
partnership, trust, unincorporated organization, enterprise, government or any
department or agency of any government.
"Potential Termination Event" means an event which but for the lapse
of time or the giving of notice, or both, would constitute a Termination Event.
"Proceeds" means "proceeds" as defined in Section 9-306(1) of the UCC.
"Program Fee" means the fee payable by the Transferor to the Company
pursuant to Section 2.7 hereof, the terms of which are set forth in the Fee
Letter.
"Purchased Interest" means the interest in the Receivables acquired by
the Liquidity Provider through purchase pursuant to the terms of the Liquidity
Provider Agreement.
"Rate Variance Factor" means the number, computed from time to time in
good faith by the Company, that reflects the largest potential variance (from
minimum to maximum) in selected interest rates over a period of time selected by
the Company from time to time, set forth in a written notice by the Company to
the Transferor and the Collection Agent.
"Receivable" means the indebtedness owed upon creation to the Seller
by any Obligor under a Contract whether constituting an account, chattel paper,
instrument or general intangible, arising in connection with the provision of
services by the Seller, and includes the right to payment of any Finance Charges
and other obligations of such Obligor with respect thereto. Notwithstanding the
foregoing, once a Receivable has been deemed collected pursuant to Section 2.9
hereof, it shall no longer constitute a Receivable hereunder.
"Receivables Purchase Agreement" means that certain Amended and
Restated Receivables Purchase Agreement dated as November 21, 1994 between the
Seller and the Transferor.
"Records" means all Contracts and other documents, books, records and
other information (including,
19
without limitation, computer programs, tapes, discs, punch cards, data
processing software and related property and rights) maintained with respect to
Receivables and the related Obligors.
"Related Security" means with respect to any Receivable:
(i) all security interests or liens and property subject thereto
from time to time, if any, purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such
Receivable or otherwise, together with all financing statements
signed by an Obligor describing any collateral securing such
Receivable;
(ii) all guarantees, insurance or other agreements or
arrangements of any kind from time to time supporting or securing
payment of such Receivable whether pursuant to the Contract related
to such Receivable or otherwise; and
(iii) all Records.
"Section 8.2 Costs" has the meaning specified in Section 8.2(d).
"Seller" shall mean, collectively, Borg-Warner and the other
originators named in the Receivables Purchase Agreement, together with their
successors as permitted in the Receivables Purchase Agreement.
"Servicing Fee" shall mean the fee payable by the Company to the
Collection Agent, with respect to a Tranche, in an amount equal to 1% per annum
on the amount of the Net Investment allocated to such Tranche pursuant to
Section 2.3. Such fee shall accrue from the date of the initial purchase of an
ownership interest in the Receivables to the later of the Termination Date or
the date on which the Net Investment is reduced to zero. On or prior to the
Termination Date such fee shall be payable only from Collections pursuant to,
and subject to the priority of payments set forth in, Section 2.5. After the
Termination Date such fee shall be payable only from Collections pursuant to,
and subject to the priority of payments set forth in, Section 2.6.
20
"Servicing Fee Reserve" means at any time the sum of an amount equal
to the product of (A) the aggregate Outstanding Balance of the Receivables at
such time multiplied by the Servicing Fee percentage and (B) a fraction having
as the numerator, the sum of (x) the Estimated Maturity Period multiplied by 1.5
plus (y) 30 and the denominator of which is 360.
"Standard & Poor's" or "S&P" means Standard & Poor's Ratings Group.
"Subsidiary" of a Person means any corporation more than 50% of the
outstanding voting securities of which shall at any time be owned or controlled,
directly or indirectly, by such Person or by one or more Subsidiaries of such
Person or any similar business organization which is so owned or controlled.
"Termination Date" means the earliest of (i) that Business Day
designated by the Transferor to the Company as the Termination Date at any time
following 30 days' written notice to the Company, (ii) the date of termination
of the commitment of (A) the Liquidity Provider under the Liquidity Provider
Agreement or (B) the Credit Support Provider under the Credit Support Agreement,
(iii) the day on which a Termination Event occurs pursuant to Section 7.1, or
(v) November 20, 1997.
"Termination Event" means an event described in Section 7.1.
"Tranche" means a portion of the Net Investment allocated to a Tranche
Period pursuant to Section 2.3.
"Tranche Period" means a CP Tranche Period, a BR Tranche Period, a CD
Tranche Period or a Eurodollar Tranche Period.
"Tranche Rate" means either the CP Rate, the Base Rate, the CD Rate or
the Eurodollar Rate.
"Transaction Costs" has the meaning specified in Section 8.3(a).
"Transfer" means a conveyance, transfer and assignment by the
Transferor to the Company of an undi-
21
vided percentage ownership interest in Receivables hereunder.
"Transfer Certificate" has the meaning given to it in Section 2.2(a).
"Transfer Date" means, with respect to each Transfer, the Business Day
on which such Transfer is made.
"Transfer Price" means with respect to any Incremental Transfer, the
amount paid to the Transferor by the Company as described in the Transfer
Certificate.
"Transferred Interest" means, at any time of determination, an
undivided percentage ownership interest in (i) each and every then outstanding
Receivable, (ii) all Related Security with respect to each such Receivable,
(iii) all Collections with respect thereto, and (iv) other Proceeds of the
foregoing, equal to the Percentage Factor at such time, and only at such time
(without regard to prior calculations). The Transferred Interest in each
Receivable, together with Related Security and Collections with respect thereto,
shall at all times be equal to the Transferred Interest in each other
Receivable, together with Related Security and Collections. To the extent that
the Transferred Interest shall decrease as a result of a recalculation of the
Percentage Factor, the Company shall be considered to have reconveyed to the
Transferor an undivided percentage ownership interest in each Receivable,
together with Related Security and Collections, in an amount equal to such
decrease such that in each case the Transferred Interest in each Receivable
shall be equal to the Transferred Interest in each other Receivable.
"UCC" means, with respect to any state, the Uniform Commercial Code as
from time to time in effect in such state.
"Unused Facility Fee" means the fee payable by the Transferor to the
Company pursuant to Section 2.7 hereof, the terms of which are set forth in the
Fee Letter.
"Weekly Report" means a report in substantially the form of Exhibit G
hereto (with such modification as may be mutually agreed to by the Transferor
and the Company) prepared and furnished by the Collection Agent
22
to the Administrative Agent, pursuant to Section 2.11, setting forth the Net
Receivable Balance and the calculation of the Percentage Factor.
SECTION 1.2 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 1.3 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."
23
ARTICLE II
PURCHASES AND SETTLEMENTS
SECTION 2.1 Facility. Upon the terms and subject to the conditions
herein set forth the Transferor may, at its option, convey, transfer and assign
to the Company, and the Company shall accept such conveyance, transfer and
assignment from the Transferor, without recourse except as provided herein,
undivided percentage ownership interests in the Receivables, together with
Related Security and Collections with respect thereto, from time to time.
SECTION 2.2 Transfers; Company Certificate; Eligible Receivables (a)
Incremental Transfers. Upon the terms and subject to the conditions herein set
forth the Transferor may, at its option, convey, transfer and assign to the
Company, and the Company shall accept such conveyance, transfer and assignment
from the Transferor, without recourse except as provided herein, undivided
percentage ownership interests in the Receivables, together with Related
Security and Collections with respect thereto (each, an "Incremental Transfer")
from time to time prior to the occurrence of a Termination Date for an aggregate
Transfer Price not to exceed the Maximum Net Investment; provided that the
Company shall not accept any such transfer if it is unable to obtain funds
therefor in the commercial paper market or under the Liquidity Provider
Agreement. The Transferor shall by notice given by telefax offer to convey,
transfer and assign to the Company undivided percentage ownership interests in
the Receivables at least two (2) Business Days prior to the proposed date of
transfer. Each such notice shall specify the desired Transfer Price (which
shall be at least $1,000,000 or integral multiples of $1,000,000 in excess
thereof) and the desired date of such Incremental Transfer, together with the
desired Tranche Period (or range) related thereto as required by Section 2.3.
The Company if it accepts such offer shall accept such offer to convey, transfer
and assign undivided percentage ownership interests by notice given to the
Transferor by telephone or telefax. Each notice of proposed Transfer shall be
irrevocable and binding on the Transferor and the Transferor shall indemnify the
Company against any loss or expense incurred by the Company, either directly or
24
through the Liquidity Provider Agreement as a result of any failure by the
Transferor to complete such Incremental Transfer including, without limitation,
any loss (including loss of anticipated profits) or expense incurred by the
Company, either directly or pursuant to the Liquidity Provider Agreement, by
reason of the liquidation or reemployment of funds acquired by the Company or
the Liquidity Provider (including, without limitation, funds obtained by issuing
commercial paper or promissory notes or obtaining deposits as loans from third
parties) for the Company to fund such Incremental Transfer.
On the date of the initial Incremental Transfer, the Company shall
deliver written confirmation to the Transferor of the Transfer Price, the
Tranche Period(s) and the Tranche Rate(s) relating to such Transfer and the
Transferor shall deliver to the Company the Transfer Certificate in the form of
Exhibit F hereto (the "Transfer Certificate"). The Company shall indicate the
amount of the initial Incremental Transfer together with the date thereof on the
grid attached to the Transfer Certificate. On the date of each subsequent
Incremental Transfer, the Company shall send written confirmation to the
Transferor of the Transfer Price, the Tranche Period(s), the Transfer Date and
the Tranche Rate(s) applicable to such Incremental Transfer. The Company shall
indicate the amount of the Incremental Transfer together with the date thereof
as well as any decrease in the Net Investment on the grid attached to the
Transfer Certificate. The Transfer Certificate shall evidence the Incremental
Transfers. Following each Incremental Transfer, the Company shall deposit to
the Transferor's account at the location indicated in Section 9.3, in
immediately available funds, an amount equal to the Transfer Price for such
Incremental Transfer.
(b) Reinvestment Transfers. On each Business Day occurring after the
initial Incremental Transfer hereunder and prior to the Termination Date, the
Transferor hereby agrees to convey, transfer and assign to the Company, and in
consideration of Transferor's agreement to maintain at all times prior to the
Termination Date a Net Receivables Balance in an amount at least sufficient to
maintain the Percentage Factor at an amount not greater than the Maximum
Percentage Factor, the Company hereby agrees to purchase from the Transferor
undivided percentage ownership interests in each and
25
every Receivable, together with Related Security and Collections with respect
thereto, to the extent that Collections are available for such Transfer in
accordance with Section 2.5, such that after giving effect to such Transfer, (i)
the amount of the Company's Net Investment at the close of the Company's
business on such Business Day shall be equal to the amount of the Company's Net
Investment at the close of the Company's business on the Business Day
immediately preceding such Business Day plus the Transfer Price of any
Incremental Transfer made on such day, if any, and (ii) the Company's
Transferred Interest in each Receivable, together with Related Security and
Collections with respect thereto, shall be equal to its Transferred Interest in
each other Receivable, together with Related Security and Collections with
respect thereto.
(c) All Transfers. Each Transfer shall constitute a purchase of
undivided percentage ownership interests in each and every Receivable, together
with Related Security and Collections with respect thereto, then existing, as
well as in each and every Receivable, together with Related Security and
Collections with respect thereto, which arises at any time after the date of
such Transfer. The Company's aggregate undivided percentage ownership interest
in the Receivables, together with Related Security and Collections with respect
thereto, shall equal the Percentage Factor in effect from time to time.
(d) Company Certificate. The Transferor shall issue to the Company
the Company Certificate, in the form of Exhibit M, on or prior to the date
hereof.
(e) Percentage Factor. The Percentage Factor shall be calculated by
the Collection Agent on the day of the initial Incremental Transfer hereunder.
Thereafter, until the Termination Date, the Collection Agent shall daily
recompute the Percentage Factor and report such recomputations to the Company
weekly in the Weekly Report or as requested by the Company. The Percentage
Factor shall remain constant from the time as of which any such computation or
recomputation is made until the time as of which the next such recomputation
shall be made, notwithstanding any additional Receivables arising, any
Incremental Transfer made pursuant to Section 2.2(a) or any reinvestment
Transfer made pursuant to Section
26
2.2(b) and 2.5 during any period between computations of the Percentage Factor.
