EXECUTION VERSION
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RECEIVABLES PURCHASE AND SALE AGREEMENT
Dated as of December 9, 1998
Among
CALIFORNIA COMPENSATION INSURANCE COMPANY,
COMMERCIAL COMPENSATION INSURANCE COMPANY,
COMBINED BENEFITS INSURANCE COMPANY
and
BUSINESS INSURANCE COMPANY,
EACH AS AN ORIGINATOR,
and
INSURANCE FUNDING LLC,
AS THE BUYER.
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS
SECTION 1.01. Certain Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting and Certain Other Terms.. . . . . . . . . . . . . . . . . 8
SECTION 1.03. Other Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 1.04. Computation of Time Periods. . . . . . . . . . . . . . . . . . . . . 9
ARTICLE II AMOUNTS AND TERMS OF THE PURCHASE.
SECTION 2.01. Agreement to Purchase. . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.02. Payment for the Purchase . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.03. Payments and Computations, Etc . . . . . . . . . . . . . . . . . . . 9
SECTION 2.04. Transfer of Records to the Buyer. . . . . . . . . . . . . . . . . . .10
ARTICLE III CONDITIONS OF PURCHASE
SECTION 3.01. Conditions Precedent to the Purchase . . . . . . . . . . . . . . . .10
SECTION 3.02. Effect of Payment of Purchase Price. . . . . . . . . . . . . . . . .10
ARTICLE IV REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Originators. . . . . . . . . .11
ARTICLE V GENERAL COVENANTS
SECTION 5.01. General Covenants. . . . . . . . . . . . . . . . . . . . . . . . . .14
ARTICLE VI COLLECTION AND MONITORING OF ASSETS
SECTION 6.01. Collections and Lock-Boxes.. . . . . . . . . . . . . . . . . . . . .17
SECTION 6.02. UCC Matters; Protection and Perfection of Transferred Assets.. . . .18
SECTION 6.03. Obligations of the Originators With Respect to Receivables.. . . . .19
SECTION 6.04. Applications of Collections. . . . . . . . . . . . . . . . . . . . .19
ARTICLE VII FURTHER ASSURANCES
SECTION 7.01. Further Assurances.. . . . . . . . . . . . . . . . . . . . . . . . .19
ARTICLE VIII INDEMNIFICATION
SECTION 8.01. Indemnities by the Originators. . . . . . . . . . . . . . . . . . . .19
ARTICLE IX MISCELLANEOUS
SECTION 9.01. Amendments and Waivers.. . . . . . . . . . . . . . . . . . . . . . .21
SECTION 9.02. Notices, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . .21
SECTION 9.03. Setoff and Counterclaim. . . . . . . . . . . . . . . . . . . . . . .22
SECTION 9.04. No Waiver; Remedies. . . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 9.05. Binding Effect; Assignability. . . . . . . . . . . . . . . . . . . .22
SECTION 9.06. Term of this Agreement.. . . . . . . . . . . . . . . . . . . . . . .22
SECTION 9.07. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF OBJECTION TO VENUE. . . . . . . . . . . . . . . . . . . . . . . .22
SECTION 9.08. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . .23
SECTION 9.09. Costs, Expenses and Taxes. . . . . . . . . . . . . . . . . . . . . .23
SECTION 9.10. Execution in Counterparts; Severability; Integration . . . . . . . .23
SECTION 9.11. Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . .24
SCHEDULES
Schedule I -- Condition Precedent Documents
Schedule II -- Description of Credit and Collection Policy
Schedule III -- Lock-Box Banks and Lock-Box Accounts
Schedule IV -- Tradenames, Fictitious Names and "Doing Business As" Names
Schedule V -- List of Receivables Purchased on the Closing Date
EXHIBITS
Exhibit A -- Form of Lock-Box Agreements
Exhibit B -- Form of Opinion of Counsel for the Originators
THIS RECEIVABLES PURCHASE AND SALE AGREEMENT (the "AGREEMENT")
is made as of December 9, 1998, by and among CALIFORNIA COMPENSATION
INSURANCE COMPANY, a California corporation, COMMERCIAL COMPENSATION
INSURANCE COMPANY, a New York corporation, COMBINED BENEFITS INSURANCE
COMPANY, a California corporation, and BUSINESS INSURANCE COMPANY, a Delaware
corporation, as the originators (each an "ORIGINATOR" and, collectively, the
"ORIGINATORS"), INSURANCE FUNDING LLC, a Delaware limited liability company
(the "BUYER").
WITNESSETH:
WHEREAS, the Originators desire to sell, and the Buyer desires
to purchase, all of the Originators' right, title and interest in certain
receivables on the terms and conditions provided herein;
NOW, THEREFORE, the parties hereto, intending to be legally bound
hereby, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. CERTAIN DEFINED TERMS. (a) Certain capitalized
terms used throughout this Agreement are defined above or in this SECTION 1.01.
(b) As used in this Agreement and its exhibits, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"ADVERSE CLAIM" means a lien, security interest, charge,
encumbrance or other right or claim of any Person having the practical effect of
a lien, security interest, charge or encumbrance.
"AFFILIATE" when used with respect to a Person means any other
Person controlling, controlled by or under common control with such Person.
For purposes of this definition, "control" when used with respect to any
specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract, or otherwise; and the terms "controlling" and
"controlled" have the meanings correlative to the foregoing.
"AGENT'S BALANCE" means, in respect of an Insurance Premium, the
amount of such Insurance Premium due and payable to an Originator by (a) an
Insurance Agent, on behalf of the related Policyholder, in which case the
Insurance Agent has deducted any commissions due such Insurance Agent from the
Outstanding Balance thereof or (b) a Policyholder, in which case the
Originator shall have deducted any commissions due such Insurance Agent from
the Outstanding Balance thereof.
"BANKRUPTCY CODE" means the United States Bankruptcy Reform Act
of 1978 (11 U.S.C. Sections 101 ET SEQ.), as amended from time to time, or any
successor statute.
"BASE RATE" means, on any day, a fluctuating rate of interest per
annum equal to the higher of (a) the per annum rate of interest announced from
time to time by BankBoston, N.A. at its head office in Boston, Massachusetts as
its "base rate", and (b) 1/2 of one percent per annum above the Federal Funds
Rate.
"BENEFIT PLAN" means any employee benefit plan as defined in
Section 3(3) of ERISA in respect of which any Originator or any ERISA Affiliate
of any Originator is, or at any time during the immediately preceding six years
was, an "employer" as defined in Section 3(5) of ERISA.
"BUSINESS DAY" means a day of the year other than a Saturday or a
Sunday on which banks are required to be open in New York City and Boston,
Massachusetts.
"CLOSING DATE" means the date on which the Buyer makes the
Purchase of Receivables under this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended, and
any successor statute.
"COLLECTION ACCOUNT" has the meaning set forth in the Receivables
Purchase Agreement.
"COLLECTION ACCOUNT AGREEMENT" means that certain Collection
Account Agreement dated as of even date herewith among the Collection Account
Bank, the Servicer, the Buyer and the Deal Agent.
"COLLECTION ACCOUNT BANK" means the financial institution
maintaining the Collection Account, which initially shall be BankBoston, N.A.
"COLLECTIONS" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of the Related Security with respect thereto.
"CONFIDENTIAL INFORMATION" has the meaning assigned to such term
in SECTION 9.11.
"CONTRACT" means an agreement between an Originator and a Person
pursuant to or under which such Obligor shall be obligated to make one or more
payments to an Originator including, without limitation, (i) Insurance Policies
and (ii) Reinsurance Treaties.
"CREDIT AND COLLECTION POLICY" means those credit and collection
policies and practices relating to Contracts and Receivables described in
SCHEDULE II.
