EXHIBIT 10.4
RECEIVABLES PURCHASE AND SERVICING AGREEMENT
Dated as of February 10, 1999,
by and among
GOLF FUNDING CORPORATION,
as Seller,
REDWOOD RECEIVABLES CORPORATION,
as Purchaser,
CALLAWAY GOLF SALES COMPANY,
as Servicer,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Operating Agent and Collateral Agent
TABLE OF CONTENTS
ARTICLE I.
DEFINITIONS AND INTERPRETATION....................................................... 2
Section 1.01. Definitions............................................................ 2
Section 1.02. Rules of Construction.................................................. 2
ARTICLE II.
AMOUNTS AND TERMS OF PURCHASES....................................................... 2
Section 2.01. Purchases.............................................................. 2
Section 2.02. Optional Changes in Maximum Purchase Limit............................. 2
Section 2.03. Notices Relating to Purchases and Reductions in Capital Investment..... 3
Section 2.04. Conveyance of Receivables.............................................. 4
(a) Purchase Assignment.................................................... 4
(b) Funding of Collection Account; Payment of Purchase Price............... 4
(c) Vesting of Ownership................................................... 4
(d) Repurchases of Transferred Receivables................................. 4
Section 2.05. Facility Termination Date.............................................. 5
Section 2.06. Daily Yield............................................................ 5
Section 2.07. Fees................................................................... 5
Section 2.08. Time and Method of Payments............................................ 5
Section 2.09. Capital Requirements; Additional Costs................................. 6
Section 2.10. Breakage Costs......................................................... 8
Section 2.11. Purchase Excess........................................................ 8
ARTICLE III.
CONDITIONS PRECEDENT................................................................. 8
Section 3.01. Conditions to Effectiveness of Agreement............................... 9
(a) Purchase Agreement; Other Related Documents............................ 9
(b) Governmental Approvals................................................. 9
(c) Compliance with Laws................................................... 9
(d) Payment of Fees........................................................ 9
(e) Credit Facility Conditions............................................. 9
(f) Confirmation of Commercial Paper Ratings............................... 9
Section 3.02. Conditions Precedent to All Purchases.................................. 9
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES...................................................... 10
Section 4.01. Representations and Warranties of the Seller.......................... 10
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(a) Corporate Existence; Compliance with Law.............................. 10
(b) Executive Offices; Collateral Locations; Corporate or Other Names;
FEIN.................................................................. 11
(c) Corporate Power, Authorization, Enforceable Obligations............... 11
(d) No Litigation......................................................... 12
(e) Solvency.............................................................. 12
(f) Material Adverse Effect............................................... 12
(g) Ownership of Property; Liens.......................................... 12
(h) Ventures, Subsidiaries and Affiliates; Outstanding Stock and
Indebtedness.......................................................... 13
(i) Taxes................................................................. 13
(j) Full Disclosure....................................................... 13
(k) ERISA................................................................. 13
(l) Brokers............................................................... 14
(m) Margin Regulations.................................................... 14
(n) Nonapplicability of Bulk Sales Laws................................... 14
(o) Securities Act and Investment Company Act Exemptions.................. 14
(p) Government Regulation................................................. 14
(q) Nonconsolidation...................................................... 14
(r) Deposit and Disbursement Accounts..................................... 16
(s) Transferred Receivables............................................... 16
(t) Representations and Warranties in Other Related Documents............. 17
(u) Year 2000............................................................. 17
Section 4.02. Representations and Warranties of the Servicer........................ 17
ARTICLE V.
GENERAL COVENANTS OF THE SELLER..................................................... 18
Section 5.01. Affirmative Covenants of the Seller................................... 18
(a) Compliance with Agreements and Applicable Laws........................ 18
(b) Maintenance of Existence and Conduct of Business...................... 18
(c) Deposit of Collections................................................ 18
(d) Use of Proceeds....................................................... 18
(e) Payment, Performance and Discharge of Obligations..................... 19
(f) ERISA................................................................. 19
(g) Year 2000............................................................. 19
Section 5.02. Reporting Requirements of the Seller.................................. 19
Section 5.03. Negative Covenants of the Seller...................................... 20
(a) Sale of Stock and Assets.............................................. 20
(b) Liens................................................................. 20
(c) Modifications of Receivables or Contracts............................. 20
(d) Changes in Instructions to Obligors................................... 20
(e) Capital Structure and Business........................................ 20
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(f) Mergers, Subsidiaries, Etc............................................ 20
(g) Sale Characterization; CGS Transfer Agreement......................... 21
(h) Restricted Payments................................................... 21
(i) Indebtedness.......................................................... 21
(j) Prohibited Transactions............................................... 21
(k) Investments........................................................... 21
(l) Commingling........................................................... 21
(m) ERISA................................................................. 22
ARTICLE VI.
COLLECTIONS AND DISBURSEMENTS....................................................... 22
Section 6.01. Establishment of Deposit Accounts..................................... 22
(a) Cash Management Systems............................................... 22
(b) The Blocked Accounts.................................................. 22
(c) Collection Account.................................................... 23
(d) Retention Account..................................................... 24
(e) Collateral Account.................................................... 24
Section 6.02. Funding of Collection Account......................................... 24
Section 6.03. Daily Disbursements From the Collection Account and Related Sub-
Accounts; Revolving Period............................................ 26
Section 6.04. Disbursements From the Retention Account; Settlement Date Procedures;
Revolving Period...................................................... 27
Section 6.05. Liquidation Settlement Procedures..................................... 28
Section 6.06. Investment of Funds in Accounts....................................... 31
Section 6.07. Termination Procedures................................................ 31
ARTICLE VII.
SERVICER PROVISIONS................................................................. 32
Section 7.01. Appointment of the Servicer........................................... 32
Section 7.02. Duties and Responsibilities of the Servicer........................... 32
Section 7.03. Collections on Receivables............................................ 32
Section 7.04. Authorization of the Servicer......................................... 33
Section 7.05. Servicing Fees........................................................ 34
Section 7.06. Covenants of the Servicer............................................. 34
(a) Ownership of Transferred Receivables.................................. 34
(b) Compliance with Credit and Collection Policies........................ 34
(c) Year 2000............................................................. 34
(d) Covenants in Other Related Documents.................................. 34
Section 7.07. Reporting Requirements of the Servicer................................ 34
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ARTICLE VIII.
GRANT OF SECURITY INTERESTS.......................................................... 35
Section 8.01. Seller's Grant of Security Interest................................... 35
Section 8.02. Seller's Certification................................................ 36
Section 8.03. Consent to Assignment................................................. 36
Section 8.04. Delivery of Collateral................................................ 37
Section 8.05. Seller Remains Liable................................................. 37
Section 8.06. Covenants of the Seller and the Servicer Regarding the Seller
Collateral............................................................ 37
(a) Offices and Records................................................... 38
(b) Access................................................................ 38
(c) Communication with Accountants........................................ 39
(d) Collection of Transferred Receivables................................. 39
(e) Performance of Seller Assigned Agreements............................. 40
ARTICLE IX.
TERMINATION EVENTS................................................................... 40
Section 9.01. Termination Events.................................................... 40
Section 9.02. Events of Servicer Termination........................................ 43
ARTICLE X.
REMEDIES............................................................................. 45
Section 10.01. Actions Upon Termination Event........................................ 45
Section 10.02. Exercise of Remedies.................................................. 46
Section 10.03. Power of Attorney..................................................... 46
Section 10.04. Continuing Security Interest.......................................... 47
ARTICLE XI.
SUCCESSOR SERVICER PROVISIONS....................................................... 47
Section 11.01. Servicer Not to Resign............................................... 47
Section 11.02. Appointment of the Successor Servicer................................ 47
Section 11.03. Duties of the Servicer............................................... 48
Section 11.04. Effect of Termination or Resignation................................. 48
ARTICLE XII.
INDEMNIFICATION..................................................................... 48
Section 12.01. Indemnities by the Seller............................................ 48
Section 12.02. Indemnities by the Servicer.......................................... 50
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Section 12.03. Limitation of Damages; Purchaser Indemnified Persons................ 51
ARTICLE XIII.