The Percentage Factor, as calculated at the close of business on the Business
Day immediately preceding the Termination Date, shall remain constant at all
times thereafter until such time as the Company shall have received the
Aggregate Unpaids, at which time the Percentage Factor shall be recomputed in
accordance with Section 2.6.
SECTION 2.3 Selection of Tranche Periods and Tranche Rates.
(a) At all times hereafter, but prior to the occurrence of a
Termination Event, the Transferor shall, subject to the Company's approval and
the limitations described below, request Tranche Periods and allocate a portion
of the Net Investment to each selected Tranche Period, so that the aggregate
amounts allocated to outstanding Tranche Periods at all times shall equal the
Net Investment. The Transferor shall give the Company irrevocable notice by
telephone of the new requested Tranche Period(s) at least two (2) Business Days
prior to the expiration of any then existing Tranche Period; provided, however,
that the Company may select, in its sole discretion, any such new Tranche Period
if (i) the Transferor fails to provide such notice on a timely basis or (ii) the
Company determines, in its sole discretion, that the Tranche Period requested by
the Transferor is unavailable or for any reason commercially undesirable. The
Company confirms that it is its intention to allocate all or substantially all
of the Net Investment to one or more CP Tranche Periods; provided that the
Company may determine, from time to time, in its sole discretion, that funding
such Net Investment by means of one or more CP Tranche Periods is not desirable
for any reason. If the Liquidity Provider acquires a Purchased Interest with
respect to the Receivables pursuant to the terms of the Liquidity Provider
Agreement, the Liquidity Provider may exercise the right of selection granted to
the Company hereby. The Tranche Rate applicable to any such Purchased Interest
may be the BR Rate, the CD Rate or the Eurodollar Rate, as determined by the
Liquidity Provider. In the case of any Tranche Period outstanding upon the
occurrence of a Termination Event, such Tranche Period shall end on the date of
such occurrence.
27
(b) At all times on and after the occurrence of a Termination Event,
the Company or the Liquidity Provider, as applicable, shall select all Tranche
Periods and Tranche Rates applicable thereto.
SECTION 2.4 Discount, Fees and Other Costs and Expenses.
Notwithstanding the limitation on recourse under Section 2.1, the Transferor
shall pay, as and when due in accordance with this Agreement, all fees
hereunder, Discount, all amounts payable pursuant to Article VIII hereof, if
any, and the Servicing Fee. On the last day of each Tranche Period the
Transferor shall pay to the Company an amount equal to the accrued and unpaid
Discount for such Tranche Period together with an amount equal to the discount
accrued on the Company's Commercial Paper notes to the extent such notes were
issued in order to fund the Transferred Interest in an amount in excess of the
Transfer Price of an Incremental Transfer. The Transferor shall pay to the
Company, on each day on which Commercial Paper is issued by the Company, the
Dealer Fee. Discount shall accrue with respect to each Tranche on each day
occurring during the Tranche Period related thereto. Nothing in this Agreement
shall limit in any way the obligations of the Transferor to pay the amounts set
forth in this Section 2.4.
SECTION 2.5 Non-Liquidation Settlement and Reinvestment Procedures.
On each day after the date of any Incremental Transfer but prior to the
Termination Date, the Collection Agent shall out of the Percentage Factor of
Collections received on or prior to such day and not previously applied or
accounted for: (i) set aside and hold in trust for the Company (or deposit into
the Collection Account if so required pursuant to Section 2.12) an amount equal
to all Discount and the Servicing Fee accrued through such day and not so
previously set aside or paid and (ii) apply the balance of such Percentage
Factor of Collections remaining after application of Collections as provided in
clause (i) of this Section 2.5 to the Transferor, for the benefit of the Company
to the purchase of additional undivided percentage interests in each Receivable
pursuant to Section 2.2(b). On the last day of each Tranche Period, from the
amounts set aside as described in clause (i) of the first sentence of this
Section 2.5, the Collection Agent shall deposit
28
to the Company's account, an amount equal to the accrued and unpaid Discount for
such Tranche Period and shall deposit to its account an amount equal to the
accrued and unpaid Servicing Fee for such Tranche Period. As provided in Section
6.2(b), the Collection Agent shall remit to the Transferor, as soon as
practicable after receipt, such portion of Collections not allocated to the
Company.
SECTION 2.6 Liquidation Settlement Procedures. If on the Termination
Date, the Percentage Factor is greater than the Maximum Percentage Factor, then
the Transferor shall immediately pay to the Company from previously received
Collections, an amount equal to the amount such that, when applied in reduction
of the Net Investment, will result in a Percentage Factor less than or equal to
the Maximum Percentage Factor. Such amount shall be applied by the Company to
the reduction of the Net Investment of Tranche Periods selected by the Company.
On the Termination Date and on each day thereafter, the Collection Agent shall
set aside and hold in trust for the Company (or deposit into the Collection
Account if so required pursuant to Section 2.12) the Percentage Factor of all
Collections received on such day. On the Termination Date, the Collection Agent
shall deposit to the Company's account any remaining amounts set aside pursuant
to Section 2.5(i) above. On the last day of each Tranche Period to occur on or
after the Termination Date, the Collection Agent shall deposit to the Company's
account, the amounts set aside pursuant to the preceding sentence, together with
any remaining amounts set aside pursuant to Section 2.5(i) prior to the
Termination Date but not to exceed the sum of (i) the accrued Discount for such
Tranche Period, (ii) the portion of the Net Investment allocated to such Tranche
Period, and (iii) the aggregate of all other amounts then owed (whether due or
accrued) hereunder by Transferor to the Company. On such day, the Collection
Agent shall deposit to its account, from the amounts set aside pursuant to the
preceding sentence which remain after payment in full of the aforementioned
amounts, the accrued Servicing Fee for such Tranche Period. If there shall be
insufficient funds on deposit for the Collection Agent to distribute funds in
payment in full of the aforementioned amounts, the Collection Agent shall
distribute funds first, in payment of the accrued Discount, second, in payment
of all fees and expenses payable to the Company hereunder, third, if the
Transferor is not the Collection Agent, to the Collection Agent's account, in
payment of the Servicing Fee payable to the Collection Agent, fourth, in
reduction of the Net
29
Investment allocated to such Tranche Period, fifth, in payment of all other
amounts payable to the Company and sixth, if the Transferor is the Collection
Agent, to its account as Collection Agent, in payment of the Servicing Fee
payable to the Transferor as Collection Agent. Following the date on which the
Net Investment has been reduced to zero, all accrued Discount and Servicing Fees
have been paid in full and all other Aggregate Unpaids have been paid in full,
(i) the Collection Agent shall recompute the Percentage Factor, (ii) the Company
shall be considered to have reconveyed to the Transferor any interest in the
Receivables (including the Transferred Interest), (iii) the Collection Agent
shall pay to Transferor any remaining Collections set aside and held by the
Collection Agent pursuant to the second sentence of this Section 2.6 and (iv)
the Company shall execute and deliver to the Transferor, at the Transferor's
expense, such documents or instruments as are necessary to terminate the
Company's interest in the Receivables. Any such documents shall be prepared by
or on behalf of the Transferor.
SECTION 2.7 Fees. Notwithstanding any limitation on recourse
contained in this Agreement, the Transferor shall pay the following non-
refundable fees:
(a) On the last day of each month, to the Company,the Program
Fee and the Unused Facility Fee.
(b) On the date of execution hereof, to the Administrative Agent,
the Arrangement Fee.
SECTION 2.8 Protection of Ownership Interest of the Company.
(a) The Transferor agrees that from time to time, at its expense, it
will promptly execute and deliver all instruments and documents and take all
actions as may be necessary or as the Company may reasonably request in order to
perfect or protect the Transferred Interest or to enable the Company to exercise
or enforce any of its rights hereunder. Without limiting the foregoing, the
Transferor will, upon the request of the Company, in order to accurately reflect
this purchase and sale transaction, execute and file such financing or
continuation statements or amendments thereto or assignments thereof (as
permitted pursuant to Section 9.6
30
hereof) as may be requested by the Company and mark its master data processing
records and other documents with a legend describing the purchase by the Company
of the Transferred Interest. The Transferor shall, upon request of the Company,
obtain such additional search reports as the Company shall request. To the
fullest extent permitted by applicable law, the Company shall be permitted to
sign and file continuation statements and amendments thereto and assignments
thereof without the Transferor's signature. Carbon, photographic or other
reproduction of this Agreement or any financing statement shall be sufficient as
a financing statement. The Transferor shall neither change its name, identity
or corporate structure (within the meaning of Section 9-402(7) of the UCC as in
effect in the States of New York and Illinois) nor relocate its chief executive
office or any office where Records are kept unless it shall have: (i) given the
Company at least thirty (30) days prior notice thereof and (ii) prepared at
Transferor's expense and delivered to the Company all financing statements,
instruments and other documents necessary to preserve and protect the
Transferred Interest or requested by the Company in connection with such change
or relocation. Any filings under the UCC or otherwise that are occasioned by
such change in name or location shall be made at the expense of Transferor.
(b) The Collection Agent shall cause the Sellers to instruct all
Obligors to cause all Collections to be deposited directly with a Lock-Box Bank.
Any Lock-Box Account maintained by a Lock-Box Bank pursuant to the related Lock-
Box Agreement shall be under the ownership and control of the Collateral Agent.
The Collection Agent shall be permitted to give instructions to the Lock-Box
Banks for so long as either a Collection Agent default or any other Termination
Event has not occurred hereunder. The Collection Agent shall not add any bank
as a Lock-Box Bank to those listed on Exhibit C unless such bank has entered
into a Lock-Box Agreement. The Collection Agent shall not terminate any bank as
a Lock-Box Bank unless the Administrative Agent shall have received fifteen (15)
days' prior notice of such termination. If the Transferor or the Collection
Agent receives any Collections or the Transferor is deemed to receive any
Collections pursuant to Section 2.9, the Transferor or the Collection Agent, as
applicable, shall imme-
31
diately, but in any event within forty-eight (48) hours of receipt, remit such
Collections to a Lock-Box Account.
SECTION 2.9 Deemed Collections; Application of Payments. (a) If on
any day the Outstanding Balance of a Receivable is either (x) reduced as a
result of any defective, rejected or returned goods or services, any cash
discount, credit, rebate, allowance or other dilution factor, any billing
adjustment or other adjustment, or (y) reduced or canceled as a result of a
setoff or offset in respect of any claim by any Person (whether such claim
arises out of the same or a related transaction or an unrelated transaction),
the Transferor shall be deemed to have received on such day a collection of such
Receivable in the amount of such reduction or cancellation and the Transferor
shall pay to the Collection Agent an amount equal to such reduction or
cancellation and such amount shall be applied by the Collection Agent as a
Collection in accordance with Section 2.5 or 2.6, as applicable. The Net
Investment shall be reduced by the amount of such payment actually received by
the Company.
(b) If on any day any of the representations or warranties in Article
III is no longer true with respect to a Receivable, the Transferor shall be
deemed to have received on such day a Collection of such Receivable in full and
the Transferor shall on such day pay to the Collection Agent an amount equal to
the aggregate Percentage Factor of the Outstanding Balance of such Receivable
and such amount shall be allocated to the Company and applied by the Collection
Agent as a Collection allocable to the Transferred Interest in accordance with
Section 2.5 or 2.6, as applicable. The Net Investment shall be reduced by the
amount of such payment actually received by the Company.
(c) Any payment by an Obligor in respect of any indebtedness owed by
it to the Transferor shall, except as otherwise specified by such Obligor or
otherwise required by contract or law and unless otherwise instructed by the
Company, be applied as a Collection of any Receivable of such Obligor included
in the Transferred Interest (starting with the oldest such Receivable) to the
extent of any amounts then due and payable thereunder before being applied to
any other receivable or other indebtedness of such Obligor.