"DEAL AGENT" means the "Deal Agent" under the Receivables
Purchase Agreement.
"DEFAULTED RECEIVABLE" means a Receivable (a) (ii) in the case of
an Agent's Balance, as to which any payment, or part thereof, remains unpaid for
more than 270 days from the original invoice date for such payment and (ii) in
the case of a Reinsurance Recoverable, as to which any payment, or party
thereof, remains unpaid for more than 270 days from the date of this Agreement,
(b) as to which the Obligor thereof has taken any action constituting an
Insolvency Event or suffered any Insolvency Event or (c) which, consistent with
the Credit and Collection Policy, has been or should be written off the
applicable Originator's books as uncollectible.
"DILUTION FACTORS" means, with respect to the Receivables, any
credits, rebates, freight charges, discounts, allowances, disputes, chargebacks,
allowances for early payments and other allowances or adjustments granted in
accordance with the Buyer's or the Originators' usual practices.
"DISCOUNT FACTOR" means a percentage calculated to provide the
Buyer with a reasonable return on its investment in the Transferred Assets after
taking account of the time value of money based upon the anticipated dates of
collection of the Transferred Assets. The Discount Factor shall be 5.5%.
"EAGLEFUNDING" means EagleFunding Capital Corporation, a Delaware
corporation.
"ELIGIBLE RECEIVABLE" means, at any time, a Receivable:
(a) the Obligor of which is a United States resident, is not an
Affiliate of the Buyer or any Originator, and is not a government or a
governmental subdivision or agency;
(b) which is not a Defaulted Receivable;
(c) which arises under a Contract (i) the performance of which
has been completed by the applicable Originator and by all other parties
other than the Obligor and (ii) that has been duly authorized and,
together with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the Obligor of
such Receivable, enforceable against such Obligor in accordance with its
terms and is not subject to any dispute, offset, counterclaim or defense
whatsoever;
(d) (i) which is an "account" or a "general intangible" within
the meaning of Section 9-106 of the UCC of all applicable jurisdictions,
(ii) as to which all performance and other action required to be taken
in connection therewith by such Originator for the
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Obligor has been so performed or taken, (iii) is denominated and payable
only in United States dollars in the United States, (iv) no portion of
which is payable on account of sales taxes, and (v) in which the
applicable Originator can grant a perfected security interest;
(e) which arises in the ordinary course of the Originators'
business in connection with providing services or the sale of goods
within the United States;
(f) the assignment of which (including, without limitation, the
sale of an undivided percentage interest therein and the assignment of
any Related Security) does not contravene or conflict with any
applicable laws, rules or regulations or any contractual or other
restriction, limitation or encumbrance;
(g) which does not have an Adverse Claim filed against it (other
than pursuant to the Receivables Purchase Agreement) and is not
otherwise subject to an Adverse Claim and has not been compromised,
adjusted or modified (including by extension of time of payment or the
granting of any discounts, allowances or credits) except for discounts,
allowances or credits made in accordance with the Credit and Collection
Policy and in the ordinary course of the Originators' business;
(h) which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and
regulations relating to truth in lending, fair credit billing, fair
credit reporting, equal credit opportunity, fair debt collection
practices and privacy) and with respect to which no party to the
Contract related thereto is in violation of any such law, rule or
regulation in any material respect;
(i) which satisfies, and has been originated in accordance with,
all applicable requirements of the Credit and Collection Policy;
(j) as to which the Buyer has not notified the applicable
Originator in writing that the Buyer or Deal Agent (as Buyer's assignee)
has determined, in its reasonable business judgment, that such
Receivable (or class of Receivables) is not acceptable for purchase
hereunder;
(k) with respect to which, (i) prior to the Purchase hereunder
by Buyer, the applicable Originator has a first priority ownership
interest therein, free and clear of any Adverse Claim, and (ii) from and
after the Purchase hereunder, Buyer has a properly perfected first
priority ownership interest therein, free and clear of any Adverse
Claim; and
(l) with respect to which no Person other than the applicable
Originator or an Affiliate thereof is attempting to collect the proceeds
of such Receivable.
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"ERISA" means the U.S. Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA AFFILIATE" means (a) any corporation which is a member
of the same controlled group of corporations (within the meaning of Section
414(b) of the Code) as the Originators; (b) a partnership or other trade or
business (whether or not incorporated) under common control (within the
meaning of Section 414(c) of the Code) with the Originators or (c) a member
of the same affiliated service group (within the meaning of Section 414(m) of
the Code) as the Originators, any corporation described in CLAUSE (a) above
or any partnership, trade or business described in CLAUSE (b) above.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, in each case consistently
applied.
"NDEMNIFIED AMOUNTS" has the meaning assigned to that term in
SECTION 8.01.
"INDEMNIFIED PARTIES" has the meaning assigned to that term in
SECTION 8.01.
"INSOLVENCY EVENT" means, with respect to any Person, any of the
following events:
such Person shall make a general assignment for the benefit of creditors; or any
case or proceeding shall be instituted by or against such Person seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, dissolution,
winding up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, or other similar official for
it or for any substantial part of its property.
"INSURANCE AGENT" means a Person authorized to sell an Insurance
Policy.
"INSURANCE POLICY" means a duly filed and approved contract of
insurance in force and effective on the date hereof.
"INSURANCE PREMIUM" means an amount due from a Policyholder in
order to receive the benefits of an Insurance Policy.
"INVESTMENT COMPANY ACT" means the Investment Company Act of
1940, as amended and any successor.
"LOCK-BOX" means a post office box to which Collections are
remitted for retrieval by a Lock-Box Bank and deposited by such Lock-Box Bank
into a Lock-Box Account.
"LOCK-BOX ACCOUNT" means an account maintained for the purpose of
receiving Collections at a bank or other financial institution which has
executed a Lock-Box Agreement.
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"LOCK-BOX AGREEMENT" means an agreement, in substantially the
form of EXHIBIT A, among the applicable Originator and a Lock-Box Bank.
"LOCK-BOX BANK" means any of the banks or other financial
institutions holding one or more Lock-Box Accounts.
"MATERIAL ADVERSE EFFECT" means any act, omission, situation,
circumstance, event or undertaking which could, singly or in any combination
with one or more other acts, omissions, situations, circumstances, events or
undertakings, have, or are reasonably likely to have, a material adverse
effect upon (a) the business, assets, properties, liabilities, financial
condition, or results of operations of any Originator and its subsidiaries
taken as a whole, (b) the value of the whole or any material part of the
Transferred Assets, the interests therein transferred or purported to be
transferred pursuant to the terms hereof or the priority of such interests,
(c) the respective ability of the Originators or any of their subsidiaries to
perform any obligations under this Agreement or any other Originator Document
to which it is a party, or (d) the legality, validity, binding effect or
enforceability of any Originator Document or the ability of the Buyer or the
Deal Agent to enforce any rights or remedies under or in connection with any
Originator Document.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is or was at any time during the current year
or the immediately preceding five years contributed to by an Originator or any
ERISA Affiliate on behalf of its employees.
"OBLIGOR" means a Person obligated to make payments pursuant to a
Contract, and includes, without limitation, (i) in the case of a Reinsurance
Recoverable, the applicable Reinsurance Company and (ii) in the case of an
Agent's Balance, either the Insurance Agent or the Policyholder, as the case may
be.
"ORIGINATOR DOCUMENTS" means this Agreement, the Lock-Box
Agreements, and all other certificates, instruments, UCC financing statements,
reports, notices, agreements and documents executed or delivered under or in
connection with this Agreement, in each case as the same may be amended,
supplemented or otherwise modified from time to time in accordance with this
Agreement.