OPERATING AGENT AND COLLATERAL AGENT................................................ 51
Section 13.01. Authorization and Action............................................ 51
Section 13.02. Reliance............................................................ 52
Section 13.03. GE Capital and Affiliates........................................... 52
ARTICLE XIV. MISCELLANEOUS.................................................................. 53
Section 14.01. Notices............................................................. 53
Section 14.02. Binding Effect; Assignability....................................... 53
Section 14.03. Termination; Survival of Seller Secured Obligations Upon Facility
Termination Date.................................................... 54
Section 14.04. Costs, Expenses and Taxes........................................... 54
Section 14.05. Confidentiality..................................................... 56
Section 14.06. No Proceedings...................................................... 56
Section 14.07. Complete Agreement; Modification of Agreement; Intercreditor
Agreement........................................................... 56
Section 14.08. Amendments and Waivers.............................................. 57
Section 14.09. No Waiver; Remedies................................................. 57
Section 14.10. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
JURY TRIAL.......................................................... 57
Section 14.11. Counterparts........................................................ 59
Section 14.12. Severability........................................................ 59
Section 14.13. Section Titles...................................................... 59
Section 14.14. Limited Recourse.................................................... 59
Section 14.15. Further Assurances.................................................. 59
EXHIBITS
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Exhibit 2.02(a) - Form of Commitment Reduction Notice
Exhibit 2.02(b) - Form of Commitment Termination Notice
Exhibit 2.03(a) - Form of Investment Base Certificate
Exhibit 2.03(b) - Form of Purchase Request
Exhibit 2.03(c) - Form of Repayment Notice
Exhibit 2.04(a) - Form of Purchase Assignment
Exhibit 3.01(a)(i) - Form of Solvency Certificate
Exhibit 3.01(a)(ii)(A) - Form of Bringdown Certificate (Closing)
Exhibit 3.01(a)(ii)(B) - Form of Bringdown Certificate (Post-Closing)
Exhibit 3.01(a)(iii)(A - Form of Servicer's Certificate (Closing)
Exhibit 3.01(a)(iii)(B) - Form of Servicer's Certificate (Post-Closing)
Exhibit 3.01(a)(iv) - Form of Monthly Report
Exhibit 10.03 - Form of Power of Attorney
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SCHEDULES
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Schedule 4.01(b) Executive Offices; Collateral Locations; Corporate
or Other Names; FEIN/Seller
Schedule 4.01(d) Litigation/Seller
Schedule 4.01(f) Material Adverse Effect
Schedule 4.01(h) Ventures, Subsidiaries and Affiliates; Outstanding
Stock and Indebtedness/Seller
Schedule 4.01(i) Tax Matters/Seller
Schedule 4.01(r) Deposit and Disbursement Accounts/Seller
Schedule 5.01(b) Trade Names/Seller
Schedule 5.03(b) Existing Liens/Seller
ANNEXES
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Annex 1 - Concentration Limits
Annex 2 - Excluded Obligors
Exhibit A to Annex 2 - Form of Amending Letter
Annex 3 - Determination of "Redwood Yield"
Annex 4 - Yield Discount Amount
Annex 5 - Collateral Covenants
Annex 5.02(a) - Reporting Requirements of the Seller
Annex 5.02(b) - Investment Reports
Annex 7.07 - Reporting Requirements of the Servicer
Annex X - Definitions
Annex Y - Schedule of Documents
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THIS RECEIVABLES PURCHASE AND SERVICING AGREEMENT ("Agreement") is
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entered into as of February 10, 1999, by and among GOLF FUNDING CORPORATION, a
Delaware corporation (the "Seller"), REDWOOD RECEIVABLES CORPORATION, a Delaware
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corporation (the "Purchaser"), and CALLAWAY GOLF SALES COMPANY as servicer
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hereunder (in such capacity, the "Servicer"), and GENERAL ELECTRIC CAPITAL
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CORPORATION, a New York corporation, as operating agent for the Purchaser
hereunder (in such capacity, the "Operating Agent") and as collateral agent for
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the Purchaser and the Purchaser Secured Parties (in such capacity, the
"Collateral Agent").
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RECITALS
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A. The Seller is a special purpose corporation owned by Callaway
Golf Sales Company ("CGS Originator").
B. The Seller has been formed for the purpose of purchasing, or
otherwise acquiring by capital contribution, all trade receivables of the CGS
Originator pursuant to the CGS Transfer Agreement.
C. The Seller intends to sell, and the Purchaser intends to
purchase, such trade receivables, from time to time, as described herein.
D. The Operating Agent has been requested and is willing to act as
operating agent on behalf of the Purchaser in connection with the making and
financing of such purchases.
E. In order to effectuate the purposes of this Agreement, the
Purchaser desires to appoint Callaway Golf Sales Company to service, administer
and collect the receivables acquired by the Purchaser pursuant to this Agreement
and Callaway Golf Sales Company is willing to act in such capacity as the
Servicer hereunder on the terms and conditions set forth herein.
F. In order to induce the Purchaser to appoint Callaway Golf Sales
as Servicer, the Parent Guarantor has agreed, pursuant to the CGS Transfer
Agreement, to guarantee the Servicer's obligations under this Agreement.
AGREEMENT
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NOW, THEREFORE, in consideration of the premises and the mutual
covenants hereinafter contained, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I.
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DEFINITIONS AND INTERPRETATION
Section 1.01. Definitions. Capitalized terms used herein and not
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otherwise defined shall have the meanings ascribed to them in Annex X.
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Section 1.02. Rules of Construction. For purposes of this Agreement,
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the rules of construction set forth in Annex X shall govern. All Appendices
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hereto, or expressly identified to this Agreement, are incorporated herein by
reference and, taken together with this Agreement, shall constitute but a single
agreement.
ARTICLE II.
AMOUNTS AND TERMS OF PURCHASES
Section 2.01. Purchases. From and after the Closing Date and until the
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Facility Termination Date and subject to the terms and conditions hereof, the
Purchaser agrees to purchase Transferred Receivables (each such purchase
hereunder, a "Purchase") from the Seller from time to time and the Seller agrees
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to sell such Transferred Receivables to the Purchaser. Under no circumstances
shall the Purchaser make any Purchase if, after giving effect thereto, a
Purchase Excess would exist. The aggregate purchase price for each such
Purchase shall equal the Cash Purchase Price plus the Deferred Purchase Price.
----
Section 2.02. Optional Changes in Maximum Purchase Limit.
------------------------------------------
(a) So long as no Incipient Termination Event or Termination Event
shall have occurred and be continuing, the Seller may, not more than twice
during each calendar year, reduce the Maximum Purchase Limit permanently;
provided, that (i) the Seller shall give ten Business Day's prior written notice
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of any such reduction to the Purchaser and the Operating Agent substantially in
the form of Exhibit 2.02(a) (each such notice, a "Commitment Reduction Notice"),
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(ii) any partial reduction of the Maximum Purchase Limit shall be in a minimum
amount of $5,000,000 or an integral multiple thereof, and (iii) no such
reduction shall reduce the Maximum Purchase Limit below Capital Investment at
such time.
(b) The Seller may at any time on at least 90 days' prior written
notice by the Seller to the Purchaser and the Operating Agent irrevocably
terminate the Maximum Purchase Limit; provided, that (i) such notice of
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termination shall be substantially in the form of Exhibit 2.02(b) (the
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"Commitment Termination Notice"), and (ii) the Seller shall reduce the Capital
-----------------------------
Investment to zero and make all payments required by Section 2.03(c) at the time
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and in the manner specified therein. Upon such termination, the Seller's right
to request that the Purchaser make Purchases hereunder shall simultaneously
terminate and the Facility Termination Date shall automatically occur.
(c) Intentionally omitted.
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(d) Each written notice required to be delivered pursuant to Sections
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2.02(a) and (b) shall be irrevocable and shall be effective (i) on the day of
- ------- ---
receipt if received by the Purchaser and the Operating Agent not later than 5:00
p.m. (New York time) on any Business Day and (ii) on the immediately succeeding
Business Day if received by the Purchaser or the Operating Agent after such time
on such Business Day or if any such notice is received on a day other than a
Business Day (regardless of the time of day such notice is received). Each such
notice of termination or reduction shall specify, respectively, the amount of,
or the amount of the proposed reduction in, the Maximum Purchase Limit.
Section 2.03. Notices Relating to Purchases and Reductions in Capital
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Investment.