SECTION 2.10 Payments and Computations, Etc. All amounts to be paid
or deposited by the Transferor or
32
the Collection Agent hereunder shall be paid or deposited in accordance with the
terms hereof no later than 1:00 p.m. (New York City time) on the day when due in
immediately available funds; if such amounts are payable to the Company they
shall be paid or deposited in accordance with the instructions of the
Administrative Agent, until otherwise notified by the Company. The Transferor
shall, to the extent permitted by law, pay to the Company upon demand, interest
on all amounts not paid or deposited when due to the Company hereunder at a rate
equal to 2% per annum plus the Base Rate. All computations of discount, interest
and all per annum 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. Any computations of amounts payable by the Transferor hereunder to
the Company, the Liquidity Provider or the Credit Support Provider shall be
binding absent manifest error.
SECTION 2.11 Reports. (a) Prior to the 18th day of each month, the
Collection Agent shall prepare and forward to the Administrative Agent (i) an
Investor Report as of the end of the last day of the immediately preceding month
and (ii) if requested by the Company or the Administrative Agent, a listing by
Obligor of all Receivables together with an aging of such Receivables. The
Collection Agent shall prepare and provide to the Administrative Agent such
other information as the Company or the Administrative Agent may reasonably
request.
(b) Beginning on Wednesday November 30, 1994, and on each Wednesday
of each week thereafter, prior to 12:00 noon (New York City time), the
Collection Agent shall deliver to the Administrative Agent a Weekly Report
setting forth the Net Receivable Balance, calculated on the basis of the most
recent information available from the Collection Agent's master servicing
records (which information shall not be more than three (3) Business Days old),
and the calculation of the Percentage Factor as of the preceding day.
SECTION 2.12 Collection Account. There shall be established on the
day of the initial Incremental Transfer hereunder and maintained, for the
benefit of the Company, with the Collateral Agent, a segregated account
(the "Collection Account"), bearing a designation clearly indicating that the
funds deposited therein are held for
33
the benefit of the Company. The Collection Agent shall remit daily within forty-
eight hours of receipt to the Collection Account all Collections received with
respect to any Receivables; provided, however, the Collection Agent shall be
permitted to make payments to the Company on the last day of each Tranche Period
instead of depositing funds into the Collection Account on a daily basis for so
long as, and only for so long as no Collection Agent default and no other
Termination Event has occurred hereunder. Funds on deposit in the Collection
Account (other than investment earnings) shall be invested by the Collateral
Agent in Eligible Investments that will mature so that such funds will be
available prior to the last day of each successive Tranche Period following such
investment. All interest and earnings (net of losses and investment expenses) on
funds on deposit in the Collection Account shall be retained in the Collection
Account and be available to make any payments required to be made hereunder
(including Discount) to the Company. On the date on which the Net Investment is
zero and all amounts payable hereunder have been paid to the Company, any funds
remaining on deposit in the Collection Account shall be paid to the Transferor.
34
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Transferor. The
Transferor represents and warrants to the Company that:
(a) Corporate Existence and Power. The Transferor is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate power and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business in each jurisdiction in which its business is now conducted.
(b) Corporate and Governmental Authorization; Contravention. The
execution, delivery and performance by the Transferor of this Agreement, the
Receivables Purchase Agreement, the Fee Letter, the Company Certificate and the
Transfer Certificate are within the Transferor's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official (except as
contemplated by Section 2.8), and do not contravene, or constitute a default
under, any provision of applicable law or regulation or of the Certificate of
Incorporation or Bylaws of the Transferor or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Transferor or
result in the creation or imposition of any lien on assets of the Transferor or
any of its Subsidiaries (except as contemplated by Section 2.8).
(c) Binding Effect. Each of this Agreement, the Receivables Purchase
Agreement, the Fee Letter and the Company Certificate constitutes and the
Transfer Certificate upon payment by the Company of the Transfer Price set forth
therein will constitute the legal, valid and binding obligation of the
Transferor, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws affecting the rights of
creditors.
35
(d) Perfection. Immediately preceding each Transfer hereunder, the
Transferor shall be the owner of all of the Receivables, free and clear of all
liens, encumbrances, security interests, preferences or other security
arrangement of any kind or nature whatsoever. On or prior to each Transfer and
each recomputation of the Transferred Interest, all financing statements and
other documents required to be recorded or filed in order to perfect and protect
the Transferred Interest against all creditors of and purchasers from the
Transferor will have been duly filed in each filing office necessary for such
purpose and all filing fees and taxes, if any, payable in connection with such
filings shall have been paid in full (except to the extent that such perfection
may be governed by any federal or state law relating to the perfection of an
interest in any Receivable owed by the federal government or a municipality).
(e) Accuracy of Information. All written information heretofore
furnished by the Transferor (including without limitation, the Investor Reports,
the Weekly Reports, any other reports delivered pursuant to Section 2.11 or as
part of the Company's due diligence process and the Transferor's financial
statements) to the Company or the Administrative Agent for purposes of or in
connection with this Agreement or any transaction contemplated hereby is, and
all such information hereafter furnished by the Transferor to the Company or the
Administrative Agent will be, true and accurate in every material respect, on
the date such information is stated or certified.
(f) Tax Status. The Transferor has filed all tax returns (federal,
state and local) required to be filed and has paid or made adequate provision
for the payment of all taxes, assessments and other governmental charges.
(g) Action, Suits. Except as set forth in Exhibit H, there are no
actions, suits or proceedings pending, threatened, or to the knowledge of the
Transferor, probable of assertion, against or affecting the Transferor or its
properties, in or before any court, arbitrator or other body, which question the
validity of the transactions contemplated by this Agreement or which may,
individually or in the aggregate, be reasonably
36
expected to have a material adverse effect on the financial condition of the
Transferor or materially adversely affect the ability of Transferor to perform
its obligations under this Agreement or the Receivables Purchase Agreement.
(h) Use of Proceeds. No proceeds of any Transfer will be used by the
Transferor to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(i) Place of Business. The chief place of business and chief
executive office of the Transferor are located at the address of the Transferor
indicated in Section 9.3 hereof and the offices where the Transferor keeps all
its Records, are located at the address(es) described on Exhibit I or such other
locations notified to the Company in accordance with Section 2.8 in
jurisdictions where all action required by Section 2.8 has been taken and
completed.
(j) Good Title. Upon each Transfer and each recomputation of the
Transferred Interest, the Company shall acquire a valid and perfected first
priority undivided percentage ownership interest to the extent of the
Transferred Interest or a first priority perfected security interest in each
Receivable that exists on the date of such Transfer and recomputation and in the
Related Security and Collections with respect thereto free and clear of any
Adverse Claim.
(k) Tradenames, Etc. As of the date hereof: (i) the Transferor's
chief executive office is located at the address for notices set forth in
Section 9.3 hereof; (ii) the Transferor has only the subsidiaries and divisions
listed on Exhibit J hereto; and (iii) the Transferor has, since its formation in
1992, operated only under the tradenames identified in Exhibit J hereto, and,
since formation, has not changed its name, merged with or into or consolidated
with any other corporation or been the subject of any proceeding under Title 11,
United States Code (Bankruptcy).
(l) Nature of Receivables. Each Receivable included as an "Eligible
Receivable" in any computation or certification required or delivered hereunder
37
did, at such time, in fact, satisfy the definition of "Eligible Receivable".
(m) Coverage Requirement. The Percentage Factor does not exceed
the Maximum Percentage Factor.
(n) Credit and Collection Policy. Since September 27, 1994, there
have been no material changes in the Credit and Collection Policy; since such
date, no material adverse change has occurred in the overall rate of collection
of the Receivables.
(o) No Termination Event. No event has occurred and is continuing
and no condition exists that, with the giving of notice and/or the passage of
time, would constitute a Termination Event.
(p) Not an Investment Company. The Transferor is not an "investment
company" within the meaning of the Investment Company Act of 1940, as amended,
or is exempt from all provisions of such Act.
(q) ERISA. The Transferor is in compliance in all material respects
with ERISA and no lien in favor of the Pension Benefit Guaranty Corporation on
any of the Receivables shall exist.
(r) Receivables. Each Receivable represents all or part of the
sales price of services rendered by the Seller.
Any document, instrument, certificate or notice delivered to the
Company hereunder shall be deemed a representation and warranty by the
Transferor.
SECTION 3.2 Reaffirmation of Representations and Warranties by the
Transferor. On each day that a Transfer is made hereunder, the Transferor, by
accepting the proceeds of such Transfer, whether delivered to the Transferor
pursuant to Section 2.2(a) or Section 2.5, shall be deemed to have certified
that all representations and warranties described in Section 3.1 are correct on
and as of such day as though made on and as of such day. Each Incremental
Transfer shall be subject to the further condition precedent that prior to the
date of such Incremental Transfer, the Collection Agent shall have delivered to
the Administrative Agent, in form and
38
substance satisfactory to the Administrative Agent, a completed Weekly Report
dated within two (2) days prior to the date of such Incremental Transfer,
together with a listing by Obligor, if requested, and such additional
information as may be reasonably requested by the Administrative Agent; and the
Transferor shall be deemed to have represented and warranted that such
conditions precedent have been satisfied.
SECTION 3.3 Representations and Warranties of Borg-Warner. Borg-
Warner, as Collection Agent, represents and warrants to the Company that:
(a) Corporate Existence and Power. Borg-Warner is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate power and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business in each jurisdiction in which its business is now conducted.
(b) Corporate and Governmental Authorization; Contravention. The
execution, delivery and performance by Borg-Warner of this Agreement is within
Borg-Warner's corporate powers, has been duly authorized by all necessary
corporate action, requires no action by or in respect of, or filing with, any
governmental body, agency or official (except as contemplated by Section 2.8),
and do not contravene, or constitutes a default under, any provision of
applicable law or regulation or of the Certificate of Incorporation or Bylaws of
Borg-Warner or of any agreement, judgment, injunction, order, decree or other
instrument binding upon Borg-Warner or result in the creation or imposition of
any lien on assets of Borg-Warner or any of its Subsidiaries (except as
contemplated by Section 2.8).
(c) Binding Effect. This Agreement constitutes the legal, valid and
binding obligation of Borg-Warner, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
affecting the rights of creditors.
(d) Accuracy of Information. All written information heretofore
furnished by Borg-Warner to the Company or the Administrative Agent for purposes
of or in connection with this Agreement or any transaction contem-
39
plated hereby is, and all such information hereafter furnished by Borg-Warner,
as Collection Agent, to the Company or the Administrative Agent will be, true
and accurate in every material respect, on the date such information is stated
or certified.
(e) Tax Status. Borg-Warner has filed all tax returns (federal,
state and local) required to be filed and has paid or made adequate provision
for the payment of all taxes, assessments and other governmental charges.
(f) Action, Suits. Except as set forth in Exhibit H, there are no
actions, suits or proceedings pending, or to the knowledge of Borg-Warner,
threatened, against or affecting Borg-Warner or any Affiliate of Borg-Warner or
their respective properties, in or before any court, arbitrator or other body,
which question the validity of the transactions contemplated by this Agreement
or the Receivables Purchase Agreement, or which may, individually or in the
aggregate, be reasonably expected to have a material adverse effect on the
financial condition of Borg-Warner and its Subsidiaries taken as a whole or
materially adversely affect the ability of Borg-Warner to perform its
obligations under this Agreement or the Receivables Purchase Agreement.
(g) Place of Business. The chief place of business and chief
executive office of each Seller are located at the address of each Seller
indicated in Exhibit I and the offices where each Seller keeps all its Records,
are located at the address(es) described on Exhibit I or such other locations
notified to the Company in accordance with Section 2.8 in jurisdictions where
all action required by Section 2.8 has been taken and completed.
(h) Tradenames, Etc. As of the date hereof: (i) each Seller's chief
executive office is located at the address set forth in Exhibit I; (ii) each
Seller has only the subsidiaries listed on Exhibit J hereto; and (iii) each
Seller has, since the date four months prior to the date hereof, operated only
under the tradenames identified in Exhibit J hereto, and, since the date four
months prior to the date hereof, has not changed its name, merged with or into
or consolidated with any other corporation or been the subject of any
40
proceeding under Title 11, United States Code (Bankruptcy), except as disclosed
in Exhibit J hereto.