"OUTSTANDING BALANCE" of any Receivable at any time means the
then outstanding principal balance thereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Person succeeding to the functions thereof.
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"PERSON" means an individual, partnership, corporation (including
a business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company, government (or any agency or political
subdivision thereof) or other entity.
"POLICYHOLDER" means the Person who is the named insured under an
Insurance Policy.
"PURCHASE" means a purchase of Transferred Assets by the Buyer
from the Originators pursuant to SECTION 2.01.
"PURCHASE PRICE" means, with respect to the Purchase hereunder,
the aggregate price to be paid to the applicable Originator for the Purchase in
accordance with SECTION 2.02 for the Receivables, Related Security and
Collections being sold to the Buyer, which price shall equal the product of (x)
the aggregate Outstanding Balance of such Receivables and (y) one minus the
Discount Factor.
"RECEIVABLE" means an Agent's Balance or a Reinsurance
Recoverable.
"RECEIVABLES PURCHASE AGREEMENT" means that certain Receivables
Purchase Agreement dated as of even date herewith by and among the Buyer, as the
seller thereunder, EagleFunding, as the purchaser, BancBoston Robertson Stephens
Inc., as the "Deal Agent", and the Servicer, as the same may be amended,
restated, supplemented or otherwise modified from time to time.
"RECORDS" means all Contracts and other documents, books, records
and other information (including without limitation, computer programs, tapes,
disks, punch cards, data processing software and related property and rights)
maintained with respect to Receivables and the related Obligors which the
applicable Originator has itself generated or in which such Originator has
otherwise obtained an interest.
"REINSURANCE COMPANY" means an insurance company listed on
Schedule V hereto which has entered into a Reinsurance Treaty with an
Originator.
"REINSURANCE RECOVERABLE" means an amount due an Originator from
a Reinsurance Company in respect of a claim under a Reinsurance Treaty.
"REINSURANCE TREATY" means a contract listed on Schedule V hereto
pursuant to which an Originator reinsures or is otherwise indemnified against
all or a portion of claims it must pay to a Policyholder under any Insurance
Policy.
"RELATED SECURITY" means with respect to any Receivable:
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(a) all Adverse Claims and property subject thereto from time to
time purporting to secure payment of such Receivable, whether pursuant
to the Contract related to such Receivable or otherwise;
(b) the assignment to the Buyer of all UCC financing statements
covering any collateral securing payment of such Receivable;
(c) all guarantees, indemnities, warranties, letters of credit,
insurance policies and proceeds and premium refunds thereof and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of such Receivable whether pursuant to
the Contract related to such Receivable or otherwise;
(d) all right, title and interest of the relevant Originator in
to and under the related Contract (but only to the extent relating to
such Receivable);
(d) all Records; and
(e) all proceeds of the foregoing.
"SERVICER" means at any time the Person then authorized pursuant
to the Receivables Purchase Agreement to service, administer and collect
Receivables.
"SUPERIOR" means Superior National Insurance Group, a Delaware
corporation.
"SUPPORT AGREEMENT" means the Support Agreement, dated as of
December 9, 1998, executed by Superior in favor of the Buyer, EagleFunding and
the Deal Agent.
"TERMINATION DATE" means the date on which the aggregate
Outstanding Balance of all Receivables sold hereunder has been reduced to zero
(or such earlier date which is 365 days after all outstanding Receivables sold
hereunder have become written-off in accordance with the Credit and Collection
Policy), the Buyer has received all other amounts due to it in connection with
this Agreement or any other agreement executed pursuant hereto or in connection
herewith.
"TRANSFERRED ASSETS" means, with respect to the Purchase, (a) the
Receivables sold to the Buyer in connection with the Purchase, (b) all Related
Security relating to such Receivables, and (c) all Collections with respect to,
and other proceeds of, such Receivables.
"UCC" means the Uniform Commercial Code as from time to time in
effect in the specified jurisdiction.
"UNITED STATES" means the United States of America.
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SECTION 1.02. ACCOUNTING AND CERTAIN OTHER TERMS. All
accounting terms not specifically defined herein shall be construed in
accordance with GAAP, and all accounting determinations made and all
financial statements prepared hereunder shall be made and prepared in
accordance with GAAP. All undefined terms contained in this Agreement which
are used in Article 9 of the UCC in the State of California shall have the
meanings provided for by such Article 9.
SECTION 1.03. OTHER TERMS. The words "herein," "hereof," and
"hereunder" and other words of similar import refer to this Agreement as a
whole, including the exhibits and schedules hereto, as the same may from time
to time be amended or supplemented and not to any particular section,
subsection, or clause contained in this Agreement, and all references to
Sections, Exhibits and Schedules shall mean, unless the context clearly
indicates otherwise, the Sections hereof and the Exhibits and Schedules
attached hereto, the terms of which Exhibits and Schedules are hereby
incorporated into this Agreement. Whenever appropriate, in the context, terms
used herein in the singular also include the plural, and vice versa.
SECTION 1.04. 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 mean "to but excluding."
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASE.
SECTION 2.01. AGREEMENT TO PURCHASE. (a) On the terms and
conditions hereinafter set forth, the Buyer agrees to make the Purchase
hereunder on the Closing Date by purchasing from each Originator, and each
Originator agrees to sell to the Buyer, all Receivables of such Originator
existing as of the close of business on the Business Day immediately prior to
the Closing Date and identified on Schedule V hereto, together with all of
the Related Security relating to such Receivables and all Collections with
respect to, and other proceeds of, such Receivables. Prior to making the
Purchase hereunder, the Buyer may request of any Originator, and the
applicable Originator shall deliver, such approvals, opinions, information,
reports or documents as the Buyer may reasonably request.
(b) It is the intention of the parties hereto that the
Purchase of Receivables to be made hereunder shall constitute an absolute
sale which vests in the Buyer all right, title and interest of the
Originators in and to such Receivables, and not a loan secured by such
Receivables. If at any time a court characterizes the transactions hereunder
as loans by the Buyer to the Originators, then each of the Originators hereby
pledges, grants a security interest in and assigns to the Deal Agent, for the
benefit of the Buyer, all of its right and title to and interest in the
Purchased Property, including the Purchased Receivables, Related Security and
Collections related thereto, as security for such loans and for the payment
and performance of all obligations of the Originators hereunder (including,
without limitation, their indemnification obligations
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under ARTICLE VIII). The security interest granted pursuant to the foregoing
sentence shall be released and terminated upon the occurrence of the
Collection Date. Each sale of Receivables by any Originator to the Buyer is
made without recourse; PROVIDED, HOWEVER, that (i) the Originators shall be
liable to the Buyer for all representations, warranties and covenants made by
the Originators pursuant to the terms of this Agreement, and (ii) such sale
does not constitute and is not intended to result in an assumption by the
Buyer or any assignee thereof of any obligation of the Originators or any
other person arising in connection with the Transferred Assets, or any other
obligations of the Originators. In view of the intention of the parties
hereto that the Purchase of Receivables to be made hereunder shall constitute
a sale of such Receivables rather than a loan secured by such Receivables,
each Originator agrees to clearly, expressly and accurately state on its
respective financial statements that the Receivables have been sold to the
Buyer.
SECTION 2.02. PAYMENT FOR THE PURCHASE. (a) The Purchase Price
for the Purchase shall be payable in full in cash by the Buyer to the applicable
Originator or its designee on the date of the Purchase.