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(a) Not later than 12:00 noon (New York time) on the third Business
Day of each week, the Seller shall deliver to the Purchaser and the Operating
Agent an Officer's Certificate substantially in the form of Exhibit 2.03(a)
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(each an "Investment Base Certificate"); provided, that if (i) an Incipient
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Termination Event or a Termination Event shall have occurred and be continuing
or (ii) the Operating Agent, in good faith, believes that an Incipient
Termination Event or a Termination Event is imminent or deems the Purchaser's
rights or interests in the Transferred Receivables or the Seller Collateral
insecure, the Seller shall deliver an Investment Base Certificate to the
Purchaser and the Operating Agent at such more frequent intervals as the
Operating Agent may request from time to time. Capital Investment Available
shall be determined by the Operating Agent based on information related to the
Seller Collateral available to it, including (A) any information obtained in
connection with any audit or reflected in the most recent Investment Base
Certificate or any other Investment Report delivered to the Purchaser and the
Operating Agent or (B) any other information that may be available to the
Purchaser and the Operating Agent.
(b) Each Purchase resulting in an increase in Capital Investment shall
be made upon the provision of notice by the Seller to the Purchaser and the
Operating Agent in the manner provided herein. Any such notice must be given in
writing so that it is received no later than 4:00 p.m. (New York time) on the
Business Day immediately preceding the proposed Purchase Date set forth therein.
Each such notice (a "Purchase Request") shall (i) be substantially in the form
----------------
of Exhibit 2.03(b), (ii) be irrevocable and (iii) specify the amount by which
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the Seller wishes the Capital Investment to be increased and the proposed
Purchase Date (which shall be a Business Day), and shall include such other
information as may be required by the Purchaser and the Operating Agent.
(c) The Seller may at any time reduce the Capital Investment;
provided, that (i) the Seller shall give one Business Day's prior written notice
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of any such reduction to the Purchaser and the Operating Agent substantially in
the form of Exhibit 2.03(c) (each such notice, a "Repayment Notice"), (ii) each
--------------- ----------------
such notice shall be irrevocable, (iii) each such notice shall specify the
amount by which the Seller wishes the Capital Investment to be reduced and the
proposed date of such reduction (which shall be a Business Day) and (iv) any
such reduction must
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be accompanied by payment of (A) all Daily Yield accrued on the Capital
Investment being reduced through but excluding the date of such reduction and
(B) the costs, if any, required by Section 2.10. Any such notice of reduction
------------
must be received by the Purchaser and the Operating Agent no later than 4:00
p.m. (New York time) on the Business Day immediately preceding the date of the
proposed reduction in Capital Investment.
Section 2.04. Conveyance of Receivables.
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(a) Purchase Assignment. On or prior to the Closing Date, the Seller
-------------------
shall complete, execute and deliver to the Purchaser an assignment substantially
in the form of Exhibit 2.04(a) (the "Purchase Assignment") in order to evidence
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the Purchases.
(b) Funding of Collection Account; Payment of Purchase Price.
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(i) Funding of Collection Account by Purchaser. Following
------------------------------------------
receipt of any Purchase Request, and subject to satisfaction of the
conditions set forth in Section 3.02, the Purchaser shall make available to
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or on behalf of the Seller on the Purchase Date specified therein the
lesser of the amount specified in such Purchase Request and Capital
Investment Available by depositing such amount in same day funds into the
Collection Account.
(ii) Payment of Purchase Price. The Purchaser shall, or shall
-------------------------
cause the Operating Agent to, deposit into the Agent Account on each
Business Day during the Revolving Period, in same day funds, all amounts on
deposit in the Collection Account that are to be disbursed to or on behalf
of the Seller as payment for the Transferred Receivables pursuant to
Section 6.03.
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(c) Vesting of Ownership. Effective on and as of each Purchase Date,
--------------------
the Purchaser shall own all Transferred Receivables sold by the Seller hereunder
on such Purchase Date. The Seller shall not take any action inconsistent with
such ownership and shall not claim any ownership interest in such Transferred
Receivables. The Seller shall indicate in its Records that ownership of such
Transferred Receivables is vested in the Purchaser. In addition, the Seller
shall respond to any inquiries with respect to the ownership of any such
Transferred Receivable by stating that it is no longer the owner of such
Transferred Receivable and that ownership thereof is vested in the Purchaser.
The Seller and the Servicer shall hold all Contracts and other documents and
incidents relating to such Transferred Receivables in trust for the benefit of
the Purchaser, as the owner thereof, and for the sole purpose of facilitating
the servicing of such Transferred Receivables. The Seller and the Servicer
hereby acknowledge that their retention and possession of such Contracts and
documents shall at all times be at the sole discretion of the Purchaser and in a
custodial capacity for the Purchaser's benefit only.
(d) Repurchases of Transferred Receivables. If the CGS Originator is
--------------------------------------
required to repurchase Transferred Receivables from the Seller pursuant to
Section 4.04 of the CGS
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Transfer Agreement, the Purchaser shall, at the option of the Seller, either
sell or reconvey such Transferred Receivables to the Seller (i) for cash or (ii)
in exchange for new Eligible Receivables, in each case in an amount equal to the
Outstanding Balance of such Transferred Receivables.
Section 2.05. Facility Termination Date. Notwithstanding anything to
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the contrary set forth herein, the Purchaser shall have no obligation to
purchase any additional Transferred Receivables from and after the Facility
Termination Date.
Section 2.06. Daily Yield.
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(a) The Seller shall pay Daily Yield to the Purchaser in the manner
and at the times specified in Sections 6.03, 6.04 and 6.05.
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(b) Notwithstanding the foregoing, the Seller shall pay interest at
the applicable Daily Yield Rate on unpaid Daily Yield and on any other amount
payable by the Seller hereunder (to the extent permitted by law) that shall not
be paid in full when due (whether at stated maturity, by acceleration or
otherwise) for the period commencing on the due date thereof to (but excluding)
the date the same is paid in full.
Section 2.07. Fees.
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(a) On or prior to the Closing Date, the Seller shall pay to the
Purchaser the fees set forth in the Fee Letter.
(b) On each Settlement Date, the Seller shall pay to the Servicer or
to the Successor Servicer, as applicable, the Servicing Fee or the Successor
Servicing Fees and Expenses, respectively, in each case to the extent of
available funds therefor as provided in Section 6.04.
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Section 2.08. Time and Method of Payments.
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(a) Subject to the provisions of Sections 6.02, 6.03, 6.04 and 6.05,
------------- ---- ---- ----
all payments in reduction of Capital Investment and all payments of yield, fees
and other amounts payable by the Seller hereunder shall be made in Dollars, in
immediately available funds, to the Purchaser not later than 12:00 noon (New
York time) on the due date therefor. Any such payment made on such date but
after such time shall be deemed to have been made on, and Daily Yield shall
continue to accrue and be payable thereon until, the next succeeding Business
Day. If any such payment becomes due on a day other than a Business Day, the
maturity thereof will be extended to the next succeeding Business Day and Daily
Yield thereon shall be payable during such extension.
(b) Any and all payments by the Seller hereunder shall be made in
accordance with this Section 2.08 without setoff or counterclaim and free and
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clear of and without deduction
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for any and all present or future taxes, levies, imposts, deductions, charges or
withholdings, excluding taxes imposed on or measured by the net income of any
Affected Party by the jurisdictions under the laws of which any such Affected
Party is organized or by any political subdivisions thereof (such non-excluded
taxes, levies, imposts, deductions, charges and withholdings being "Indemnified
-----------
Taxes"). If the Seller shall be required by law to deduct any Indemnified
- -----
Taxes from or in respect of any sum payable hereunder, (i) the sum payable shall
be increased as much as shall be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.08) the Affected Party entitled to receive any such payment
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receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Seller shall make such deductions, and (iii) the
Seller shall pay the full amount deducted to the relevant taxing or other
authority in accordance with applicable law. Within 30 days after the date of
any payment of Indemnified Taxes, the Seller shall furnish to the Operating
Agent the original or a certified copy of a receipt evidencing payment thereof.
The Seller shall indemnify any Affected Party from and against, and, within ten
days of demand therefor, pay any Affected Party for, the full amount of taxes
(together with any taxes imposed by any jurisdiction on amounts payable under
this Section 2.08) paid by such Affected Party and any liability (including
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penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such taxes were correctly or legally asserted.