(i) [Reserved]
(j) Credit and Collection Policy. Since September 27, 1994, there
have been no material changes in the Credit and Collection Policy; since such
date, no material adverse change has occurred in the overall rate of collection
of the Receivables.
(k) Collections and Servicing. Since June 30, 1994, there has been
no material adverse change in the ability of Borg-Warner to service and collect
the Receivables.
(l) No Termination Event. No event has occurred and is continuing
and no condition exists that, with the giving of notice and/or the passage of
time, would constitute a Termination Event.
(m) ERISA. Borg-Warner is in compliance in all material respects
with ERISA and no lien in favor of the Pension Benefit Guaranty Corporation on
any of its assets shall exist.
(n) Lock-Box Accounts. The names and addresses of all the Lock-Box
Banks, together with the account numbers of the Lock-Box Accounts at such Lock-
Box Banks, are specified in Exhibit C hereto (or at such other Lock-Box Banks
and/or with such other Lock-Box Accounts as have been notified to the Collateral
Agent and for which Lock-Box Agreements have been executed in accordance with
Section 2.8(b) and delivered to the Administrative Agent). All Obligors have
been instructed to make payment to a Lock-Box Account and only Collections are
deposited into the Lock-Box Accounts.
Any document, instrument, certificate or notice delivered by Borg-
Warner to the Company hereunder shall be deemed a representation and warranty by
Borg-Warner.
41
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 Conditions to Closing. On or prior to the date of
execution hereof, the Transferor shall deliver to the Company the following
documents, instruments and fees all of which shall be in a form and substance
acceptable to the Company:
(a) A copy of the Resolutions of the Board of Directors of the
Transferor certified by its Secretary or any Assistant Secretary approving the
Agreement and the other documents to be delivered by the Transferor hereunder.
(b) The Articles of Incorporation of the Transferor certified by the
Secretary of State or other similar official of the Transferor's jurisdiction of
incorporation.
(c) A Good Standing Certificate for the Transferor issued by the
Secretary of State or a similar official of the Transferor's jurisdiction of
incorporation and certificates of qualification as a foreign corporation issued
by the Secretaries of State or other similar officials of each jurisdiction when
such qualification is material to the transactions contemplated by this
Agreement.
(d) A Certificate of the Secretary or any Assistant Secretary of the
Transferor certifying (i) the names and signatures of the officers authorized on
its behalf to execute this Agreement, the Company Certificate, the Transfer
Certificate, the Fee Letter and any other documents to be delivered by it
hereunder (on which certificates the Company may conclusively rely until such
time as the Company shall receive from the Transferor a revised certificate
meeting the requirements of this clause (d)(i)) and (ii) a copy of its By-Laws.
(e) A copy of the Resolutions of the Board of Directors of the
Collection Agent certified by its Secretary or any Assistant Secretary approving
the Agreement and the other documents to be delivered by the Collection Agent
hereunder.
42
(f) The Articles of Incorporation of the Collection Agent certified
by the Secretary of State or other similar official of the Collection Agent's
jurisdiction of incorporation.
(g) A Good Standing Certificate for the Collection Agent issued by
the Secretary of State or a similar official of the Collection Agent's
jurisdiction of incorporation and certificates of qualification as a foreign
corporation issued by the Secretaries of State or other similar officials of
each jurisdiction when such qualification is material to the transactions
contemplated by this Agreement.
(h) A Certificate of the Secretary or any Assistant Secretary of the
Collection Agent certifying (i) the names and signatures of the officers
authorized on its behalf to execute this Agreement, the Company Certificate, the
Transfer Certificate, the Fee Letter and any other documents to be delivered by
it hereunder (on which certificates the Company may conclusively rely until such
time as the Company shall receive from the Collection Agent a revised
certificate meeting the requirements of this clause (d)(i)) and (ii) a copy of
its By-Laws.
(i) A copy of the Resolutions of the Board of Directors of each
Seller certified by its Secretary or any Assistant Secretary approving the
Agreement and the other documents to be delivered by each Seller hereunder.
(j) The Articles of Incorporation of each Seller certified by the
Secretary of State or other similar official of each Seller's jurisdiction of
incorporation.
(k) A Good Standing Certificate for each Seller issued by the
Secretary of State or a similar official of each Seller's jurisdiction of
incorporation and certificates of qualification as a foreign corporation issued
by the Secretaries of State or other similar officials of each jurisdiction when
such qualification is material to the transactions contemplated by this
Agreement.
43
(l) A Certificate of the Secretary or any Assistant Secretary of each
Seller certifying (i) the names and signatures of the officers authorized on its
behalf to execute this Agreement, the Company Certificate, the Transfer
Certificate, the Fee Letter and any other documents to be delivered by it
hereunder (on which certificates the Company may conclusively rely until such
time as the Company shall receive from each Seller a revised certificate meeting
the requirements of this clause (d)(i)) and (ii) a copy of its By-Laws.
(m) [Reserved]
(n) Copies of proper financing statements (Form UCC-3), if any,
necessary to terminate all security interests and other rights of any person in
Receivables previously granted by Transferor.
(o) Certified copies of request for information or copies (Form UCC-
11) (or a similar search report certified by parties acceptable to the Company)
dated a date reasonably near the date of the initial Incremental Transfer
listing all effective financing statements which name the Transferor (under its
present name and any previous name) as debtor and which are filed in
jurisdictions in which the filings were made pursuant to item (l) above together
with copies of such financing statements (none of which shall cover any
Receivables or Contracts).
(p) Executed copies of the Lock-Box Agreements.
(q) An opinion of Mr. Neal Farrell, general counsel of Borg-Warner,
covering certain of the corporate matters set forth in Exhibit K hereto.
(r) An opinion of Kirkland & Ellis, special counsel to the
Transferor, Borg-Warner and the Seller, covering certain of the corporate
matters set forth in Exhibit K hereto and certain insolvency matters.
(s) A certificate of the Transferor in substantially the form of
Exhibit L hereto executed by the Secretary or Assistant Secretary of the
Transferor.
44
(t) A computer tape setting forth all Receivables and the Outstanding
Balances thereon and such other information as the Company may reasonably
request.
(u) An executed copy of the Fee Letter.
(v) The Transferor Certificate, duly executed by the Transferor.
(w) The Company Certificate, duly executed by the Transferor and
appropriately completed.
(x) The Arrangement Fee in accordance with Section 2.7(b).
(y) An Investor Report for October 31, 1994.
(z) An executed copy of the Receivables Purchase Agreement.
(aa) Such other documents as the Company shall reasonably
request.
45
ARTICLE V
COVENANTS
SECTION 5.1 Affirmative Covenants. At all times from the date hereof
to the later to occur of (i) the Termination Date or (ii) the date on which the
Company's Transferred Interest shall be equal to zero, unless the Company shall
otherwise consent in writing:
(a) Financial Reporting. The Transferor and Borg-Warner will
maintain, for itself and each Subsidiary, a system of accounting established and
administered in accordance with generally accepted accounting principles, and
Borg-Warner (or, in the case of the first sentence of clause (iii), clause (iv),
and the second sentence of clause (vii), the Transferor) will furnish to the
Administrative Agent:
(i) Annual Reporting. Within ninety (90) days after the close
of each of its fiscal years, audited financial statements, prepared in
accordance with generally accepted accounting principles on a consolidated
basis for itself and its Subsidiaries, including balance sheets as of the
end of such period, related statements of operations, shareholder's equity
and cash flows, accompanied by an audit report of a nationally recognized
firm of independent certified public accountants (or such other firm of
independent certified public accountants acceptable to the Administrative
Agent) which report shall be unqualified as to going concern and scope of
audit and shall state that such consolidated financial statements present
fairly the financial position of Borg-Warner and its Subsidiaries as at the
dates indicated and the results of their operations and their cash flow for
the periods indicated is in conformity with GAAP and that the examination
had been made in accordance with generally accepted auditing standards.
(ii) Quarterly Reporting. Within forty-five (45) days after the
close of the first three quarterly periods of each of its fiscal years,
for itself and its
46
Subsidiaries, consolidated unaudited balance sheets as at the close of each
such period and consolidated related statements of operations,
shareholder's equity and cash flows for the period from the beginning of
such fiscal year to the end of such quarter, all certified by its
Designated Financial Officer.
(iii) Compliance Certificate. Concurrently with the delivery by
Borg-Warner of the financial statements required hereunder, a compliance
certificate signed by its Designated Financial Officer stating that no
Termination Event or Potential Termination Event exists, or if any
Termination Event or Potential Termination Event exists, stating the nature
and status thereof. Together with the financial statements hereunder, a
compliance certificate signed by a Designated Financial Officer of Borg-
Warner showing the computation of, and showing compliance with, each of the
quarterly financial tests set forth in Section 7.1(m), (n) and (o).
(iv) Notice of Termination Events or Potential Termination
Events. As soon as possible and in any event within two (2) days after the
occurrence of each Termination Event or each Potential Termination Event, a
statement of the Designated Financial Officer of the Transferor setting
forth details of such Termination Event or Potential Termination Event and
the action which the Transferor proposes to take with respect thereto.
(v) Change in Credit and Collection Policy and Debt Ratings.
Within ten (10) days after the date any material change in or amendment to
the Credit and Collection Policy is made, a copy of the Credit and
Collection Policy then in effect indicating such change or amendment.
Within five (5) days after the date of any change in Borg-Warner's public
or private debt ratings, if any, a written certification of Borg-Warner's
public and private debt ratings after giving effect to any such change.
47
(vi) Credit and Collection Policy. Upon request by the Company,
a complete copy of the Credit and Collection Policy then in effect.
(vii) Other Information. Prompt written notice thereof in the
event that any Subsidiary of Borg-Warner becomes a Material Subsidiary (as
that term is defined in Exhibit N hereto); and such other information
including non-financial information) as the Administrative Agent may from
time to time reasonably request.
(b) Conduct of Business. The Transferor will and Borg-Warner will
(x) carry on and conduct its business in substantially the same manner and in
substantially the same or related fields of enterprise as it is presently
conducted and do all things necessary to remain duly incorporated, validly
existing and in good standing as a domestic corporation in its jurisdiction of
incorporation and (y) maintain all requisite authority to conduct its business
in each jurisdiction in which its business is conducted.
(c) Compliance with Laws. The Transferor will and Borg-Warner will
comply in all material respects with all laws, rules, regulations, orders,
writs, judgments, injunctions, decrees or awards to which it may be subject.
(d) Furnishing of Information and Inspection of Records. The
Transferor will furnish to the Company from time to time such information with
respect to the Receivables as the Company may reasonably request, including,
without limitation, listings identifying the Obligor and the Outstanding Balance
for each Receivable. Upon at least two (2) Business Days prior notice, the
Transferor and Borg-Warner will during regular business hours permit the
Company, or its agents or representatives, (i) to examine and make copies of and
abstracts from all Records and (ii) to visit the offices and properties of the
Transferor and Borg-Warner for the purpose of examining such Records, and to
discuss matters relating to Receivables or the Transferor's or Borg-Warner's
performance hereunder with any of the officers, employees or independent public
accountants of the Transferor or Borg-Warner having knowledge of such matters.
48
(e) Keeping of Records and Books of Account. The Transferor and
Borg-Warner (consistent with its role as Collection Agent) will maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Receivables in the event
of the destruction of the originals thereof), and keep and maintain, all
documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without limitation,
records adequate to permit the daily identification of each new Receivable and
all Collections of and adjustments to each existing Receivable). The Transferor
and Borg-Warner will give the Company notice of any material change in the
administrative and operating procedures referred to in the previous sentence.
(f) Performance and Compliance with Receivables and Contracts. The
Transferor and Borg-Warner will at their expense timely and fully perform and
comply with all material provisions, covenants and other promises required to be
observed by it under the Contracts related to the Receivables.
(g) Credit and Collection Policies. Borg-Warner will comply in all
material respects with the Credit and Collection Policy in regard to each
Receivable and the related Contract.
(h) Collections. The Transferor and Borg-Warner shall instruct all
Obligors to cause all Collections to be deposited directly to a Lock-Box
Account.