SECTION 2.03. PAYMENTS AND COMPUTATIONS, ETC. All amounts to
be paid by any Originator to the Buyer hereunder shall be paid in accordance
with the terms hereof no later than 11:00 A.M. (Boston, Massachusetts time)
on the day when due in immediately available funds to such account as the
Buyer may from time to time specify in writing. Payments received by the
Buyer after such time shall be deemed to have been received on the next
Business Day. In the event that any payment becomes due on a day which is
not a Business Day, then such payment shall be made on the next succeeding
Business Day. Each of the Originators shall, to the extent permitted by law,
pay to the Buyer, on demand, interest on all amounts not paid when due
hereunder at 2.0% per annum above the Base Rate, payable on demand; PROVIDED,
HOWEVER, that such interest rate shall not at any time exceed the maximum
rate permitted by applicable law. All computations of interest payable
hereunder shall be made on the basis of a year of 360 days for the actual
number of days (including the first but excluding the last day) elapsed.
SECTION 2.04. TRANSFER OF RECORDS TO THE BUYER. (a) The
Purchase of Receivables hereunder shall include the transfer to the Buyer of
all of the applicable Originator's right and title to and interest in the
Records relating to such Receivables and rights to the use of such
Originator's computer software to access and create the Records, and each
Originator hereby agrees that such transfer shall be effected automatically
with the Purchase, without any action on the part of the parties hereto or
any further documentation.
(b) Each Originator shall take such action requested by the
Buyer, from time to time hereafter, that may be necessary or appropriate to
ensure that the Buyer and its assignees have (i) an enforceable ownership
interest in the Records relating to the Receivables purchased hereunder and
(ii) an enforceable right (whether by license or sublicense or otherwise) to
use all of the computer software used to account for the Receivables and/or
to recreate such Records.
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ARTICLE III
CONDITIONS OF PURCHASE
SECTION 3.01. CONDITIONS PRECEDENT TO THE PURCHASE. (a) The
Purchase hereunder is subject to the conditions precedent that the Buyer shall
have received on or before the date of such purchase the items listed in
SCHEDULE I, each (unless otherwise indicated) dated such date, in form and
substance satisfactory to the Buyer.
(b) The Purchase from the Originators by the Buyer shall be
subject to the further conditions precedent that (i) on the Closing Date, (A)
the representations and warranties contained in SECTION 4.01 are correct on
and as of such day as though made on and as of such date, and (B) no law or
regulation shall prohibit, and no order, judgment or decree of any federal,
state or local court or governmental body, agency or instrumentality shall
prohibit or enjoin, the making of the Purchase by the Buyer in accordance
with the provisions hereof and (ii) the Buyer shall have received such other
approvals, opinions or documents as the Buyer may reasonably request.
SECTION 3.02. EFFECT OF PAYMENT OF PURCHASE PRICE. Each
Originator, by accepting the proceeds of the Purchase Price, shall be deemed
to have certified to the Buyer the satisfaction of the conditions precedent
described in the immediately preceding SECTION 3.01. Upon the payment of the
Purchase Price, title to the Transferred Assets included in the Purchase
shall vest irrevocably in the Buyer, whether or not the conditions precedent
to the Purchase were in fact satisfied; PROVIDED, HOWEVER, that the Buyer
shall not be deemed to have waived thereby any claim for indemnification it
may have under this Agreement for the failure by any Originator in fact to
have satisfied any such condition precedent.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. REPRESENTATIONS AND WARRANTIES OF THE ORIGINATORS.
The Originators represent and warrant that as of the date hereof and as of the
date of the Purchase:
(a) Each of the Originators is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified to do business, and is in
good standing, in every jurisdiction in which the nature of its business
requires it to be so qualified and the failure to do so could reasonably be
expected to have a Material Adverse Effect.
(b) The execution, delivery and performance by the
Originators of this Agreement and all other Originator Documents to be entered
into by them, including the Originators' use of the proceeds of the Purchase,
are within each Originator's corporate powers, have been duly authorized by all
necessary corporate action, do not contravene (i) each
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Originator's charter or by-laws, (ii) any law, rule or regulation applicable
to the Originators, (iii) any contractual restriction binding on or affecting
each Originator or its property or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting each Originator or its property,
and do not result in or require the creation of any Adverse Claim upon or
with respect to any of its properties (other than in favor of the Buyer with
respect to the Transferred Assets); and no transaction contemplated hereby
requires compliance with any bulk sales act or similar law. This Agreement
and each other Originator Document to be entered into by the Originators have
each been duly executed and delivered by the Originators.
(c) This Agreement and each other Originator Document to be
entered into by the Originators constitute the legal, valid and binding
obligation of the Originators enforceable against each Originator in
accordance with their respective terms subject to bankruptcy and similar laws
affecting creditors generally and principles of equity.
(d) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Originators
of this Agreement or any other Originator Document to be entered into by
them, except for the filing of the UCC financing statements referred to in
ARTICLE III, all of which financing statements have been duly executed and
are in proper form for filing in the relevant jurisdictions.
(e) No filing, recording, notice or acknowledgment is
necessary in any jurisdiction to provide third parties with notice of the
sale of the Receivables herein contemplated, and to give to the Buyer a first
priority perfected security interest in such Receivables, except for (i) the
filing of the UCC financing statements referred to in ARTICLE III, all of
which financing statements have been duly executed and are in proper form for
filing in the relevant jurisdictions and (ii) the delivery of the notices of
change of ownership referred to in ARTICLE III, all of which notices of
change of ownership have been duly executed and are in proper form for
delivery to the relevant Reinsurance Companies.
(f) (i) Each Originator has furnished to the Buyer and the
Deal Agent (A) copies of the audited consolidated balance sheets of each
Originator and its consolidated subsidiaries as at June 30, 1998, and the
related audited consolidated statements of income, shareholders' equity and
cash flows for the fiscal year of each Originator and its consolidated
subsidiaries then ended reported on by June 30, 1998, which financial
statements present fairly in all material respects in accordance with GAAP
the financial position of each Originator and its consolidated subsidiaries
as at June 30, 1998, and the results of operations of each Originator and its
consolidated subsidiaries for the fiscal year of each Originator then ended,
and (B) copies of the unaudited consolidated balance sheets of each
Originator and its consolidated subsidiaries as at September 30, 1998, and
the related unaudited consolidated statements of income, shareholders' equity
and cash flows for the three-month period then ended, which financial
statements present fairly in all material respects in accordance with GAAP
the financial position of each Originator and its consolidated subsidiaries
as at September 30, 1998, and the results of operations of each Originator
and its consolidated subsidiaries for the three-month period then ended; and
(ii) since
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September 30, 1998, (A) no material adverse change has occurred in the
business, assets, liabilities, financial condition, or results of operations
or business prospects of each Originator and its subsidiaries taken as a
whole, and (B) no event has occurred or failed to occur which has had, or may
have, singly or in the aggregate, a Material Adverse Effect.
(g) There is no pending or threatened action or proceeding
affecting any Originator or any subsidiaries of any Originator before any
court, governmental agency or arbitrator that could reasonably be expected to
have a Material Adverse Effect. None of the Originators, or any subsidiary
of any Originator is in default with respect to any order of any court,
arbitrator or governmental body except for defaults with respect to orders of
governmental agencies which defaults are not material to the business or
operations of the Originators or any subsidiary of any of the Originators.