(c) The Purchaser shall obtain from each Liquidity Lender organized
under the laws of a jurisdiction other than the United States or any state
thereof (a "Foreign Lender") as to which payments to be made under this
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Agreement are exempt from United States withholding tax under an applicable
statute or tax treaty a properly completed and executed IRS Form 4224 or Form
1001 or other applicable form, certificate or document prescribed by the IRS or
the United States certifying as to such Foreign Lender's entitlement to such
exemption (a "Certificate of Exemption"). The Operating Agent shall obtain a
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Certificate of Exemption from any foreign Person that seeks to become a
Liquidity Lender prior to the foreign Person becoming a Liquidity Lender. No
foreign Person may become a Liquidity Lender if such Person is unable to deliver
a Certificate of Exemption.
Section 2.09. Capital Requirements; Additional Costs.
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(a) If the Operating Agent on behalf of any Affected Party shall have
determined that the adoption after the date hereof of any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar requirements or
compliance by such Affected Party with any request or directive regarding
capital adequacy, reserve requirements or similar requirements (whether or not
having the force of law) from any central bank or other Governmental Authority
increases or would have the effect of increasing the amount of capital, reserves
or other funds required to be maintained by such Affected Party against
commitments made by it under this Agreement, any other Related Document or any
Program Document and thereby reducing the rate of return on such Affected
Party's capital as a consequence of its commitments hereunder or thereunder,
then the Seller shall from time to time upon demand by the Operating Agent pay
to the Collateral
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Agent on behalf of such Affected Party additional amounts sufficient to
compensate such Affected Party for the Seller's Share of such reduction together
with interest thereon from the date of any such demand until payment in full at
the Daily Yield Rate. A certificate as to the amount of that reduction and
showing the basis of the computation thereof submitted by the Operating Agent to
the Seller shall be final, binding and conclusive on the parties hereto (absent
manifest error) for all purposes.
(b) If, due to any Regulatory Change, there shall be any increase in
the cost to any Affected Party of agreeing to make or making, funding or
maintaining any commitment hereunder, under any other Related Document or under
any Program Document, including with respect to any Purchases, Capital
Investment, LOC Draws or Liquidity Loans, or any reduction in any amount
receivable by such Affected Party hereunder or thereunder, including with
respect to any Purchases, Capital Investment, LOC Draws or Liquidity Loans (any
such increase in cost or reduction in amounts receivable are hereinafter
referred to as "Additional Costs"), then the Seller shall, from time to time
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upon demand by the Operating Agent, pay to the Collateral Agent on behalf of
such Affected Party additional amounts sufficient to compensate such Affected
Party for the Seller's Share of such Additional Costs together with interest
thereon from the date demanded until payment in full thereof at the Daily Yield
Rate; provided that the demand is made within 180 days after the incurrence of
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such Additional Costs (unless such adoption, change or compliance arose or
became effective retrospectively, in which case such Affected Party shall not be
limited to such 180 day period so long as the Affected Party has given notice to
the Seller pursuant to Section 2.09(c) not later than 180 days from the date
---------------
such adoption, change or compliance became applicable to the Affected Party).
Such Affected Party agrees that, as promptly as practicable after it becomes
aware of any circumstance referred to above that would result in any such
Additional Costs, it shall, to the extent not inconsistent with its internal
policies of general application, use reasonable commercial efforts to minimize
costs and expenses incurred by it and payable to it by the Seller pursuant to
this Section 2.09(b).
---------------
(c) Determinations by any Affected Party for purposes of this Section
-------
2.09 of the effect of any Regulatory Change on its costs of making, funding or
- ----
maintaining any commitments hereunder, under any other Related Document or under
any Program Document or on amounts receivable by it hereunder or thereunder or
of the additional amounts required to compensate such Affected Party in respect
of any Additional Costs shall be set forth in a written notice to the Seller in
reasonable detail and shall be final, binding and conclusive on the Seller
(absent manifest error) for all purposes.
(d) Within fifteen (15) Business Days after receipt by the Seller of
written notice and demand from any Affected Party which is a Liquidity Lender
(an "Affected Lender") for payment of additional amounts or increased costs as
---------------
provided in Section 2.08(b), 2.09(a) or 2.09(b), the Seller may, at its option,
--------------- ------- -------
notify the Operating Agent and such Affected Lender of its intention to replace
the Affected Lender. So long as no Incipient Termination Event, Termination
Event, Incipient Servicer Termination Event or Servicer Termination Event shall
have occurred and be continuing, the Seller, with the consent of the Operating
Agent, may obtain, at the Seller's
-7-
expense, a replacement Lender ("Replacement Lender") for the Affected Lender,
------------------
which Replacement Lender must be satisfactory to the Operating Agent in its sole
discretion. If the Seller obtains a Replacement Lender within ninety (90) days
following notice of its intention to do so, the Affected Lender shall be
unconditionally obligated to sell, transfer and assign its Loans and Commitments
to such Replacement Lender for an amount equal to the principal balance of all
Loans held by the Affected Lender and all accrued interest and Fees with respect
thereto through the date of such sale, provided that the Seller shall have
--------
reimbursed such Affected Lender for the additional amounts or increased costs
that it is entitled to receive under this Agreement through the date of such
sale and assignment. Notwithstanding the foregoing, the Seller shall not have
the right to obtain a Replacement Lender if the Affected Lender rescinds its
demand for increased costs or additional amounts within fifteen (15) days
following its receipt of the Seller's notice of intention to replace such
Affected Lender. Furthermore, if the Seller gives a notice of intention to
replace and does not so replace such Affected Lender within ninety (90) days
thereafter, the Seller's rights under this Section 2.09(d) shall terminate and
---------------
the Seller shall promptly pay all increased costs or additional amounts demanded
by such Affected Lender pursuant to Sections 2.08(b), 2.09(a) and 2.09(b).
---------------- ------- -------
Section 2.10. Breakage Costs. The Seller shall pay to the Collateral
--------------
Agent for the account of the Purchaser, upon request of the Purchaser, such
amount or amounts as shall compensate the Purchaser for any loss, cost or
expense incurred by the Purchaser (as determined by the Purchaser) as a result
of any reduction by the Seller in Capital Investment (and accompanying loss of
Daily Yield thereon) other than on the maturity date of the Commercial Paper (or
other financing source) funding such Capital Investment, which compensation
shall include an amount equal to any loss or expense incurred by the Purchaser
during the period from the date of such reduction to (but excluding) the
maturity date of such Commercial Paper (or other financing source) if the rate
of interest obtainable by the Purchaser upon the redeployment of funds in an
amount equal to such reduction is less than the interest rate applicable to such
Commercial Paper (or other financing source)(any such loss, cost or expense
referred to collectively herein as "Breakage Costs"). The determination by the
--------------
Purchaser of the amount of any such loss or expense shall be set forth in a
written notice to the Seller in reasonable detail and shall be final, binding
and conclusive on the Seller (absent manifest error) for all purposes.
Section 2.11. Purchase Excess. On each Business Day during the
---------------
Revolving Period and after completion of the disbursements specified in Section
-------
6.03, the Operating Agent shall notify the Seller and the Servicer of any
- ----
Purchase Excess on such day, and the Seller shall deposit the amount of such
Purchase Excess in the Collection Account by 12:00 noon (New York time) on the
immediately succeeding Business Day.
ARTICLE III
CONDITIONS PRECEDENT
-8-
Section 3.01. Conditions to Effectiveness of Agreement. The Purchaser
----------------------------------------
shall not be obligated to purchase Transferred Receivables hereunder on the
occasion of the initial Purchase, nor shall the Purchaser, the Operating Agent
or the Collateral Agent be obligated to take, fulfill or perform any other
action hereunder, until the following conditions have been satisfied, in the
sole discretion of, or waived in writing by, the Purchaser and the Operating
Agent:
(a) Purchase Agreement; Other Related Documents. This Agreement or
-------------------------------------------
counterparts hereof shall have been duly executed by, and delivered to, the
parties hereto and the Purchaser and the Operating Agent shall have received
such other documents, instruments, agreements and legal opinions as the
Purchaser and the Operating Agent shall request in connection with the
transactions contemplated by this Agreement, including all those listed in the
Schedule of Documents, each in form and substance satisfactory to the Purchaser
and the Operating Agent.