(i) Collections Received. The Transferor and Borg-Warner shall hold
in trust, and deposit, immediately, but in any event not later than forty-eight
(48) hours of its receipt thereof, to a Lock-Box Account all Collections
received from time to time by them (including without limitation all Collections
deemed to have been received by the Transferor under Section 2.9).
(j) Sale Treatment. The Transferor shall report the transactions
contemplated by the Agreement on its financial statements as a sale of the
Transferred Interest to the Company.
49
(k) Separate Business. The Transferor shall at all times (a) to the
extent the Transferor's office is located in the offices of Borg-Warner or any
Affiliate of Borg-Warner, pay fair market rent for its executive office space
located in the offices of Borg-Warner or any Affiliate of Borg-Warner, (b)
maintain the Transferor's books, financial statements, accounting records and
other corporate documents and records separate from those of Borg-Warner or any
other entity, (c) not commingle the Transferor's assets with those of Borg-
Warner or any other entity; (d) act solely in its corporate name and through its
own authorized officers and agents, (e) make investments directly or by brokers
engaged and paid by the Transferor or its agents (provided that if any such
agent is an Affiliate of the Transferor it shall be compensated at a fair market
rate for its services), (f) separately manage the Transferor's liabilities from
those of Borg-Warner or any Affiliates of Borg-Warner and pay its own
liabilities, including all administrative expenses, from its own separate
assets, and (g) pay from the Transferor's assets all obligations and
indebtedness of any kind incurred by the Transferor. The Transferor shall abide
by all corporate formalities, including the maintenance of current minute books,
and the Transferor shall cause its financial statements to be prepared in
accordance with generally accepted accounting principles in a manner that
indicates the separate existence of the Transferor and its assets and
liabilities. The Transferor shall (i) pay all its liabilities, (ii) not assume
the liabilities of Borg-Warner or any Affiliate of Borg-Warner, and (iii) not
guarantee the liabilities of Borg-Warner or any Affiliate of Borg-Warner. The
officers and directors of the Transferor (as appropriate) shall make decisions
with respect to the business and daily operations of the Transferor independent
of and not dictated by any controlling entity.
(l) Corporate Documents. The Transferor shall only amend, alter,
change or repeal Articles Third, Fourth(b), Sixth, and the last paragraph of
Article Tenth of its Certificate of Incorporation as in effect on the date
hereof with the prior written consent of the Administrative Agent.
SECTION 5.2 Negative Covenants. During the term of this Agreement,
unless the Company shall otherwise consent in writing:
50
(a) No Sales, Liens, Etc. Except as otherwise provided herein,
neither the Transferor or Borg-Warner will sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any Adverse
Claim upon (or the filing of any financing statement) or with respect to, any
inventory or goods (other than sales in the ordinary course of business), the
sale of which may give rise to a Receivable or any Receivable or related
Contract, or upon or with respect to any account which concentrates in a Lock-
Box Bank to which any Collections of any Receivable are sent, or assign any
right to receive income in respect thereof.
(b) No Extension or Amendment of Receivables. Except as otherwise
permitted in Section 6.2, neither the Transferor nor Borg-Warner will extend,
amend or otherwise modify the terms of any Receivable, or amend, modify or waive
any term or condition of any Contract related thereto.
(c) No Amendment of Receivables Purchase Agreement. The Transferor
shall not amend or otherwise modify the Receivables Purchase Agreement without
the prior written consent of the Company.
(d) No Change in Business or Credit and Collection Policy. Neither
the Transferor nor Borg-Warner will make any change in the character of its
business or in the Credit and Collection Policy (in the case of Borg-Warner),
which change would, in either case, impair the collectibility of any Receivable.
(e) Sale of Assets, Etc. Neither the Transferor nor Borg-Warner will
sell, lease or transfer all or substantially all of its assets to any other
person.
(f) Change in Payment Instructions to Obligors. Neither the
Transferor nor any Seller nor the Collection Agent will add or terminate any
bank as a Lock-Box Bank or any account as a Lock-Box Account to or from those
listed in Exhibit C hereto or make any change in its instructions to Obligors
regarding payments to be made to any Lock-Box Account, unless (i) such
instructions are to deposit such payments to another existing Lock-Box Account
or (ii) the Administrative Agent shall have
51
received written notice of such addition, termination or change at least 30 days
prior thereto and the Administrative Agent shall have received a Lock-Box
Agreement executed by each new Lock-Box Bank or an existing Lock-Box Bank with
respect to each new Lock-Box Account, as applicable.
(g) Deposits to Lock-Box Accounts. Neither the Transferor nor Borg-
Warner will deposit or otherwise credit, or cause or permit to be so deposited
or credited, to any Lock-Box Account cash or cash proceeds other than
Collections of Receivables.
(h) Change of Name, Etc. The Transferor will not change its name,
identity or structure or its chief executive office, unless at least 10 days
prior to the effective date of any such change the Transferor delivers to the
Collateral Agent (i) UCC financing statements, executed by the Transferor
necessary to reflect such change and to continue the perfection of the Company's
ownership interests or security interests in the Receivables and (ii) the Lock-
Box Agreements and, in the case of the Lock-Box Agreements, the Lock-Box Banks
necessary to reflect such change and to continue to enable the Collateral Agent
to exercise its rights contained in Section 2.8.
52
ARTICLE VI
ADMINISTRATION AND COLLECTIONS
SECTION 6.1 Appointment of Collection Agent. The servicing,
administering and collection of the Receivables shall be conducted by such
Person (the "Collection Agent") so designated from time to time in accordance
with this Section 6.1. Until the Company gives notice to Borg-Warner of the
designation of a new Collection Agent, Borg-Warner is hereby designated as, and
hereby agrees to perform the duties and obligations of, the Collection Agent
pursuant to the terms hereof. The Company may, upon the occurrence of a
Collection Agent default or any other Termination Event designate as Collection
Agent any Person (including itself) to succeed Borg-Warner 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 hereof. After the occurrence of a Termination
Event, the Company may notify any Obligor of the Transferred Interest. The
Collection Agent may delegate to any Affiliate any portion of its obligation
hereunder in the ordinary course of its business; provided that no such
delegation shall relieve the Collection Agent of any liability hereunder.
SECTION 6.2 Duties of Collection Agent.
(a) The Collection Agent shall take or cause to be taken all such
action as may be necessary or advisable to collect each 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 Transferor and the Company hereby appoints as its agent the
Collection Agent, from time to time designated pursuant to Section 6.1, to
enforce its respective rights and interests in and under the Receivables, the
Related Security and the Contracts. The Collection Agent shall set aside for
the account of the Transferor and the Company their respective allocable shares
of the Collections of Receivables in accordance with Sections 2.5 and 2.6. The
Collection Agent shall segregate and deposit to the Company's account the
Company's allocable share of Collections of Receivables when required pursuant
to
53
Article II hereof. So long as no Termination Event shall have occurred and be
continuing, the Collection Agent may, in accordance with the Credit and
Collection Policy, adjust the Outstanding Balance of a Receivable as the
Transferor may determine to be appropriate to maximize Collections thereof;
provided, however, that such adjustment shall not alter the status of such
Receivable as a Delinquent Receivable or a Defaulted Receivable. The Transferor
shall deliver to the Collection Agent and the Collection Agent shall hold in
trust for the Transferor and the Company in accordance with their respective
interests, all Records which evidence or relate to Receivables or Related
Security. Notwithstanding anything to the contrary contained herein, the
Company shall have the absolute and unlimited right to direct the Collection
Agent (whether the Collection Agent is the Transferor or any other Person) to
commence or settle any legal action to enforce collection of any Receivable or
to foreclose upon or repossess any Related Security; provided that no such
direction may be given unless a Termination Event has occurred and is continuing
hereunder.
(b) The Collection Agent shall hold for the benefit of the Transferor
Collections received minus the Percentage Factor of such Collections. On the
last day of each Tranche Period, the Collection Agent shall deduct from such
Collections and pay to the Company in reduction of the Net Investment any
amounts due under Section 2.9 hereof and unpaid from the Transferor and turn the
remainder of such Collections over to the Transferor. In addition, the
Collection Agent shall, as soon as practicable following receipt thereof, turn
over to the Transferor any collections of any indebtedness of any Obligor which
is not a Receivable. If Borg-Warner is not the Collection Agent, the Collection
Agent, by giving three Business Days' prior written notice to the Company, may
revise the percentage used to calculate the Servicing Fee so long as the revised
percentage will not result in a Servicing Fee that exceeds 110% of the
reasonable and appropriate out-of-pocket costs and expenses of such Collection
Agent incurred in connection with the performance of its obligations hereunder
as documented to the reasonable satisfaction of the Company. The Collection
Agent, if other than the Transferor, shall as soon as practicable upon demand,
deliver to the Transferor all Records in its possession which evidence or relate
to indebtedness of an Obligor which is not a Receivable.
54
(c) On or before 90 days after the end of each fiscal year of the
Collection Agent, beginning with the fiscal year ending December 31, 1994, the
Collection Agent shall cause a firm of independent public accountants (who may
also render other services to the Collection Agent or the Transferor) to furnish
a report to the Company to the effect that they have (i) compared the
information contained in the Investor Reports delivered during such fiscal year
with the information contained in the Contracts and the Collection Agent's
records and computer systems for such period, and that, on the basis of such
examination and comparison, such firm is of the opinion that the information
contained in the Investor Reports reconciles with the information contained in
the Contracts and the Collection Agent's records and computer system and that
the servicing of the Receivables has been conducted in compliance with this
Agreement, (ii) confirmed the Net Receivables Balance as reported on each
Investor Report and Weekly Report delivered during such fiscal year, and (iii)
verified that the Receivables treated by the Collection Agent as Eligible
Receivables in fact satisfied the requirements of the definition thereof
contained herein except, in each case for (a) such exceptions as such firm shall
believe to be immaterial (which exceptions need not be enumerated) and (b) such
other exceptions as shall be set forth in such statement.
(d) Notwithstanding anything to the contrary contained in this
Article VI, the Collection Agent shall have no obligation to collect, enforce or
take any other action described in this Article VI with respect to any
Receivable that is not included in the Transferred Interest other than to
deliver to the Transferor the Collections and documents with respect to any such
Receivable as described in Section 6.2(b).
SECTION 6.3 Rights After Designation of New Collection Agent. At any
time following the designation of a Collection Agent (other than Borg-Warner)
pursuant to Section 6.1:
(i) The Company may direct that payment of all amounts payable
under any Receivable be made directly to the Company or its designee.
55
(ii) Borg-Warner shall, at the Company's request and at Borg-
Warner's expense, give notice of the Company's interest in the Receivables
to each Obligor and direct that payments be made directly to the Company or
its designee.
(iii) Borg-Warner shall, at the Company's request, (A) assemble
all of the Records, and shall make the same available to the Company at a
place selected by the Company or its designee, and (B) segregate all cash,
checks and other instruments received by it from time to time constituting
Collections of Receivables in a manner acceptable to the Company and shall,
promptly upon receipt, remit all such cash, checks and instruments, duly
endorsed or with duly executed instruments of transfer, to the Company or
its designee.
(iv) Upon the occurrence and during the continuation of a
Termination Event, the Transferor hereby authorizes the Company to take any
and all steps in the Transferor's name and on behalf of the Transferor
necessary or desirable, in the determination of the Company, to collect all
amounts due under any and all Receivables, including, without limitation,
endorsing the Transferor's name on checks and other instruments
representing Collections and enforcing such Receivables and the related
Contracts.
SECTION 6.4 Responsibilities of the Transferor. Anything herein to
the contrary notwithstanding, the Transferor shall (i) perform all of its
obligations under the Contracts related to the Receivables to the same extent as
if interests in such Receivables had not been transferred hereunder and the
exercise by the Company of its rights hereunder shall not relieve the Transferor
from such obligations and (ii) pay when due any taxes, including without
limitation, any sales taxes payable in connection with the Receivables and their
creation and satisfaction. The Company shall not have any obligation or
liability with respect to any Receivable or related Contracts, nor shall it be
obligated to perform any of the obligations of the Transferor thereunder.