(h) No proceeds of the Purchase will be used by the
Originators 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) Immediately prior to the Purchase hereunder, each
Receivable to be sold hereunder, together with the Contract related thereto
and the other Transferred Assets relating thereto, is owned by the applicable
Originator free and clear of any Adverse Claim except as provided herein or
permitted hereby, and the Buyer shall acquire all of such Originator's right,
title and interest in such Transferred Assets and a valid and perfected first
priority ownership interest in each such Receivable then existing or
thereafter arising and in the Related Security and Collections with respect
thereto, free and clear of any Adverse Claim except as created hereby or by
the Buyer in the Receivables Purchase Agreement or any related document. No
effective financing statement or other instrument similar in effect covering
any Transferred Assets shall at any time be on file in any recording office
except such as may be filed in favor of the Buyer relating to this Agreement
or in favor of assignees of the Buyer under the Receivables Purchase
Agreement. No notice of the change of ownership of any Transferred Assets
shall at any time have been or be delivered to any Obligor except such as may
be delivered to give notice of the change in ownership of the Transferred
Assets comprised of Reinsurance Recoverables to the Buyer pursuant to this
Agreement or to the assignees of the Buyer pursuant to the Receivables
Purchase Agreement. The Purchase of the Transferred Assets by the Buyer
constitute true and valid sales and transfers for consideration (and not
merely a pledge of such Transferred Assets for security purposes),
enforceable against creditors of the Buyers and no Transferred Assets shall
constitute property of any Originator.
(j) No information, exhibit, financial statement, document,
book, record or report furnished or to be furnished by any Originator to the
Buyer in connection with this Agreement is or will be inaccurate in any
material respect as of the date it is or shall be dated or (except as
otherwise disclosed to the Buyer, as the case may be, at such time) as of the
date so furnished, and no such document contains or will contain any material
misstatement of fact or omits or shall omit to state a material fact or any
fact necessary to make the statements contained therein not misleading.
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(k) The principal place of business and chief executive
office of the Originators and the offices where the Originators keep all the
Records are located at the addresses of the Originators referred to in
SECTION 9.02 hereof (or at such other locations as to which the notice and
other requirements specified in SECTION 6.08 shall have been satisfied).
(l) 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 and the names, addresses and account numbers of all accounts to which
Collections of the Receivables outstanding before the Purchase hereunder have
been sent, are specified in SCHEDULE III (which shall be deemed to be amended
in respect of terminating or adding any Lock-Box Account or Lock-Box Bank
upon satisfaction of the notice and other requirements specified in respect
thereof). The Originators have no other lock-box accounts or similar deposit
accounts for the collection of the Transferred Assets except for the Lock-Box
Accounts. No Adverse Claim exists upon or with respect to any of the
Lock-Box Accounts.
(m) Except as described in SCHEDULE IV, none of the
Originators has any trade names, fictitious names, assumed names or "doing
business as" names or other names under which it has done (at any time during
the five year period preceding the date hereof) or is currently doing
business.
(n) The Purchase Price constitutes reasonably equivalent
value in consideration for the transfer to the Buyer of the Transferred
Assets from the Originators and no such transfer shall have been made for or
on account of an antecedent debt owed by any Originator to the Buyer and no
such transfer is or may be voidable under any Section of the Bankruptcy Code.
(o) Each Originator has received advice from its counsel
which is consistent with the conclusions set forth in the legal opinion(s) of
Tobin & Tobin, relating to the issues of substantive consolidation and true
sale of the Receivables and the related property.
(p) Each Originator is solvent at the time of (and
immediately after) each transfer of Transferred Assets to the Buyer hereunder.
(q) Each Originator has accounted for and has otherwise
treated the Purchase of Transferred Assets hereunder in its books, records
and financial statements as a sale to the Buyer, in each case consistent with
GAAP and with the requirements set forth herein.
(r) None of the Originators is an "investment company" or a
company controlled by an "investment company" registered or required to be
registered under the Investment Company Act, or otherwise subject to any
other federal or state statute or regulation limiting its ability to incur
indebtedness.
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(s) None of the Originators is engaged, principally or as
one of its important activities, in the business of extending credit for the
purpose of "purchasing" or "carrying" any "margin stock" (as each of the
quoted terms is defined or used in Regulation T, U or X). No part of the
proceeds of any Transferred Asset has been used for so purchasing or carrying
margin stock or for any purpose which violates, or which would be
inconsistent with, the provisions of Regulation T, U or X.
(t) Each of the Originators has the right (whether by
license, sublicense or assignment) to use all of the computer software used
by the Originators to account for the Transferred Assets to the extent
necessary to administer the Transferred Assets, and to assign (by way of
sale) or sublicense such rights to use all of such software to the Buyer.
(u) Each Originator has filed or caused to be filed all
Federal, state and local tax returns which are required to be filed by it,
and has paid or caused to be paid all taxes shown to be due and payable on
such returns or on any assessments received by it, other than any taxes or
assessments, the validity of which are being contested in good faith by
appropriate proceedings and with respect to which the applicable Originator
has set aside adequate reserves on its books in accordance with GAAP and
which proceedings have not given rise to any Adverse Claim.
(v) Each Receivable sold hereunder is an Eligible Receivable.
(w) The copy of the Credit and Collection Policy attached
hereto as SCHEDULE II is a true and complete copy thereof.
ARTICLE V
GENERAL COVENANTS
SECTION 5.01. GENERAL COVENANTS.
(a) COMPLIANCE WITH LAWS; PRESERVATION OF CORPORATE
EXISTENCE. The Originators shall comply in all material respects with all
applicable laws (including, without limitation, ERISA and the Code), rules,
regulations, orders and Originator Documents and preserve and maintain their
corporate existence, rights, franchises, qualifications and privileges where
the failure to comply could reasonably be expected to have a Material Adverse
Effect.
(b) SALES, LIENS, ETC. Except as otherwise specifically
provided herein, no Originator shall (i) sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any Adverse
Claim upon or with respect to, any Transferred Asset, or upon or with respect
to any Lock-Box Account, the Collection Account or any other account to which
any Collections of any Receivable are sent, or assign any right to receive
income in
15
respect thereof or (ii) create or suffer to exist any Adverse Claim upon or
with respect to any of the Originators' inventory, the sale of which would
give rise to a Receivable.
(c) GENERAL REPORTING REQUIREMENTS. Each Originator will
provide, or cause to be provided, to the Buyer the following:
(i) as soon as available and in any event within 90 days after
the end of each fiscal year of each Originator, consolidated balance
sheets of each Originator and its consolidated subsidiaries and the
related statement of income, shareholders' equity and cash flows for
such year, each prepared in accordance with GAAP and reported on by
nationally recognized independent public accountants acceptable to the
Buyer;
(ii) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of each
Originator, consolidated balance sheets of each Originator and its
consolidated subsidiaries and the related statements of income,
shareholders' equity and cash flows each for the period commencing at
the end of the previous fiscal year and ending with the end of such
quarter, prepared in accordance with GAAP and certified by a senior
financial officer of each Originator;
(iii) promptly after the filing or receiving thereof, copies of
all reports and notices with respect to any Reportable Event defined in
Article IV of ERISA which the applicable Originator or any ERISA
Affiliate files under ERISA with the Internal Revenue Service or the
PBGC or the U.S. Department of Labor or which the applicable Originator
or any ERISA Affiliate receives from such entity; and
(iv) promptly following the Buyer's request therefor, such other
information respecting the Receivables or the conditions or operations,
financial or otherwise, of the Originators or any of their Affiliates as
the Buyer may from time to time reasonably request in order to protect
the interests of the Buyer in connection with this Agreement.
(d) ACCOUNTING OF THE PURCHASE. Each Originator will not
prepare any financial statements which shall account for the transactions
contemplated hereby in any manner other than as the sale of the Transferred
Assets to the Buyer or in any other respect account for or treat the
transactions contemplated hereby in any manner other than as a sale of the
Transferred Assets by the applicable Originator to the Buyer.