(b) Governmental Approvals. The Purchaser and the Operating Agent
----------------------
shall have received (i) satisfactory evidence that the Seller and the Servicer
have obtained all required consents and approvals of all Persons, including all
requisite Governmental Authorities, to the execution, delivery and performance
of this Agreement and the other Related Documents and the consummation of the
transactions contemplated hereby or thereby or (ii) an Officer's Certificate
from each of the Seller and the Servicer in form and substance satisfactory to
the Purchaser and the Operating Agent affirming that no such consents or
approvals are required.
(c) Compliance with Laws. The Seller and the Servicer shall be in
--------------------
compliance in all material respects with all applicable foreign, federal, state
and local laws and regulations, including those specifically referenced in
Section 5.01(a).
- ---------------
(d) Payment of Fees. The Seller shall have paid all fees required to
---------------
be paid by it on the Closing Date, including all fees required hereunder and
under the Fee Letter, and shall have reimbursed the Purchaser for all fees,
costs and expenses of closing the transactions contemplated hereunder and under
the other Related Documents, including the Purchaser's legal, rating agency and
audit expenses, and other document preparation costs.
(e) Credit Facility Conditions. The initial funding of loans under
--------------------------
the Credit Facility shall have occurred.
(f) Confirmation of Commercial Paper Ratings. The Operating Agent
----------------------------------------
shall have received written confirmation from each Rating Agency that the then
current rating of the Commercial Paper shall not be withdrawn or downgraded
after giving effect to this Agreement and the transactions contemplated thereby.
Section 3.02. Conditions Precedent to All Purchases. The Purchaser
-------------------------------------
shall not be obligated to purchase Transferred Receivables hereunder on any
Purchase Date if, as of the date thereof:
-9-
(a) any representation or warranty of the Seller or the Servicer
contained herein or in any of the other Related Documents shall be untrue or
incorrect as of such date, either before or after giving effect to the Purchase
of Transferred Receivables on such date and to the application of the proceeds
therefrom, except to the extent that such representation or warranty expressly
relates to an earlier date and except for changes therein expressly permitted by
this Agreement;
(b) any event shall have occurred, or would result from the Purchase
of Transferred Receivables on such Purchase Date or from the application of the
proceeds therefrom, that constitutes an Incipient Termination Event, a
Termination Event, an Incipient Servicer Termination Event or an Event of
Servicer Termination;
(c) the Facility Termination Date shall have occurred;
(d) either before or after giving effect to such Purchase and to the
application of the proceeds therefrom, a Purchase Excess would exist;
(e) the CGS Originator, the Seller or the Servicer shall fail to have
taken such other action, including delivery of approvals, consents, opinions,
documents and instruments to the Purchaser and the Operating Agent, (i) as the
Purchaser or the Operating Agent may reasonably request, or (ii) within a
reasonable time as the Rating Agency may request; or
(f) the Operating Agent or the Collateral Agent shall have determined
that any event or condition has occurred that has had, or could reasonably be
expected to have or result in, a Material Adverse Effect.
The delivery by the Seller of a Purchase Request and the acceptance by
the Seller of the purchase price for any Transferred Receivables on any Purchase
Date shall be deemed to constitute, as of any such Purchase Date, a
representation and warranty by the Seller that the conditions in this Section
-------
3.02 have been satisfied.
- ----
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the Seller. To
--------------------------------------------
induce the Purchaser to purchase the Transferred Receivables and each of the
Operating Agent and the Collateral Agent to take any action hereunder, the
Seller makes the following representations and warranties to the Purchaser, the
Operating Agent and the Collateral Agent, each and all of which shall survive
the execution and delivery of this Agreement.
(a) Corporate Existence; Compliance with Law. The Seller (i) is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of
-10-
incorporation; (ii) is duly qualified to conduct business and is in good
standing in each other jurisdiction where its ownership or lease of property or
the conduct of its business requires such qualification; (iii) has the requisite
corporate power and authority and the legal right to own, pledge, mortgage or
otherwise encumber and operate its properties, to lease the property it operates
under lease, and to conduct its business as now, heretofore and proposed to be
conducted; (iv) has all licenses, permits, consents or approvals from or by, and
has made all filings with, and has given all notices to, all Governmental
Authorities having jurisdiction, to the extent required for such ownership,
operation and conduct; (v) is in compliance with its charter and bylaws; and
(vi) subject to specific representations set forth herein regarding ERISA, tax
and other laws, is in compliance with all applicable provisions of law, except
where the failure to comply, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect.
(b) Executive Offices; Collateral Locations; Corporate or Other Names;
------------------------------------------------------------------
FEIN. As of the Closing Date, the current location of the Seller's chief
- ----
executive office, principal place of business, other offices, the warehouses and
premises within which any Seller Collateral is stored or located, and the
locations of its records concerning the Seller Collateral (including originals
of the Seller Assigned Agreements) are set forth in Schedule 4.01(b) and none of
----------------
such locations has changed within the past 12 months (or such shorter time as
the Seller has been in existence). During the prior five years (or such shorter
time as the Seller has been in existence), except as set forth in Schedule
--------
4.01(b), the Seller has not been known as or used any corporate, fictitious or
- -------
trade name. In addition, Schedule 4.01(b) lists the federal employer
----------------
identification number of the Seller.
(c) Corporate Power, Authorization, Enforceable Obligations. The
-------------------------------------------------------
execution, delivery and performance by the Seller of this Agreement and the
other Related Documents to which it is a party, the creation and perfection of
all Liens and ownership interests provided for therein and, solely with respect
to clause (vii) below, the exercise by each of the Seller, the Purchaser, the
------------
Operating Agent or the Collateral Agent of any of its rights and remedies under
any Related Document to which it is a party: (i) are within such Person's
corporate power; (ii) have been duly authorized by all necessary or proper
corporate and shareholder action; (iii) do not contravene any provision of such
Person's charter or bylaws; (iv) do not violate any law or regulation, or any
order or decree of any court or Governmental Authority; (v) do not conflict with
or result in the breach or termination of, constitute a default under or
accelerate or permit the acceleration of any performance required by, any
indenture, mortgage, deed of trust, lease, agreement or other instrument to
which such Person or the CGS Originator is a party or by which such Person or
the CGS Originator or any of the property of such Person or the CGS Originator
is bound; (vi) do not result in the creation or imposition of any Adverse Claim
upon any of the property of such Person or the CGS Originator; and (vii) do not
require the consent or approval of any Governmental Authority or any other
Person, except those referred to in Section 3.01(b), all of which will have been
---------------
duly obtained, made or complied with prior to the Closing Date. On or prior to
the Closing Date, each of the Related Documents to which the Seller is a party
shall have been duly executed and delivered by the Seller and each such Related
Document shall then
-11-
constitute a legal, valid and binding obligation of the Seller enforceable
against it in accordance with its terms.
(d) No Litigation. No Litigation is now pending or, to the knowledge
-------------
of the Seller, threatened against the Seller that (i) challenges the Seller's
right or power to enter into or perform any of its obligations under the Related
Documents to which it is a party, or the validity or enforceability of any
Related Document or any action taken thereunder, (ii) seeks to prevent the
transfer, sale, pledge or contribution of any Receivable or the consummation of
any of the transactions contemplated under this Agreement or the other Related
Documents, or (iii) has a reasonable risk of being determined adversely to the
Seller and that, if so determined, could have a Material Adverse Effect. Except
as set forth on Schedule 4.01(d), as of the Closing Date there is no Litigation
----------------
pending or threatened that seeks damages or injunctive relief against, or
alleges criminal misconduct by, the Seller.
(e) Solvency. Both before and after giving effect to (i) the
--------
transactions contemplated by this Agreement and the other Related Documents and
(ii) the payment and accrual of all transaction costs in connection with the
foregoing, the Seller is and will be Solvent.