56
ARTICLE VII
TERMINATION EVENTS
SECTION 7.1 Termination Events. The occurrence of any one or more of
the following events shall constitute a Termination Event:
(a) (i) the Collection Agent or Transferor shall fail to
perform or observe any term, covenant or agreement hereunder (other than as
referred to in clause (ii) of this Section 7.1(a)) and such failure shall
remain unremedied for ten (10) days, or (ii) either the Collection Agent,
any Seller or the Transferor shall fail to make any payment or deposit to
be made by it hereunder or under the Receivables Purchase Agreement when
due or the Collection Agent shall fail to observe or perform any term,
covenant or agreement on the Collection Agent's part to be performed under
Section 2.8(b) hereof; or
(b) any representation, warranty, certification or statement
made by the Transferor or the Collection Agent in this Agreement or by any
Seller in the Receivables Purchase Agreement or in any other document
delivered pursuant hereto or thereto shall prove to have been incorrect in
any material respect when made or deemed made; provided that with respect
to any representation, warranty, certification or statement made pursuant
to Section 3.1(m) which shall prove to have been incorrect in any material
respect when made or deemed made, a Termination Event shall occur if such
representation, warranty, certification or statement remains incorrect for
more than one (1) day; or
(c) the Transferor or Borg-Warner, shall default in the
performance of any payment or undertaking (other than those covered by
clause (a) above) (i) to be performed or observed by it under Sections
5.1(a)(iv), 5.1(a)(v), 5.1(b)(x), 5.1(f), 5.1(g), 5.1(h), 5.1(i), 5.1(k),
5.1(l), 5.2(a), (c), (d), (e), (f) or (h)(ii) hereof or under Sections
7.1(e), 7.1(g), 7.1(h), 7.3(a), 7.3(c), 7.3(d), 7.3(e), 7.3(f) or 8.2(a) of
the Receivables Purchase Agreement or (ii) to be performed or observed
under any other provision hereof or under the Receivables Purchase
Agreement and such default in the
57
case of this clause (ii) shall continue for ten (10) days; or
(d) (i) failure of Borg-Warner or any of its Subsidiaries to pay
when due (x) any principal or interest on any Indebtedness (as such term is
defined in Exhibit N hereto) in an individual principal amount of
$4,000,000 or items of Indebtedness with an aggregate principal amount of
$8,000,000 or more or (y) any Contingent Obligation (as such term is
defined in Exhibit N hereto) in an individual principal amount of
$4,000,000 or more or Contingent Obligations with an aggregate principal
amount of $8,000,000 or more, in each case beyond the end of any period
prior to which the obligee is prohibited from accelerating payment
thereunder; or (ii) breach or default of Borg-Warner or any of its
Subsidiaries with respect to any other material term of (x) any evidence of
any Indebtedness in an individual principal amount of $4,000,000 or more or
items of Indebtedness with an aggregate principal amount of $8,000,000 or
more or any Contingent Obligation in an individual principal amount of
$4,000,000 or more or Contingent Obligations with an aggregate principal
amount of $8,000,000 or more; (y) any loan agreement, mortgage, indenture
or other agreement relating thereto, if the effect of such failure, default
or breach is to cause, or to permit the holder or holders of that
Indebtedness or Contingent Obligation (or a trustee on behalf of such
holder or holders) then to cause, that Indebtedness or Contingent
Obligation to become or be declared due prior to its stated maturity (or
the stated maturity of any underlying obligation, as the case may be); or
(e) any Event of Bankruptcy shall occur with respect to the
Transferor, the Collection Agent, any Seller or any Material Subsidiary (as
such term is defined in Exhibit N hereto) of Borg-Warner; or
(f) the Transferor shall, for any reason, fail to have a valid
ownership interest in the Receivables at the time of Transfer, or the
Company shall, for any reason, fail to have a valid and perfected first
priority security interest in the Receivables; or
(g) either of the Transferor, Borg-Warner or any Seller shall
enter into any transaction or merger whereby it is not the surviving
entity; provided however,
58
that if such transaction or merger involves Borg-Warner, and the Company's
written approval is obtained for the assumption by a Subsidiary of Borg-
Warner of Borg-Warner's obligations hereunder in its individual capacity
and under the Receivables Purchase Agreement as a Seller, such event shall
not constitute a Termination Event; provided further, that any Seller may
merge or consolidate with another Seller; provided further, that any Seller
(other than Borg-Warner) may voluntarily liquidate and convey all or
substantially all of its assets to another Seller; and provided further,
that any Seller may be acquired by merger or otherwise by another Person if
the Net Receivables Balance calculated solely by reference to Receivables
originated by such Seller constitutes less than 10% of the aggregate Net
Receivables Balance, and all Receivables generated by such Seller are
removed upon such a sale from the aggregate Net Receivables Balance (upon
such acquisition, such Seller shall be removed from, and shall no longer be
a party to, the Receivables Purchase Agreement) without causing a
Termination Event, such sale shall not constitute a Termination Event; or
(h) any material adverse change in the operations of any Seller,
Borg-Warner, the Transferor or the Collection Agent shall occur or any
other event shall occur which materially affects any Seller's, Borg-
Warner's, the Transferor's or the Collection Agent's ability to either
collect the Receivables or to perform under this Agreement or the
Receivables Purchase Agreement; or
(i) the Percentage Factor as calculated in any Weekly Report
exceeds the Maximum Percentage Factor; or
(j) the Dilution Ratio, averaged for three consecutive months,
exceeds 1.5%; or
(k) the Loss to Liquidation Ratio, averaged for three
consecutive months, exceeds 1.5%; or
(l) the Delinquency Ratio, averaged for three consecutive
months, exceeds 10%; or
(m) Borg-Warner permits the ratio of (x) Funded Debt to (y)
Consolidated EBITDA (as such terms are defined in Exhibit N hereto) over
any four consecutive
59
fiscal quarter period to be greater than the ratio set forth below for the
respective fiscal quarter (such quarter being the last fiscal quarter in
such four fiscal quarter period):
Fourth Quarter, 1994 3.40 to 1.0
First Quarter, 1995 3.40 to 1.0
Second Quarter, 1995 3.30 to 1.0
Third Quarter, 1995 3.20 to 1.0
Fourth Quarter, 1995 3.20 to 1.0
First Quarter, 1996 3.10 to 1.0
Second Quarter, 1996,
and each
quarter thereafter, 3.00 to 1.0; or
(n) Borg-Warner permits the ratio of (x) Consolidated EBITDA
minus Consolidated Capital Expenditures to (y) Consolidated Interest
Expense (as such terms are defined in Exhibit N hereto) over any four
consecutive fiscal quarter period to be less than the ratio set forth below
for the respective fiscal quarter (such quarter being the last fiscal
quarter in such four fiscal quarter period):
Fourth Quarter, 1994 1.60 to 1.0
First Quarter, 1995 1.60 to 1.0
Second Quarter, 1995 1.60 to 1.0
Third Quarter, 1995 1.60 to 1.0
Fourth Quarter, 1995,
and each quarter
thereafter, 1.75 to 1.0; or
(o) Borg-Warner's Consolidated Net Worth at (i) the fiscal year
ended December 31, 1994 shall be less than $50 million and (ii) the end of
each fiscal quarter thereafter shall be less than the sum of (x) 50% of
Consolidated Net Income (such number not to be less than zero) for such
fiscal quarter plus (y) 100% of any subsequent equity issue plus (z) the
minimum amount of Consolidated Net Worth as calculated for the immediately
preceding fiscal quarter; or
(p) Borg-Warner's senior unsecured debt is rated below B- by
Standard & Poor's or B3 by Moody's, or its subordinated unsecured debt is
rated below CCC+ by Standard & Poor's or CCC1 by Moody's.
60
SECTION 7.2 Termination. (a) If a Termination Event occurs, the
Company may, by notice to the Transferor, declare all outstanding Tranche
Periods to be ended and designate the Base Rate plus 2% to be applicable to the
Net Investment.
(b) In addition, if any Termination Event occurs the Company and the
Collateral Agent shall have all of the rights and remedies provided to a secured
creditor or a purchaser of accounts under the UCC by applicable law in respect
thereto.
61
ARTICLE VIII
INDEMNIFICATION; EXPENSES; RELATED MATTERS
SECTION 8.1 Indemnities by the Transferor. Without limiting any other
rights which the Company may have hereunder or under applicable law, the
Transferor hereby agrees to indemnify the Company, the Liquidity Provider and
the Credit Support Provider and any permitted assigns and their respective
officers, directors and employees (collectively, "Indemnified Parties") from and
against any and all damages, losses, claims, liabilities, costs and expenses,
including reasonable attorneys' fees (which such attorneys may be employees of
the Liquidity Provider, the Credit Support Provider or the Company) 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, either directly or
indirectly, by the Company of the Transferred Interest excluding, however, (i)
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of an Indemnified Party or (ii) recourse (except as
otherwise specifically provided in this Agreement) for uncollectible
Receivables. Without limiting the generality of the foregoing, the Transferor
shall indemnify each Indemnified Party for Indemnified Amounts relating to or
resulting from:
(i) reliance on any representation or warranty made by the
Transferor (or any officers of the Transferor) under or in connection with
this Agreement, any Investor Report or any other information or report
delivered by the Transferor pursuant hereto, which shall have been false or
incorrect in any material respect when made or deemed made;
(ii) the failure by the Transferor to comply with any applicable
law, rule or regulation with respect to any Receivable or the related
Contract, or the nonconformity of any Receivable or the related Contract
with any such applicable law, rule or regulation;
62
(iii) the failure to vest and maintain vested in the Company an
undivided percentage ownership interest, to the extent of the Transferred
Interest, in the Receivables included in the Transferred Interest, free and
clear of any Adverse Claim;
(iv) the failure to file, or any delay in filing, financing
statements, continuation statements, or other similar instruments or
documents under the UCC of any applicable jurisdiction or other applicable
laws with respect to any Receivable included in the Transferred Interest
and the failure to perfect the Company's interest in the Receivables
including any such failure in respect of any Receivable the Obligor of
which is the federal government or a municipality;
(v) any dispute, claim, offset or defense (other than discharge
in bankruptcy) of the Obligor to the payment of any Receivable included in
the Transferred Interest (including, without limitation, a defense based on
such Receivable or the related Contract not being 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 merchandise or
services related to such Receivable or the furnishing or failure to furnish
such merchandise or services;
(vi) any failure of Borg-Warner, as Collection Agent, to perform
its duties or obligations in accordance with the provisions of Article VI;
or
(vii) any products liability claim or personal injury or
property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with merchandise or services
which are the subject of any Receivable;
provided, however, that if the Company enters into agreements for the purchase
of interests in receivables from
one or more Other Transferors, the Company shall allocate such Indemnified
Amounts which are in connection with the Liquidity Provider Agreement, the
Credit Support Agreement or the credit support furnished by the Credit Support
Provider to the Transferor and each Other Trans-
63
feror; and provided, further, that if such Indemnified Amounts are attributable
to the Transferor and not attributable to any Other Transferor, the Transferor
shall be solely liable for such Indemnified Amounts or if such Indemnified
Amounts are attributable to Other Transferors and not attributable to the
Transferor, such Other Transferors shall be solely liable for such Indemnified
Amounts.