(e) ERISA MATTERS. No Originator will (a) fail to comply in all
material respects with ERISA and the provisions of the Code applicable to the
Benefit Plans; (b) engage or permit any ERISA Affiliate to engage in any
prohibited transaction which would subject any Originator to a material tax or
penalty imposed on a prohibited transaction; (c) permit to exist any accumulated
funding deficiency, as defined in Section 302(a) of ERISA and Section 412(a) of
the Code, or funding deficiency with respect to any Benefit Plan other than a
Multiemployer Plan; (d) incur any liability to the PBGC over and above the
premiums required by law; and (e) terminate any Benefit Plan in a manner which
could result in the imposition of a lien on the property of any Originator or
any such ERISA Affiliate.
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(f) CHANGE IN CORPORATE NAME. No Originator will make any
change to its corporate name or use any trade names, fictitious names, assumed
names or conduct business under any names other than those described in SCHEDULE
IV.
(g) AUDITS. At any time and from time to time upon prior
written notice from the Buyer during regular business hours and on an annual
(or more frequent) basis, if requested by the Buyer, the Originators will
permit the Buyer, or their agents or representatives, (i) to examine and make
copies of and abstracts from all Records, (ii) to visit the offices and
properties of the Originators for the purpose of examining such Records, and
to discuss matters relating to the Receivables or the Originators'
performance hereunder with any of the officers or employees of the
Originators having knowledge of such matters and (iii) to have access to its
software for the purposes of examining such Records. Each such audit shall
be at the sole expense of the Originators.
(h) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Originators
will maintain (or cause to be maintained) and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing the Receivables in the event of the destruction of the
originals thereof) and keep and maintain, all documents, books, records and
other information which are reasonably necessary or advisable for the
collection of the Transferred Assets (including all Receivables and
Collections included therein). Such books and records shall be marked to
indicate the sales of all Receivables and Related Security hereunder and
shall include, without limitation, records adequate to permit the daily
identification of each Receivable and all collections of and adjustments
(including, without limitation, adjustments on account of Dilution Factors)
to each Receivable.
(i) LOCATION OF RECORDS. Each Originator will keep its chief
place of business and chief executive office, and the offices where it keeps
the Records, at the addresses referred to in SECTION 9.02, or, in any such
case, upon 30 days' prior written notice to the Buyer, at such other
locations within the United States where all action required by SECTION 6.02
shall have been taken and completed.
(j) CREDIT AND COLLECTION POLICIES. Each Originator will
comply in all material respects with the Credit and Collection Policy (as
currently in effect) in regard to each Receivable and the related Contract.
The Originators shall not, without the written consent of the Buyer and the
Deal Agent (as Buyer's assignee), make any change in the Credit and
Collection Policy.
(k) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. The
Originators will not add or terminate any bank as a Lock-Box Bank from those
listed in SCHEDULE III or make any change in its instructions to Obligors
regarding payments to be made to any Lock-Box Bank, unless the Buyer shall
have given its prior written consent to such addition, termination or change
(which consent shall not be unreasonably withheld) and the Buyer shall have
received (i) ten Business Days' prior notice of such addition, termination or
change, (ii) prior to the effective date of such
17
addition, termination or change, (x) executed copies of Lock-Box Agreements
executed by each new Lock-Box Bank and the applicable Originator and (y)
copies of all agreements and documents signed by either the applicable
Originator or the respective Lock-Box Bank with respect to any new Lock-Box
Account, and (iii) the prior written consent of the Buyer to such addition,
termination or change (which consent shall not be unreasonably withheld).
(l) SEGREGATION OF COLLECTIONS. To the extent that any such
funds other than Collections are deposited into any of the Collection Accounts,
the applicable Originator will promptly identify any such funds to the Servicer
for segregation and remittance to the owner thereof.
(m) RECEIVABLES. No Originator will, without the written
consent of the Buyer and the Deal Agent (as Buyer's assignee), amend, modify,
waive or cancel the terms of any Receivable unless such amendment, modification,
waiver or cancellation is in the ordinary course of business of such Originator
and, with respect to the cancellation of any Receivable, for which cash
consideration is paid with respect to any such Receivable.
ARTICLE VI
COLLECTION AND MONITORING OF ASSETS
SECTION 6.01. COLLECTIONS AND LOCK-BOXES. The Originators will
(i) instruct all Obligors to cause all Collections to be either
(A) remitted to a Lock-Box and will cause each Lock-Box Bank to retrieve such
Collections promptly and deposit the same to the respective Lock-Box Accounts or
(B) deposited directly with the Lock-Box Bank, and
(ii) pursuant to the Receivables Purchase Agreement, instruct all
Lock-Box Banks to transfer such Collections in same day funds to the Collection
Account (listed in SCHEDULE III attached hereto) maintained with a Collection
Account Bank. If the Originators receive any Collections, the applicable
Originator will remit such Collections to the Collection Account within one
Business Day following such Originator's receipt thereof. The Originators will
not add or terminate any bank as Lock-Box Bank from those listed in SCHEDULE III
or make any change in their instructions to Obligors regarding payments to be
made to any Lock Box or any Lock-Box Bank, unless the Buyer shall have received
at least ten Business Days' prior written notice of such addition, termination
or change and all actions reasonably requested by the Buyer to protect and
perfect the interest of the Buyer in the Collections of Transferred Assets have
been taken and completed.
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SECTION 6.02. UCC MATTERS; PROTECTION AND PERFECTION OF
TRANSFERRED ASSETS. Each Originator will keep its principal place of business
and chief executive office, and the office where it keeps the Records, at the
address of such Originator referred to in SECTION 9.02 or, upon 30 days'
prior written notice to the Buyer, at such other locations within the United
States where all actions reasonably requested by the Buyer to protect and
perfect the interest of the Buyer in the Transferred Assets have been taken
and completed. Each Originator agrees that from time to time, at its expense,
it will promptly execute and deliver all further instruments and documents,
and take all further action that the Buyer may reasonably request in order to
perfect, protect or more fully evidence the Transferred Assets acquired by
the Buyer hereunder, or to enable the Buyer to exercise or enforce any of its
respective rights hereunder. Without limiting the generality of the
foregoing, the Originators will: (a) upon the request of the Buyer, execute
and file such financing or continuation statements, or amendments thereto or
assignments thereof, and such other instruments or notices, as may be
necessary or appropriate or as the Buyer may request, and (b) on or prior to
the date hereof, mark their master data processing records evidencing such
Transferred Assets and related Contracts with a legend, acceptable to the
Buyer, evidencing that the Buyer or its assigns have purchased all right and
title thereto. Each Originator hereby authorizes the Buyer to file one or
more financing or continuation statements, and amendments thereto and
assignments thereof, relative to all or any of the Transferred Assets now
existing or hereafter arising without the signature of the applicable
Originator where permitted by law. A carbon, photographic or other
reproduction of this Agreement or any financing statement covering the
Transferred Assets or any part thereof shall be sufficient as a financing
statement. On or before the Closing Date, the Originators (at the
Originators' expense) shall (i) deliver, return receipt requested, to the
Reinsurance Companies in respect of the Reinsurance Recoverables, notice of
the change in ownership of the Transferred Assets comprised of Reinsurance
Recoverables from the applicable Originators to the Buyer. Notwithstanding
the foregoing, the Originators shall, upon the request of the Buyer at any
time and at the Originators' expense, notify (to the extent not otherwise
notified in accordance with the immediately preceding sentence) the Obligors
of Transferred Assets, or any of them, of the ownership of Transferred Assets
by the Buyer. If the Originators fail to perform any of their agreements or
obligations under this SECTION 6.02, the Buyer may (but shall not be required
to) itself perform, or cause performance of, such agreement or obligation,
and the expenses of the Buyer incurred in connection therewith shall be
payable by the Originators upon the Buyer's demand therefor. For purposes of
enabling the Buyer to exercise its rights described in the preceding sentence
and elsewhere in this ARTICLE VI, the Originators hereby authorize the Buyer
to take any and all steps in the Originators' names and on behalf of the
Originators necessary or desirable, in the determination of the Buyer, to
collect all amounts due under any and all Receivables, including, without
limitation, endorsing the Originators' names on checks and other instruments
representing Collections and enforcing such Receivables and the related
Contracts.