(f) Material Adverse Effect. Between the date of its formation and
-----------------------
the Closing Date, (i) the Seller has not incurred any obligations, contingent or
non-contingent liabilities, liabilities for charges, long-term leases or unusual
forward or long-term commitments that, alone or in the aggregate, could
reasonably be expected to have a Material Adverse Effect, (ii) no contract,
lease or other agreement or instrument has been entered into by the Seller or
has become binding upon the Seller's assets and no law or regulation applicable
to the Seller has been adopted that has had or could reasonably be expected to
have a Material Adverse Effect and (iii) the Seller is not in default and no
third party is in default under any material contract, lease or other agreement
or instrument to which the Seller is a party that alone or in the aggregate
could reasonably be expected to have a Material Adverse Effect. Between
December 31, 1997 and the Closing Date, no event has occurred that alone or
together with other events could reasonably be expected to have a Material
Adverse Effect, other than as listed on Schedule 4.01(f).
----------------
(g) Ownership of Property; Liens. As of the Closing Date, no
----------------------------
Transferred Receivable is subject to any Adverse Claim, none of the other
properties and assets of the Seller are subject to any Adverse Claims other than
Permitted Encumbrances, and there are no facts, circumstances or conditions
known to the Seller that may result in (i) with respect to the Transferred
Receivables, any Adverse Claims (including Adverse Claims arising under
Environmental Laws) and (ii) with respect to its other properties and assets,
any Adverse Claims (including Adverse Claims arising under Environmental Laws)
other than Permitted Encumbrances. The Seller has received all assignments,
bills of sale and other documents, and has duly effected all recordings, filings
and other actions necessary to establish, protect and perfect the Seller's
right, title and interest in and to the Transferred Receivables and its other
properties and assets. The Liens granted to the Purchaser pursuant to Section
-------
8.01 will at all times be fully perfected first priority Liens in and to the
- ----
Seller Collateral.
-12-
(h) Ventures, Subsidiaries and Affiliates; Outstanding Stock and
------------------------------------------------------------
Indebtedness. Except as set forth in Schedule 4.01(h), the Seller has no
- ------------ ----------------
Subsidiaries, is not engaged in any joint venture or partnership with any other
Person, and is not an Affiliate of any other Person. All of the issued and
outstanding Stock of the Seller is owned by each of the Stockholders in the
amounts set forth on Schedule 4.01(h). There are no outstanding rights to
----------------
purchase, options, warrants or similar rights or agreements pursuant to which
the Seller may be required to issue, sell, repurchase or redeem any of its Stock
or other equity securities or any Stock or other equity securities of its
Subsidiaries. All outstanding Debt of the Seller as of the Closing Date is
described in Section 5.03(i).
---------------
(i) Taxes. All tax returns, reports and statements, including
-----
information returns, required by any Governmental Authority to be filed by the
Seller have been filed with the appropriate Governmental Authority and all
Charges have been paid prior to the date on which any fine, penalty, interest or
late charge may be added thereto for nonpayment thereof (or any such fine,
penalty, interest, late charge or loss has been paid), excluding Charges or
other amounts being contested in accordance with Section 5.01(e). Proper and
---------------
accurate amounts have been withheld by the Seller from its respective employees
for all periods in full and complete compliance with all applicable federal,
state, local and foreign laws and such withholdings have been timely paid to the
respective Governmental Authorities. Schedule 4.01(i) sets forth as of the
----------------
Closing Date (i) those taxable years for which the Seller's tax returns are
currently being audited by the IRS or any other applicable Governmental
Authority and (ii) any assessments or threatened assessments in connection with
any such audit or otherwise currently outstanding. Except as described on
Schedule 4.01(i), the Seller has not executed or filed with the IRS or any other
- ----------------
Governmental Authority any agreement or other document extending, or having the
effect of extending, the period for assessment or collection of any Charges.
The Seller is not liable for any Charges: (A) under any agreement (including any
tax sharing agreements) or (B) to the best of the Seller's knowledge, as a
transferee. As of the Closing Date, the Seller has not agreed or been requested
to make any adjustment under IRC Section 481(a), by reason of a change in
accounting method or otherwise, that would have a Material Adverse Effect.
(j) Full Disclosure. No information contained in this Agreement, any
---------------
Investment Base Certificate or any of the other Related Documents, or any
written statement furnished by or on behalf of the Seller to the Purchaser, the
Operating Agent or the Collateral Agent pursuant to the terms of this Agreement
or any of the other Related Documents contains any untrue statement of a
material fact or omits or will omit to state a material fact necessary to make
the statements contained herein or therein not misleading in light of the
circumstances under which they were made.
(k) ERISA. The Seller is in compliance with ERISA and has not
-----
incurred and does not expect to incur any liabilities (except for premium
payments arising in the ordinary course of business) payable to the PBGC under
ERISA.
-13-
(l) Brokers. No broker or finder acting on behalf of the Seller was
-------
employed or utilized in connection with this Agreement or the other Related
Documents or the transactions contemplated hereby or thereby and the Seller has
no obligation to any Person in respect of any finder's or brokerage fees in
connection therewith.
(m) Margin Regulations. The Seller is not engaged in the business of
------------------
extending credit for the purpose of "purchasing" or "carrying" any "margin
security," as such terms are defined in Regulation U of the Federal Reserve
Board as now and from time to time hereafter in effect (such securities being
referred to herein as "Margin Stock"). The Seller owns no Margin Stock, and no
------------
portion of the proceeds of the purchase price for Transferred Receivables sold
hereunder will be used, directly or indirectly, for the purpose of purchasing or
carrying any Margin Stock, for the purpose of reducing or retiring any Debt that
was originally incurred to purchase or carry any Margin Stock or for any other
purpose that might cause any portion of such proceeds to be considered a
"purpose credit" within the meaning of Regulations T, U or X of the Federal
Reserve Board. The Seller will not take or permit to be taken any action that
might cause any Related Document to violate any regulation of the Federal
Reserve Board.
(n) Nonapplicability of Bulk Sales Laws. No transaction contemplated
-----------------------------------
by this Agreement or any of the Related Documents requires compliance with any
bulk sales act or similar law.
(o) Securities Act and Investment Company Act Exemptions. Each
----------------------------------------------------
purchase of Transferred Receivables under this Agreement will constitute (i) a
"current transaction" within the meaning of Section 3(a)(3) of the Securities
Act and (ii) a purchase or other acquisition of notes, drafts, acceptances, open
accounts receivable or other obligations representing part or all of the sales
price of merchandise, insurance or services within the meaning of Section
3(c)(5) of the Investment Company Act.
(p) Government Regulation. The Seller is not an "investment company"
---------------------
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act.
The Purchase of the Transferred Receivables by the Purchaser hereunder, the
application of the proceeds thereof and the consummation of the transactions
contemplated by this Agreement and the other Related Documents will not violate
any provision of any such statute or any rule, regulation or order issued by the
Securities and Exchange Commission.