SECTION 8.2 Indemnity for Taxes, Reserves and Expenses. (a) If after
the date hereof, the adoption of any Law or bank regulatory guideline or any
amendment or change in the interpretation of any existing or future Law or bank
regulatory guideline by any Official Body charged with the administration,
interpretation or application thereof, or the compliance with any directive of
any Official Body (in the case of any bank regulatory guideline, whether or not
having the force of Law):
(i) shall subject any Indemnified Party to any tax, duty or
other charge with respect to this Agreement, the Transferred Interest, the
Receivables or payments of amounts due hereunder, or shall change the basis
of taxation of payments to any Indemnified Party of amounts payable in
respect of this Agreement, the Transferred Interest, the Receivables or
payments of amounts due hereunder or its obligation to advance funds under
the Liquidity Provider Agreement or the credit support furnished by the
Credit Support Provider or otherwise in respect of this Agreement, the
Transferred Interest or the Receivables (except for changes in the rate of
general corporate, franchise, net income or other income tax imposed on
such Indemnified Party by the jurisdiction in which such Indemnified
Party's principal executive office is located);
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System) against assets of, deposits with or for the account of, or credit
extended by, any Indemnified Party or shall impose on any Indemnified Party
or on the United States
64
market for certificates of deposit or the London interbank market
any other condition affecting this Agreement, the Transferred Interest, the
Receivables or payments of amounts due hereunder or its obligation to
advance funds under the Liquidity Provider Agreement or the credit support
provided by the Credit Support Provider or otherwise in respect of this
Agreement, the Transferred Interest or the Receivables; or
(iii) imposes upon any Indemnified Party any other expense
(including, without limitation, reasonable attorneys' fees and expenses,
and expenses of litigation or preparation therefor in contesting any of the
foregoing) with respect to this Agreement, the Transferred Interest, the
Receivables or payments of amounts due hereunder or its obligation to
advance funds under the Liquidity Provider Agreement or the credit support
furnished by the Credit Support Provider or otherwise in respect of this
Agreement, the Transferred Interests or the Receivables,
and the result of any of the foregoing is to increase the cost to such
Indemnified Party with respect to this Agreement, the Transferred Interest, the
Receivables, the obligations hereunder, the funding of any purchases hereunder,
the Liquidity Provider Agreement or the Credit Support Agreement, by an amount
deemed by such Indemnified Party to be material, then, within ten (10) days
after demand by the Company, the Transferor shall pay to the Company such
additional amount or amounts as will compensate such Indemnified Party for such
increased cost or reduction.
(b) If any Indemnified Party shall have determined that after the
date hereof, the adoption of any applicable Law or bank regulatory guideline
regarding capital adequacy, or any change therein, or any change in
the interpretation thereof by any Official Body, or any directive regarding
capital adequacy (in the case of any bank regulatory guideline, whether or not
having the force of law) of any such Official Body, has or would have the effect
of reducing the rate of return on capital of such Indemnified Party (or its
parent) as a conse-
65
quence of such Indemnified Party's obligations hereunder or with respect hereto
to a level below that which such Indemnified Party (or its parent) could have
achieved but for such adoption, change, request or directive (taking into
consideration its policies with respect to capital adequacy) by an amount deemed
by such Indemnified Party to be material, then from time to time, within ten
(10) days after demand by the Company, the Transferor shall pay to the Company
such additional amount or amounts as will compensate such Indemnified Party (or
its parent) for such reduction.
(c) The Company will promptly notify the Transferor of any event of
which it has knowledge, occurring after the date hereof, which will entitle an
Indemnified Party to compensation pursuant to this Section. A notice by the
Company claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, the Company may use
any reasonable averaging and attributing methods.
(d) Anything in this Section 8.2 to the contrary notwithstanding, if
the Company enters into agreements for the acquisition of interests in
receivables from one or more Other Transferors, the Company shall allocate the
liability for any amounts under this Section 8.2 ("Section 8.2 Costs") to the
Transferor and each Other Transferor; and provided, further, that if such
Section 8.2 Costs are attributable to the Transferor and not attributable to any
Other Transferor, the Transferor shall be solely liable for such Section 8.2
Costs or if such Section 8.2 Costs are attributable to Other Transferors and not
attributable to the Transferor, such Other Transferors shall be solely liable
for such Section 8.2 Costs.
SECTION 8.3 Other Costs, Expenses and Related Matters. (a) The
Transferor agrees, upon receipt of a written invoice, to pay or cause to be
paid, and to save the Company and the Administrative Agent harmless against
liability for the payment of, all reasonable out-of-pocket expenses (including,
without limitation, attorneys', accountant's and other third parties' fees and
expenses, any filing fees and expenses incurred by officers or employees of the
Company) incurred by or on
66
behalf of the Company and the Administrative Agent (i) in connection with the
negotiation, execution, delivery and preparation of this Agreement and any
documents or instruments delivered pursuant hereto and the transactions
contemplated hereby (including, without limitation, the perfection or protection
of the Transferred Interest) and (ii) from time to time (a) relating to any
amendments, waivers or consents under this Agreement, (b) arising in connection
with the Company's or its agent's enforcement or preservation of rights
(including, without limitation, the perfection and protection of the Transferred
Interest under this Agreement), or (c) arising in connection with any audit,
dispute, disagreement, litigation or preparation for litigation involving this
Agreement (all of such amounts, collectively, "Transaction Costs").
(b) Transferor shall pay the Company on demand any Early Collection
Fee due on account of the reduction of a Tranche on a day prior to the last day
of its Tranche Period.
SECTION 8.4 Reconveyance Under Certain Circumstances. Transferor
agrees to accept the reconveyance from the Company of the Transferred Interest
if the Company notifies Transferor of a material breach of any representation or
warranty made or deemed made pursuant to Article III of this Agreement and
Transferor shall fail to cure such breach within 15 days (or, in the case of the
representations and warranties in Sections 3.1(d) and 3.1(j), 3 days) of such
notice. The reconveyance price shall be paid by the Transferor to the Company
in immediately available funds on such 15th day (or 3rd day, if applicable) in
an amount equal to the Aggregate Unpaids.
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ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Term of Agreement. This Agreement shall terminate
following the Termination Date when the Net Investment has been reduced to zero,
all accrued Discount has been paid in full and all other Aggregate Unpaids have
been paid in full; provided, however, that (i) the rights and remedies of the
Company with respect to any representation and warranty made or deemed to be
made by Transferor pursuant to this Agreement, (ii) the indemnification and
payment provisions of Article VIII, and (iii) the agreement set forth in Section
9.9, shall be continuing and shall survive any termination of this Agreement.
SECTION 9.2 Waivers; Amendments. No failure or delay on the part of
the Company in exercising any power, right or remedy under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or remedy preclude any other further exercise thereof or the
exercise of any other power, right or remedy. The rights and remedies herein
provided shall be cumulative and nonexclusive of any rights or remedies provided
by law. Any provision of this Agreement may be amended if, but only if, such
amendment is in writing and is signed by the Transferor and the Company.
SECTION 9.3 Notices. Except as provided below, all communications and
notices provided for hereunder shall be in writing (including bank wire, telex,
telecopy or electronic facsimile transmission or similar writing) and shall be
given to the other party at its address or telecopy number set forth below or at
such other address or telecopy number as such party may hereafter specify for
the purposes of notice to such party. Each such notice or other communication
shall be effective (i) if given by telecopy, when such telecopy is transmitted
to the telecopy number specified in this Section and confirmation is received,
(ii) if given by mail 3 Business Days following such posting, or (iii) if given
by any other means, when received at the address specified in this Section.
However, anything in this Section to the contrary notwithstanding, the
Transferor hereby authorizes
68
the Company to effect Transfers, Tranche Period and Tranche Rate selections
based on telephonic notices made by any Person which the Company in good faith
believes to be acting on behalf of the Transferor. The Transferor agrees to
deliver promptly to the Company a written confirmation of each telephonic notice
signed by an authorized officer of Transferor. However, the absence of such
confirmation shall not affect the validity of such notice. If the written
confirmation differs in any material respect from the action taken by the
Company, the records of the Company shall govern absent manifest error.
If to the Company:
Enterprise Funding Corporation
c/o Merrill Lynch Money Markets Inc.
World Financial Center--South Tower
225 Liberty Street
New York, New York 10218
Telephone: (212) 236-7200
Telecopy: (212) 236-7584
(with a copy to the Administrative Agent)
If to the Transferor:
BPS Financial Services, Inc.
200 South Michigan Avenue
Chicago, Illinois 60604
Telephone: (312)322-8500
Telecopy: (312)322-8712
Payment Information:
Bank of America Illinois
ABA #071000039
Account #71-79669
If to the Collection Agent:
Borg-Warner Security Corporation
200 South Michigan Avenue
Chicago, Illinois 60604
Attention: Scott R. Veldman
Telephone: (312) 322-8722
Telephone: (312) 322-8712
69
If to the Collateral Agent:
NationsBank of North Carolina, N.A.
NationsBank Corporate Center--7th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath--
Investment Banking
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
If to the Administrative Agent:
NationsBank of North Carolina, N.A.
NationsBank Corporate Center--7th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath--
Investment Banking
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
SECTION 9.4 Governing Law; Submission to Jurisdiction; Integration.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK. THE TRANSFEROR HEREBY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN
DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW
YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. The Transferor hereby
irrevocably waives, to the fullest extent it may effectively do so, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. Nothing in
this Section 9.4 shall affect the right of the Company to bring any action or
proceeding against the Transferor or its property in the courts of other
jurisdictions.
(b) This Agreement contains the 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.
70
SECTION 9.5 Severability; 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. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 9.6 Successors and Assigns.
(a) This Agreement shall be binding on the parties hereto and their
respective successors and assigns; provided, however, that the Transferor may
not assign any of its rights or delegate any of its duties hereunder without the
prior written consent of the Company. No provision of this Agreement shall in
any manner restrict the ability of the Company to assign, participate, grant
security interests in, or otherwise transfer any portion of the Transferred
Interest.
(b) The Transferor hereby agrees and consents to the assignment by
the Company from time to time of all or any part of its rights under, interest
in and title to this Agreement and the Transferred interest to any Liquidity
Provider. In addition, the Transferor hereby agrees and consents to the
complete assignment by the Company of all of its rights under, interest in and
title to this Agreement and the Transferred Interest to the Collateral Agent.
SECTION 9.7 Waiver of Confidentiality. The Transferor hereby consents
to the disclosure of any non-public information with respect to it received by
the Company or the Administrative Agent to any of the Company, any nationally
recognized rating agency rating the Company's commercial paper, the
Administrative Agent, the Liquidity Provider or the Credit Support Provider in
relation to this Agreement (only if such non-public information is accompanied
by a statement that such
71
Person agrees, by receipt of such information, to maintain the confidentiality
of such information).
SECTION 9.8 Confidentiality Agreement. The Transferor hereby agrees
that it will not disclose the contents of this Agreement, the Fee Letter or any
other proprietary or confidential information of the Company, the Collateral
Agent, the Administrative Agent, the Liquidity Provider or the Credit Support
Provider to any other Person except (i) its auditors and attorneys, employees or
financial advisors (other than any commercial bank) and any nationally
recognized rating agency, provided such auditors, attorneys, employees,
financial advisors or rating agencies are informed of the highly confidential
nature of such information or (ii) as otherwise required by applicable law or
order of a court of competent jurisdiction or (iii) to the extent such
information is otherwise publicly available.
SECTION 9.9 No Bankruptcy Petition Against the Company. The
Transferor hereby covenants and agrees that, prior to the date which is one year
and one day after the payment in full of all outstanding Commercial Paper or
other indebtedness of the Company, it will not institute against, or join any
other Person in instituting against, the Company any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any state of the United States.
SECTION 9.10 No Recourse Against Stockholders, Officers or Directors.
No recourse under any obligation, covenant or agreement of the Company contained
in this Agreement shall be had against Merrill Lynch Money Markets Inc. (or any
affiliate thereof), or any stockholder, officer or director of the Company, as
such, by the enforcement of any assessment or by any legal or equitable
proceeding, by virtue of any statute or otherwise; it being expressly agreed and
understood that this Agreement is solely a corporate obligation of the Company,
and that no personal liability whatever shall attach to or be incurred by
Merrill Lynch Money Markets Inc. (or any affiliate thereof), or the
stockholders, officers or directors of the buyer, as such, or any of them, under
or by reason of any of the obligations, covenants or agreements of the Company
contained in this Agreement, or implied therefrom, and that any and all personal
liabili-
72
ty for breaches by the Company of any of such obligations, covenants or
agreements, either at common law or at equity, or by statute or constitution, of
Merrill Lynch Money Markets Inc. (or any affiliate thereof) and every such
stockholder, officer or director is hereby expressly waived as a condition of
and consideration for the execution of this Agreement.