SECTION 6.03. OBLIGATIONS OF THE ORIGINATORS WITH RESPECT TO
RECEIVABLES. Each Originator will (a) at its expense, regardless of any
exercise by the Buyer of its rights hereunder, 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 Transferred Assets to the same
extent as if Transferred Assets therein had not been sold hereunder and (b)
pay when
19
due any taxes, including without limitation, sales and excise taxes, payable
in connection with the Transferred Assets. In no event shall the Buyer have
any obligation or liability with respect to any Transferred Assets or related
Contracts, nor shall it be obligated to perform any of the obligations of the
Originators or any of their Affiliates thereunder. The Originators will
timely and fully comply in all material respects with the Credit and
Collection Policy in regard to each Receivable and the related Contract. The
Originators will not make any change in the character of their businesses or
in the Credit and Collection Policy, which change would, in either case,
impair the collectibility of any Transferred Asset.
SECTION 6.04. APPLICATIONS OF COLLECTIONS. Any payment by an
Obligor in respect of any indebtedness owed by it to any Originator shall,
except as otherwise specified by such Obligor or otherwise required by
contract or law and unless otherwise instructed by the Buyer, be applied as a
Collection of any Receivables constituting Transferred Assets of such
Obligor, in the order of the age of such Receivables, starting with the
oldest such Receivable, to the extent of any amounts then due and payable
thereunder, before being applied to any Receivable that is not a Transferred
Asset or other indebtedness of such Obligor.
ARTICLE VII
FURTHER ASSURANCES
SECTION 7.01. FURTHER ASSURANCES. The Originators agree to
do and perform from time to time, any and all acts and to execute any and all
further instruments required or reasonably requested by the Buyer or the Deal
Agent (as the Buyer's assignee) more fully to effect the purposes of this
Agreement in a manner consistent with this Agreement including, without
limitation, the execution of any financing statements or continuation
statements or other documents or instruments relating to the Transferred
Assets for filing under the provisions of the UCC or other relevant laws of
any applicable jurisdiction.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.01. INDEMNITIES BY THE ORIGINATORS. Without
limiting any other rights which the Buyer may have hereunder or under
applicable law, each of the Originators, on a joint and several basis, hereby
agrees to indemnify the Buyer and its assigns, and each of their respective
directors, officers, employees, agents and attorneys (all of the foregoing
being collectively referred to as "INDEMNIFIED PARTIES") from and against any
and all damages, losses, claims, liabilities and related costs and expenses,
including reasonable attorneys' fees and disbursements (all of the foregoing
being collectively referred to as "INDEMNIFIED AMOUNTS") awarded against or
incurred by any of them arising out of or resulting from:
20
(i) the sale of any Receivable under this Agreement which is not
at the date of Purchase an Eligible Receivable;
(ii) reliance on any representation or warranty made or deemed
made by any Originator or any of their respective officers under or in
connection with this Agreement, which shall have been false or incorrect in any
material respect when made or deemed made or delivered;
(iii) the failure by any Originator to comply with any term,
provision or covenant contained in this Agreement or the Receivables Purchase
Agreement or any of the other Originator Documents, or with any applicable law,
rule or regulation with respect to any Receivable, the related Contract or the
Related Security, or the nonconformity of any Receivable, the related Contract
or the Related Security with any such applicable law, rule or regulation;
(iv) (A) the failure to vest and maintain vested in the Buyer or
to transfer to the Buyer, legal and equitable title to and ownership of, the
Receivables and the other Transferred Assets which are, or are purported to be,
sold by the Originators hereunder; or (B) the failure to grant to the Buyer a
valid and perfected ownership interest under Article 9 of the UCC in and to the
Receivables which are, or are purported to be, Transferred Assets, together with
all Collections and Related Security; in each case free and clear of any Adverse
Claim whether existing at the time of the Purchase of any such Receivable or at
any time thereafter (other than Adverse Claims created in favor of the Buyer
hereunder or by the Buyer under the Receivables Purchase Agreement);
(v) the failure by any Originator to make any payment required
on its part to be made hereunder;
(vi) the failure to file, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any Receivables
and other Transferred Assets which are, or are purported to be, sold by the
Originators hereunder, whether at the time of the Purchase or at any subsequent
time;
(vii) any dispute, claim, offset or defense (other than the
discharge in bankruptcy of the Obligor) of the Obligor to the payment of any
Receivable which is, or is purported to be sold by an Originator hereunder
(including, without limitation, a defense based on such Receivable or the
related Contract not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any other
claim resulting from the Originator's performance of services related to such
Receivable or the failure to perform such services;
(viii) any failure of any Originator to perform its duties or
obligations in accordance with the provisions of this Agreement or any failure
by any Originator or any Affiliate thereof to perform its respective duties
under the Contracts;
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(ix) the failure to pay when due any taxes, including without
limitation, sales, excise or personal property taxes payable in connection with
the Transferred Assets;
(x) any investigation, litigation or proceeding related to
this Agreement or the use of proceeds of the Purchase or the ownership by the
Buyer of Transferred Assets except any such investigation, litigation or
proceeding arising from the gross negligence or willful misconduct of the
Buyer;
(xi) any attempt by any Person to void or otherwise avoid any
transfer of a Transferred Asset from the Originators to the Buyer under any
statutory provision or common law or equitable action, including, without
limitation, any provision of the Bankruptcy Code; or
(xii) the failure of any Originator or any of their
respective agents or representatives (including, without limitation, agents,
representatives and employees of the Originators acting pursuant to authority
granted under SECTION 6.01) to remit to the Servicer, Collections of
Transferred Assets remitted to such Originator or any such agent or
representative.
Any amounts subject to the indemnification provisions of this
SECTION 8.01 shall be paid by the applicable Originator to the Buyer within
two (2) Business Days following the Buyer's written demand therefor.
Notwithstanding any other provision of this Agreement to the contrary, the
Originators shall not indemnify the Indemnified Parties for or with respect
to any Indemnified Amounts that would constitute recourse for uncollectible
Transferred Assets due to credit reasons.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. AMENDMENTS AND WAIVERS. No amendment to or
modification of any provision of this Agreement shall be effective without
the written agreement of the parties hereto and, to the extent then required
in the Receivables Purchase Agreement, the written consent of the Deal Agent.
Any waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given.
SECTION 9.02. NOTICES, ETC. All notices and other
communications provided for hereunder shall, unless otherwise stated herein,
be in writing (including telex communication and communication by facsimile
copy) and mailed, telexed, transmitted or delivered, as to each party hereto,
at its address set forth under its name on the signature pages hereof or at
such other address as shall be designated by such party in a written notice
to the other parties hereto. All such notices and communications shall be
effective, upon receipt, or in the case of (a) notice by mail, five days
after being deposited in the United States mails, first class postage
prepaid, (b) notice by telex, when telexed against receipt of answerback, or
(c) notice by facsimile copy, when verbal communication of receipt is
obtained, except that notices and communications pursuant to ARTICLE II shall
not be effective until received.
22
SECTION 9.03. SETOFF AND COUNTERCLAIM. All payments to be
made by the Originators under this Agreement shall be made free and clear of
any counterclaim, set-off, deduction or other defense, which the Originators
may have against the Buyer, or against each other.