(q) Nonconsolidation. The Seller is operated in such a manner that
----------------
the separate corporate existence of the Seller and each member of the Parent
Group would not be disregarded in the event of the bankruptcy or insolvency of
any member of the Parent Group and, without limiting the generality of the
foregoing:
(i) the Seller is a limited purpose corporation whose activities
are restricted in its certificate or articles of incorporation to those
activities expressly
-14-
permitted hereunder and under the other Related Documents and the Seller
has not engaged, and does not presently engage, in any activity other than
those activities expressly permitted hereunder and under the other Related
Documents, nor has the Seller entered into any agreement other than this
Agreement, the other Related Documents to which it is a party and, with the
prior written consent of the Purchaser, the Operating Agent and the
Collateral Agent, any other agreement necessary to carry out more
effectively the provisions and purposes hereof or thereof;
(ii) no member of the Parent Group or any individual acting as
an officer of any such member (and not acting as an officer of the Seller)
is or has been involved in the day-to-day management of the Seller;
(iii) other than the purchase and acceptance through capital
contribution of Transferred Receivables, the making of GFC Loans pursuant
to the CGS Transfer Agreement, the payment of dividends and the return of
capital to the Stockholder Originator, the payment of Servicing Fees to the
Servicer under this Agreement, and the transactions contemplated under the
Ancillary Services and Lease Agreement, the Seller engages and has engaged
in no intercorporate transactions with any member of the Parent Group;
(iv) the Seller maintains corporate records and books of account
separate from that of each member of the Parent Group, holds regular
corporate meetings and otherwise observes corporate formalities and has a
business office separate from that of each member of the Parent Group;
(v) the financial statements and books and records of the
Seller and the CGS Originator reflect the separate corporate existence of
the Seller;
(vi) (A) the Seller maintains its assets separately from the
assets of each member of the Parent Group (including through the
maintenance of separate bank accounts and except for any Records to the
extent necessary to assist the Servicer in connection with the servicing of
the Transferred Receivables), (B) the Seller's funds (including all money,
checks and other cash proceeds) and assets, and records relating thereto,
have not been and are not commingled with those of any member of the Parent
Group and (C) under applicable law, the separate creditors of the Seller
will be entitled to be satisfied out of the Seller's assets prior to any
value in the Seller becoming available to the Seller's Stockholders;
(vii) except as otherwise expressly permitted hereunder, under
the other Related Documents and under the Seller's organizational
documents, no member of the Parent Group (A) pays the Seller's expenses,
(B) guarantees the Seller's obligations, or (C) advances funds to the
Seller for the payment of expenses or otherwise;
-15-
(viii) all business correspondence and other communications of
the Seller are conducted in the Seller's own name, on its own stationery
and through a separately-listed telephone number;
(ix) the Seller does not act as agent for any member of the
Parent Group, but instead presents itself to the public as a corporation
separate from each such member and independently engaged in the business of
purchasing and financing Receivables;
(x) the Seller maintains at least two independent directors
(A) each of whom (1) is not a Stockholder (whether direct, indirect or
beneficial), customer or supplier of any member of the Parent Group; (2) is
not a director, officer, employee, affiliate or associate of any of the
Seller's Affiliates; (3) is not a person related to any person referred to
in clauses (1) or (2); (4) is not a trustee, conservator or receiver for
any member of the Parent Group; and (B) at least one of whom has (1) prior
experience as an independent director for a corporation whose charter
documents required the unanimous consent of all independent directors
thereof before such corporation could consent to the institution of
bankruptcy or insolvency proceedings against it or could file a petition
seeking relief under any applicable federal or state law relating to
bankruptcy and (2) at least three years of employment experience with one
or more entities that provide, in the ordinary course of their respective
businesses, advisory, management or placement services to issuers of
securitization or structured finance instruments, agreement or securities;
and
(xi) the bylaws or the certificate or articles of
incorporation of the Seller require (A) the affirmative vote of each
independent director before a voluntary petition under Section 301 of the
Bankruptcy Code may be filed by the Seller, (B) the Seller to maintain (1)
correct and complete books and records of account and (2) minutes of the
meetings and other proceedings of its Stockholders and board of directors.
(r) Deposit and Disbursement Accounts. Schedule 4.01(r) lists all
--------------------------------- ----------------
banks and other financial institutions at which the Seller maintains deposit or
other bank accounts as of the Closing Date, including any Blocked Accounts, and
such schedule correctly identifies the name, address and telephone number of
each depository, the name in which the account is held, a description of the
purpose of the account, and the complete account number therefor.
(s) Transferred Receivables.
-----------------------
(i) Transfers. Each Transferred Receivable was purchased by or
---------
contributed to the Seller on the relevant Transfer Date pursuant to the CGS
Transfer Agreement.
-16-
(ii) Eligibility. Each Transferred Receivable designated as an
-----------
Eligible Receivable in each Investment Base Certificate constitutes an
Eligible Receivable as of the date of such Investment Base Certificate.
(iii) No Material Adverse Effect. The Seller has no knowledge of
--------------------------
any fact (including any defaults by the Obligor thereunder on any other
Receivable) that would cause it or should have caused it to expect that any
payments on each Transferred Receivable designated as an Eligible
Receivable in any Investment Base Certificate will not be paid in full when
due or to expect any other Material Adverse Effect.
(iv) Nonavoidability of Transfers. The Seller shall (A) have
----------------------------
received each Contributed Receivable as a contribution to the capital of
the Seller by the CGS Originator and (B) (1) have purchased each Sold
Receivable from the CGS Originator for cash consideration and (2) have
accepted assignment of any Eligible Receivables transferred pursuant to
clause (b) of Section 4.04 of the CGS Transfer Agreement, in each case in
---------- ------------
an amount that constitutes fair consideration and reasonably equivalent
value therefor. Each Sale of a Sold Receivable effected pursuant to the
terms of the CGS Transfer Agreement shall not have been made for or on
account of an antecedent debt owed by the CGS Originator thereof to the
Seller and no such Sale is or may be avoidable or subject to avoidance
under any bankruptcy laws, rules or regulations.
(t) Representations and Warranties in Other Related Documents. Each
---------------------------------------------------------
of the representations and warranties of the Seller contained in the Related
Documents (other than this Agreement) is true and correct in all respects and
the Seller hereby makes each such representation and warranty to, and for the
benefit of, the Purchaser, the Operating Agent and the Collateral Agent as if
the same were set forth in full herein.
(u) Year 2000. The Parent Guarantor, on behalf of the Seller, has
---------
adopted a Year 2000 Corrective Plan, copies of which have been delivered to the
Operating Agent.
Section 4.02. Representations and Warranties of the Servicer. To
----------------------------------------------
induce the Purchaser to purchase the Transferred Receivables and each of the
Operating Agent and the Collateral Agent to take any action required to be
performed by it hereunder, the Servicer represents and warrants to the
Purchaser, the Operating Agent and the Collateral Agent, which representation
and warranty shall survive the execution and delivery of this Agreement, that
each of the representations and warranties of the Servicer (whether made by the
Servicer in its capacity as the CGS Originator or as the Servicer) contained in
any Related Document is true and correct and, if made by the Servicer in its
capacity as the CGS Originator, applies with equal force to the Servicer in its
capacity as the Servicer, and the Servicer hereby makes each such representation
and warranty to, and for the benefit of, the Purchaser, the Operating Agent and
the Collateral Agent as if the same were set forth in full herein. The Servicer
represents and warrants that on behalf of the Servicer the Parent Guarantor has
adopted a Year 2000 Corrective Plan, copies of which have been delivered to the
Operating Agent.
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ARTICLE V.
GENERAL COVENANTS OF THE SELLER
Section 5.01. Affirmative Covenants of the Seller. The Seller
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covenants and agrees that from and after the Closing Date and until the
Termination Date:
(a) Compliance with Agreements and Applicable Laws. The Seller shall
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perform each of its obligations under this Agreement and the other Related
Documents and comply with all federal, state and local laws and regulations
applicable to it and the Transferred Receivables, including those relating to
truth in lending, retail installment sales, fair credit billing, fair credit
reporting, equal credit opportunity, fair debt collection practices, privacy,
licensing, taxation, ERISA and labor matters and Environmental Laws and
Environmental Permits, except to the extent that the failure to so comply,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect. The Seller shall comply in all material respects with
the Credit and Collection Policies with respect to each Transferred Receivable
and the Contract therefor.
(b) Maintenance of Existence and Conduct of Business. The Seller
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shall: (i) do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence and its rights and franchises;
(ii) continue to conduct its business substantially as now conducted or as
otherwise permitted hereunder and in accordance with (1) the terms of its
certificate of incorporation and bylaws, and (2) Sections 4.01(q) and (r); (iii)
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at all times maintain, preserve and protect all of its assets and properties
used or useful in the conduct of its business, including all licenses, permits,
charters and registrations, and keep the same in good repair, working order and
condition in all material respects (taking into consideration ordinary wear and
tear) and from time to time make, or cause to be made, all necessary or
appropriate repairs, replacements and improvements thereto consistent with
industry practices; and (iv) transact business only in such corporate and trade
names as are set forth in Schedule 5.01(b).
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(c) Deposit of Collections. On or prior to the Closing Date, the
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Seller will establish and will maintain until the Termination Date the Cash
Management Systems. The Seller shall deposit or cause to be deposited promptly
into a Blocked Account, and in any event no later than the first Business Day
after receipt thereof, all Collections it may receive with respect to any
Transferred Receivable.
(d) Use of Proceeds. The Seller shall utilize the proceeds of the
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Purchases made hereunder solely for (i) the purchase of Receivables from the CGS
Originator pursuant to the CGS Transfer Agreement, (ii) the payment of dividends
to its Stockholders, (iii) the making of GFC Loans, and (iv) the payment of
administrative fees or Servicing Fees or expenses to the Servicer or routine
administrative or operating expenses, in each case only as expressly permitted
by and in accordance with the terms of this Agreement and the other Related
Documents.
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(e) Payment, Performance and Discharge of Obligations.