SECTION 9.11 Characterization of the Transactions Contemplated by the
Agreement; Assignment of Rights Under Receivables Purchase Agreement. It is the
intention of the parties that the transactions contemplated hereby constitute
the sale of the Transferred Interest, conveying good title thereto free and
clear of any Adverse Claims to the Company and that the Transferred Interest not
be part of the Transferor's estate in the event of an insolvency. If,
notwithstanding the foregoing, the transactions contemplated hereby should be
deemed a financing, the parties intend that the Transferor shall be deemed to
have granted to the Company, and the Transferor hereby grants to the Company, a
first priority perfected security interest in all of the Transferor's right,
title and interest in, to and under the Receivables, together with Related
Security and Collections with respect thereto, and together with all of the
Transferor's rights under the Receivables Purchase Agreement with respect to the
Receivables and with respect to any obligations thereunder of the Sellers with
respect to the Receivables, and that this Agreement shall constitute a security
agreement under applicable law. The Transferor hereby assigns to the Company
all of its rights under the Receivables Purchase Agreement with respect to the
Receivables and with respect to any obligations thereunder of the Sellers with
respect to the Receivables. The Transferor agrees that neither it nor the
Collection Agent shall give any consent or waiver required or permitted to be
given under the Receivables Purchase Agreement without the prior consent of
either the Company or the Administrative Agent.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
73
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Transfer and Administration Agreement as of the date first written above.
ENTERPRISE FUNDING CORPORATION,
as Company
By: -------------------------
Name:
Title:
BPS FINANCIAL SERVICES, INC.
as Transferor
By: -------------------------
Name:
Title:
BORG-WARNER SECURITY CORPORATION,
individually and as Collection Agent
By: _______________________
Name:
Title:
74
EXHIBIT N
---------
The following terms used in Article VII shall have the following
meanings:
"Asset Sale" means the sale, lease, assignment or other transfer for
value by Company or any of its Subsidiaries to any Person, whether in a single
transaction or a series of related transactions (other than to Company or any of
its Subsidiaries) of (i) any of the stock of any of Company's Subsidiaries; (ii)
all or substantially all of the assets of any division or line of business of
Company or any of its Subsidiaries; or (iii) any other assets or rights
(including, without limitation, any assets that do not constitute substantially
all of the assets or rights of any division or line of business of Company or
any of its Subsidiaries) having a book value or market value in excess of
$2,000,000 or more, other than in each case (A) the sale in the ordinary course
of business of personal property held for resale in the ordinary course of
business of Company or any of its Subsidiaries, (B) the sale or discount of
receivables permitted pursuant to subsection 6.9 of the Credit Agreement, and
(C) the Spin-Off.
"Automotive" means Borg-Warner Automotive, Inc.
"Borg-Warner Subsidiaries" means the Subsidiaries of Company which are
listed on Schedule A annexed hereto, as such Schedule may be supplemented from
time to time as mutually agreed upon by Borg-Warner and the Administrative
Agent.
"BW-Other Corporation" means BW-Other Corporation, a Delaware
corporation and a wholly-owned direct Subsidiary of Company, and all of its
Subsidiaries, including without limitation Borg-Warner Equities Corporation and
Centaur Insurance Company.
"Capital Lease", as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee that, in
conformity with GAAP, is accounted for as a capital lease on the balance sheet
of that Person.
N-1
"Company" means Borg-Warner Security Corporation.
"Consolidated Capital Expenditures" means, for any period, the
aggregate of all expenditures (whether in cash or accrued as liabilities) by
Company and its Consolidated Subsidiaries during such period that, in conformity
with GAAP, are included or required to be included in the property, plant or
equipment reflected in the consolidated balance sheet of Company and its
Consolidated Subsidiaries.
"Consolidated EBITDA" means, for any period, the sum of the amounts
for such period of (i) Consolidated Net Income excluding extraordinary items,
(ii) provisions for taxes based on income, (iii) Consolidated Interest Expense,
(iv) to the extent Consolidated Net Income has been reduced thereby,
amortization expense, depreciation expense and other non-cash expenses, and (v)
other non-cash items reducing Consolidated Net Income less non-cash items
increasing Consolidated Net Income, all as determined on a consolidated basis
for Company and its Consolidated Subsidiaries in conformity with GAAP.
"Consolidated Interest Expense" means, for any period, total interest
expense (including that portion attributable to Capital Leases in accordance
with GAAP) of Company and its Consolidated Subsidiaries on a consolidated basis
with respect to all outstanding Indebtedness of Company and its Consolidated
Subsidiaries, including, without limitation, all commissions, discounts and
other fees and charges owed with respect to letters of credit and with respect
to any sale, discount or other financing of receivables and net costs under any
interest rate agreements.
"Consolidated Net Income" means, for any period, the net income (or
loss) of Company and its Consolidated Subsidiaries on a consolidated basis for
such period taken as a single accounting period determined in conformity with
GAAP; provided that there shall be excluded (i) the income (or loss) of any
Person (other than a Subsidiary of Company) in which any other Person (other
than Company or any of its Subsidiaries) has a joint interest, except to the
extent of the amount of dividends or other distributions actually paid to
Company or any of its Subsidiaries by such Person during such period, (ii) the
income (or
N-2
loss) of any Person accrued prior to the date it becomes a Subsidiary of Company
or is merged into or consolidated with Company or any of its Subsidiaries or
that Person's assets are acquired by Company or any of its Subsidiaries, (iii)
the income of any Subsidiary of Company to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary, and (iv) any after-tax gains or losses
attributable to Asset Sales or returned surplus assets of any Pension Plan.
"Consolidated Net Worth" means, as at any date of determination, the
sum of the capital stock and additional paid-in capital plus retained earnings
(or minus accumulated deficit) of Company and its Consolidated Subsidiaries on a
consolidated basis calculated in conformity with GAAP, excluding all effects of
foreign currency exchange adjustments under FASB No. 52.
"Consolidated Subsidiaries" means all Subsidiaries of Company other
than BW-Other Corporation and those Subsidiaries of Company whose principal
place of business is located in Latin America that are not consolidated with
Company as of the date of this Agreement.
"Contingent Obligation", as applied to any Person, means any direct or
indirect liability, contingent or otherwise, of that Person (i) with respect to
any indebtedness, lease, dividend or other obligation of another if the primary
purpose or intent thereof by the Person incurring the Contingent Obligation is
to provide assurance to the obligee of such obligation of another that such
obligation of another will be paid or discharged, or that any agreements
relating thereto will be complied with, or that the holders of such obligation
will be protected (in whole or in part) against loss in respect thereof, (ii)
with respect to any letter of credit issued for the account of that Person or as
to which that Person is otherwise liable for reimbursement of drawings, or (iii)
under Currency Agreements or Interest Rate Agreements. Contingent Obligations
shall include, without limitation, (a) the direct or indirect guaranty,
endorsement (otherwise than for collection or deposit in the ordinary course of
business), co-making, discounting with
N-3
recourse or sale with recourse by such Person of the obligation of another, and
(b) any liability of such Person for the obligations of another through any
agreement (contingent or otherwise) (x) to purchase, repurchase or otherwise
acquire such obligation or any security therefor, or to provide funds for the
payment or discharge of such obligation (whether in the form of loans, advances,
stock purchases, capital contributions or otherwise), (y) to maintain the
solvency or any balance sheet item, level of income or financial condition of
another, or (z) to make take-or-pay or similar payments if required regardless
of non-performance by any other party or parties to an agreement, if in the case
of any agreement described under subclauses (x) or (y) of this sentence the
primary purpose or intent thereof is as described in the preceding sentence.
The amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported.
"Credit Agreement" means the Credit Agreement dated as of January 27,
1993, as it may be amended, supplemented or otherwise modified from time to
time.
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement designed to protect
Company or any of its Consolidated Subsidiaries against fluctuations in currency
values.
"Employee Benefit Plan" means any "employee benefit plan" as defined
in Section 3(3) of ERISA which is, or was at any time, maintained or contributed
to by any Loan Party or any of its ERISA Affiliates.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time and any successor statute.
"ERISA Affiliate", as applied to any Person, means (i) any corporation
which is a member of a controlled group of corporations within the meaning of
Section 414(b) of the Internal Revenue Code of which that Person is a member;
(ii) any trade or business (whether or not incorporated) which is a member of a
group of trade or businesses under common control within the meaning of Section
414(c) of the Internal Revenue Code of which that Person is a member; and (iii)
any member of an affiliated
N-4
service group within the meaning of Section 414(m) or (o) of the Internal
Revenue Code of which that Person, any corporation described in clause (i) above
or any trade or business described in clause (ii) above is a member. On and
after the Spin-Off, Automotive and its Subsidiaries shall not be ERISA
Affiliates with respect to events occurring after the Spin-Off unless the
Company is liable under the Code or ERISA with respect to such event.
"Funded Debt", as applied to any Person, means all indebtedness of
that Person that by its terms or by the terms of any instrument, or agreement
relating thereto matures more than one year from, or is directly renewable or
extendable at the option of the debtor to a date more than one year from
(including an option of the debtor under a revolving credit or similar agreement
obligating the lender or lenders to extend credit over a period of one year or
more from), the date of the creation thereof.
"GAAP" means, subject to the limitations on application thereof set
forth in subsection 1.2 of the Credit Agreement, generally accepted accounting
principles set forth in the opinions and pronouncements of the Accounting
Principles Board of the American institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as may be approved by a significant
segment of the accounting profession, that are applicable to the circumstances
as of the date of determination.
"Indebtedness", as applied to any Person, means (i) all indebtedness
for borrowed money, whether or not evidenced by a promissory note, draft or
similar instrument, (ii) that portion of obligationS with respect to Capital
Leases that is properly classified as a liability on a balance sheet in
conformity with GAAP, (iii) notes payable and drafts accepted representing
extensions of credit whether or not representing obligations for borrowed money,
(iv) any obligation owed for all or any part of the deferred purchase price of
property or services, which purchase price is (y) due more than six months from
the date of incurrence of the obligation in respect thereof, or (z) evidenced by
a note or similar written instrument, and (v) all indebtedness secured by any
Lien on any property or asset owned or held by that Person regardless
N-5
of whether the indebtedness secured thereby shall have been assumed by that
Person or is nonrecourse to the credit of that Person.
"Interest Rate Agreement" means any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other similar
agreement or arrangement designed to protect Company or any of its Subsidiaries
against fluctuations in interest rates; provided that the calculation of
payments for early termination shall be made on a reasonable basis in accordance
with customary industry practices; and provided further that all such payments
(guarantied and unguaranteed) shall constitute Indebtedness.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended to the date hereof and from time to time hereafter.
"Lender" and "Lenders" means the persons identified as "Lenders" and
listed on the signature pages of the Credit Agreement, together with their
successors and permitted assigns.
"Lien" means any lien, mortgage, deed of trust, deed to secure debt,
pledge, security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan Parties" means the Company and the Borg-Warner Subsidiaries,
collectively.
"Material Subsidiary" means (i) each Subsidiary of Borg-Warner
identified as a "Material Subsidiary" on Schedule A annexed hereto; (ii) any
other Subsidiary of Borg-Warner now existing or hereafter acquired or formed by
Borg-Warner which (x) for the most recent fiscal year of Borg-Warner commencing
on or after January 1, 1994 accounted for more than 3% of the consolidated
revenues of Borg-Warner, or (y) as at the end of such fiscal year, was the owner
of more than 3% of the consolidated assets, all as shown on the consolidated
financial statements of Borg-Warner for such fiscal year; and (iii) any other
Subsidiary mutually agreed upon by Borg-Warner and the Administrative Agent, or
so designated by Borg-Warner by an
N-6
Officers' Certificate delivered to the Administrative Agent.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 3(37) of ERISA to which Company or any of its ERISA Affiliates is
contributing or ever has contributed or to which Company or any of its ERISA
Affiliates has, or ever has had, an obligation to contribute.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Section 412 of the Internal Revenue Code
or Section 302 of ERISA.
"Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts or other organizations, whether or not legal entities, and governments
and agencies and political subdivisions thereof.
"Spin-Off" means a tax-free reorganization in which Company pays to
its shareholders a stock dividend consisting of all of the outstanding shares of
Automotive.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a combination thereof.
N-7