SECTION 9.04. NO WAIVER; REMEDIES. No failure on the part of
the Buyer to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
SECTION 9.05. BINDING EFFECT; ASSIGNABILITY. (a) This
Agreement shall be binding upon and inure to the benefit of the Originators,
the Buyer and their respective successors and permitted assigns. None of the
Originators may assign its rights and obligations or any interest herein
without the prior written consent of the Buyer. The Buyer may, subject to
any restrictions in the Receivables Purchase Agreement, assign at any time
all of its rights and obligations hereunder and interests herein without the
consent of the Originators. Without limiting the foregoing, the Originators
acknowledge the assignment of Buyer's rights and interests hereunder pursuant
to the Receivables Purchase Agreement and agrees that, subject to the terms
set forth in the Receivables Purchase Agreement, any such assignee of the
Buyer (and any further assignee of such assignee) shall have the right, as
the assignee of the Buyer (or the assignee of such assignee), to enforce the
Buyer's rights and remedies under this Agreement directly against such party
(including, without limitation, the right to give or withhold any and all
consents, requests, notices, directions, approvals, demands, extensions or
waivers under or with respect to this Agreement or the obligations in respect
of any Originator hereunder to the same extent as the Buyer may do), but
without any obligation on the part of any such assignee to perform any of the
obligations of the Buyer hereunder. Each of the Originators also agrees that
it shall send to the Deal Agent a copy of all notices required or desired to
be given by the Originators to the Buyer hereunder.
SECTION 9.06. TERM OF THIS AGREEMENT. This Agreement,
including, without limitation, the Originators' obligations to observe its
covenants set forth in ARTICLES V and VI, shall remain in full force and
effect until the Termination Date; PROVIDED, HOWEVER, that the rights and
remedies with respect to any breach of any representation and warranty made
or deemed made by the Originators pursuant to ARTICLES III and IV, and the
indemnification and payment provisions of ARTICLE VIII shall be continuing
and shall survive any termination of this Agreement.
SECTION 9.07. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER
OF OBJECTION TO VENUE. THIS AGREEMENT, OTHER THAN THE PROVISIONS RELATING TO
THE CREATION, PERFECTION AND PRIORITY OF THE SECURITY INTEREST IN THE
RECEIVABLES, SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK; THE PROVISIONS OF THIS AGREEMENT RELATING TO THE
GRANT,
23
PERFECTION AND PRIORITY OF THE SECURITY INTEREST IN THE RECEIVABLES SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE UNIFORM COMMERCIAL CODE AS
IN EFFECT IN THE STATE OF CALIFORNIA. EACH OF THE PARTIES HERETO HEREBY
AGREES TO THE JURISDICTION OF ANY FEDERAL COURT LOCATED WITHIN THE STATE OF
NEW YORK. EACH OF THE PARTIES HERETO HEREBY WAIVES ANY OBJECTION BASED ON
FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED
HEREUNDER IN ANY OF THE AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT.
SECTION 9.08. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, THE BUYER AND THE ORIGINATORS EACH WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE BETWEEN THE PARTIES HERETO ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP BETWEEN ANY OF
THEM IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY. INSTEAD, ANY SUCH DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
SECTION 9.09. COSTS, EXPENSES AND TAXES. In addition to the
rights of indemnification granted to the Buyer and the Indemnified Parties
under ARTICLE VIII hereof, the Originators agree to pay on demand, on a joint
and several basis, all reasonable costs and expenses of the Buyer and its
assignee incurred in connection with the preparation, execution, delivery,
administration (including periodic auditing), amendment or modification of,
or any waiver or consent issued in connection with, this Agreement and the
other documents to be delivered hereunder or in connection herewith,
including, without limitation, the reasonable fees and out-of-pocket expenses
of counsel for the Buyer and its assignee with respect thereto, and with
respect to advising the Buyer and its assignee as to its respective rights
and remedies under this Agreement and the other documents to be delivered
hereunder or in connection herewith, and all reasonable costs and expenses,
if any (including reasonable counsel fees and expenses), incurred by the
Buyer and its assignee in connection with the enforcement of this Agreement
and the other documents to be delivered hereunder or in connection herewith.
SECTION 9.10. EXECUTION IN COUNTERPARTS; SEVERABILITY;
INTEGRATION. 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. In case any provision
in or obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability
of the remaining provisions or obligations, or of such provision or
obligation in any other jurisdiction, shall not in any way be affected or
impaired thereby. This Agreement contains the final and complete integration
of all prior
24
expressions by the parties hereto with respect to the subject matter hereof
and shall constitute the entire agreement among the parties hereto with
respect to the subject matter hereof, superseding all prior oral or written
understandings.
SECTION 9.11. CONFIDENTIALITY. Except to the extent
otherwise required by applicable laws, rules or regulation, unless the
provider thereof shall otherwise consent in writing, each Originator agrees
that it shall (i) maintain the confidentiality of information obtained as a
result of being a party hereto, to any related documents or to any of the
transactions contemplated hereby or thereby (including, without limitation,
the contents of any summary of indicative terms and conditions with respect
to such transactions, and the provisions of this Agreement and any of the
other Originator Documents) ("CONFIDENTIAL INFORMATION") and (ii) not
disclose, deliver or otherwise make available to any third party any part of
any such Confidential Information; PROVIDED, HOWEVER, that the Originators
may disclose any Confidential Information (w) to its legal counsel, auditors
and accountants, (x) as may be required or requested by any governmental
authority, regulatory body or rating agency, (y) subject to a written
confidentiality agreement having terms substantially similar to this SECTION
9.11, to any financial institution or other party that extends or is
considering the extension of material debt or equity financing to the
applicable Originator or (z) as may be required or appropriate in response to
a court order or in connection with any litigation; PROVIDED FURTHER,
HOWEVER, that the Originators shall have no obligation of confidentiality
whatsoever in respect of any information which may be generally available to
the public or becomes available to the public through no fault of the Buyer.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
THE ORIGINATORS: CALIFORNIA COMPENSATION INSURANCE COMPANY
By: /s/ J. CHRIS SEAMAN
---------------------------------------
Name: J. Chris Seaman
Title: Vice President
c/o Superior National Insurance Group, Inc.
26601 Agoura Road
Calabasas, CA 91302
Attention: J. Chris Seaman,
Executive Vice President and CFO
Phone: 818-880-1600
Facsimile: 818-880-8615
COMMERCIAL COMPENSATION
INSURANCE COMPANY
By: /s/ J. CHRIS SEAMAN
---------------------------------------
Name: J. Chris Seaman
Title: Vice President
c/o Superior National Insurance Group, Inc.
26601 Agoura Road
Calabasas, CA 91302
Attention: J. Chris Seaman,
Executive Vice President and CFO
Phone: 818-880-1600
Facsimile: 818-880-8615
COMBINED BENEFITS INSURANCE
COMPANY
By: /s/ J. CHRIS SEAMAN
---------------------------------------
Name:
Title:
c/o Superior National Insurance Group, Inc.
26601 Agoura Road
Calabasas, CA 91302
Attention: J. Chris Seaman,
Executive Vice President and CFO
Phone: 818-880-1600
Facsimile: 818-880-8615
BUSINESS INSURANCE COMPANY
By: /s/ J. CHRIS SEAMAN
---------------------------------------
Name:
Title:
c/o Superior National Insurance Group, Inc.
26601 Agoura Road
Calabasas, CA 91302
Attention: J. Chris Seaman,
Executive Vice President and CFO
Phone: 818-880-1600
Facsimile: 818-880-8615
THE BUYER: INSURANCE FUNDING LLC
By: /s/ ANDREW L. STIDD
---------------------------------------
Name: Andrew L. Stidd
Title: Manager
c/o GSS Holdings II, Inc.
25 West 43rd Street
Suite 704
New York, New York 10036
Attention: Andy Stidd
Facsimile No: (212)302-8767
Telephone No: (212)302-8330