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(i) Subject to Section 5.01(e)(ii), the Seller shall pay,
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perform and discharge or cause to be paid, performed and discharged
promptly all charges payable by it, including (A) charges imposed upon it,
its income and profits, or any of its property (real, personal or mixed)
and all charges with respect to tax, social security and unemployment
withholding with respect to its employees, and (B) lawful claims for labor,
materials, supplies and services or otherwise before any thereof shall
become past due.
(ii) The Seller may in good faith contest, by appropriate
proceedings, the validity or amount of any charges or claims described in
Section 5.01(e)(i); provided, that (A) adequate reserves with respect to
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such contest are maintained on the books of the Seller, in accordance with
GAAP, (B) such contest is maintained and prosecuted continuously and with
diligence, (C) none of the Seller Collateral becomes subject to forfeiture
or loss as a result of such contest, (D) no Lien shall be imposed to secure
payment of such charges or claims other than inchoate tax liens and (E) the
Purchaser, the Operating Agent or the Collateral Agent has not advised the
Seller in writing that such Affected Party reasonably believes that
nonpayment or nondischarge thereof could have or result in a Material
Adverse Effect.
(f) ERISA. The Seller shall give the Operating Agent prompt written
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notice of any event that could result in the imposition of a Lien under Section
412 of the IRC or Section 302 or 4068 of ERISA.
(g) Year 2000. On or before June 30, 1999, the Seller shall have
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completed and delivered to the Operating Agent a Year 2000 Assessment. On or
prior to September 30, 1999, the Seller shall complete Year 2000 Corrective
Actions. On or before September 30, 1999, the Seller shall (i) complete Year
2000 Implementation Testing and (ii) shall eliminate all Year 2000 Problems by
September 30, 1999, except where the failure to correct the same could not
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate.
Section 5.02. Reporting Requirements of the Seller.
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(a) The Seller hereby agrees that, from and after the Closing Date
and until the Termination Date, it shall deliver or cause to be delivered to the
Purchaser, the Operating Agent, the Collateral Agent and, in the case of
Paragraph (f) therein only, to the Rating Agencies, the financial statements,
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notices and other information at the times, to the Persons and in the manner set
forth in Annex 5.02(a).
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(b) The Seller hereby agrees that, from and after the Closing Date
and until the Termination Date, it shall deliver or cause to be delivered to the
Purchaser, the Operating Agent and the Collateral Agent the Investment Reports
(including Investment Base Certificates) at the times, to the Persons and in the
manner set forth in Annex 5.02(b).
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Section 5.03. Negative Covenants of the Seller. The Seller covenants
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and agrees that, without the prior written consent of the Purchaser, the
Operating Agent and the Collateral Agent, from and after the Closing Date until
the Termination Date:
(a) Sale of Stock and Assets. The Seller shall not sell, transfer,
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convey, assign or otherwise dispose of, or assign any right to receive income in
respect of, any of its properties or other assets, including its capital Stock
(whether in a public or a private offering or otherwise), any Transferred
Receivable or Contract therefor or any of its rights with respect to any Blocked
Account, the Collection Account, the Retention Account or any other deposit
account in which any Collections of any Transferred Receivable are deposited
except as otherwise expressly permitted by this Agreement or any of the other
Related Documents.
(b) Liens. The Seller shall not create, incur, assume or permit to
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exist (i) any Adverse Claim on or with respect to its Transferred Receivables or
(ii) any Adverse Claim on or with respect to its other properties or assets
(whether now owned or hereafter acquired) except for the Liens set forth in
Schedule 5.03(b) and other Permitted Encumbrances. In addition, the Seller
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shall not become a party to any agreement, note, indenture or instrument or take
any other action that would prohibit the creation of a Lien on any of its
properties or other assets in favor of the Purchaser as additional collateral
for the Seller Secured Obligations, except as otherwise expressly permitted by
this Agreement or any of the other Related Documents.
(c) Modifications of Receivables or Contracts. The Seller shall not
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extend, amend, forgive, discharge, compromise, waive, cancel or otherwise modify
the terms of any Transferred Receivable or amend, modify or waive any term or
condition of any Contract related thereto; provided, that the Seller may
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authorize the Servicer to take such actions as are expressly permitted by the
terms of any Related Document or the Credit and Collection Policies. The Seller
shall not amend, waive or modify any term of the Credit and Collection Policies
without the prior written consent of the Operating Agent.
(d) Changes in Instructions to Obligors. The Seller shall not make
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any change in its instructions to Obligors regarding the deposit of Collections
with respect to the Transferred Receivables.
(e) Capital Structure and Business. The Seller shall not (i) make any
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changes in any of its business objectives, purposes or operations that could
have or result in a Material Adverse Effect, (ii) make any change in its capital
structure as described on Schedule 4.01(h), including the issuance of any shares
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of Stock, warrants or other securities convertible into Stock or any revision of
the terms of its outstanding Stock, or (iii) amend its certificate or articles
of incorporation or bylaws. The Seller shall not engage in any business other
than the businesses currently engaged in by it.
(f) Mergers, Subsidiaries, Etc. The Seller shall not directly or
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indirectly, by operation of law or otherwise, (i) form or acquire any
Subsidiary, or (ii) merge with, consolidate
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with, acquire all or substantially all of the assets or capital Stock of, or
otherwise combine with or acquire, any Person.
(g) Sale Characterization; CGS Transfer Agreement. The Seller shall
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not make statements or disclosures, prepare any financial statements or in any
other respect account for or treat the transactions contemplated by the CGS
Transfer Agreement (including for accounting, tax and reporting purposes) in any
manner other than (i) with respect to each Sale of each Sold Receivable effected
pursuant to the CGS Transfer Agreement, as a true sale and absolute assignment
of the title to and sole record and beneficial ownership interest of the
Transferred Receivables by the CGS Originator to the Seller and (ii) with
respect to each contribution of Contributed Receivables thereunder, as an
increase in the stated capital of the Seller.
(h) Restricted Payments. Except for the GFC Loans, the Seller shall
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not enter into any lending or borrowing transaction with any other Person. The
Seller shall not at any time (i) advance credit to any Person (including GFC
Loans to the CGS Originator) or (ii) declare any dividends, repurchase any
Stock, return any capital, or make any other payment or distribution of cash or
other property or assets in respect of the Seller's Stock if, after giving
effect to any such advance or distribution, a Purchase Excess would exist or a
Termination Event would otherwise result therefrom.
(i) Indebtedness. The Seller shall not create, incur, assume or
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permit to exist any Debt, except (i) Debt of the Seller to any Affected Party,
Purchaser Indemnified Person, the Servicer or any other Person expressly
permitted by this Agreement or any other Related Document, (ii) deferred taxes,
(iii) unfunded pension fund and other employee benefit plan obligations and
liabilities to the extent they are permitted to remain unfunded under applicable
law, and (iv) indorser liability in connection with the indorsement of
negotiable instruments for deposit or collection in the ordinary course of
business.
(j) Prohibited Transactions. The Seller shall not enter into, or
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be a party to, any transaction with any Person except as expressly permitted
hereunder or under any other Related Document.
(k) Investments. Except as otherwise expressly permitted hereunder
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or under the other Related Documents, the Seller shall not make any investment
in, or make or accrue loans or advances of money to, any Person, including any
Stockholder, director, officer or employee of the Seller or any of the Parent
Guarantor's other Subsidiaries, through the direct or indirect lending of money,
holding of securities or otherwise, except with respect to Transferred
Receivables, GFC Loans and Permitted Investments.
(l) Commingling. The Seller shall not deposit or permit the deposit
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of any funds that do not constitute Collections of Transferred Receivables into
any Blocked Account.
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(m) ERISA. The Seller shall not, and shall not cause or permit any
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of its ERISA Affiliates to, cause or permit to occur an event that could result
in the imposition of a Lien under Section 412 of the IRC or Section 302 or 4068
of ERISA.
ARTICLE VI.
COLLECTIONS AND DISBURSEMENTS
Section 6.01. Establishment of Deposit Accounts.
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(a) Cash Management Systems. On or prior to the Closing Date, Seller
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will establish and will maintain until the Termination Date, the cash management
systems described in this Section 6.01.
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(b) The Blocked Accounts.
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(i) On or before the Closing Date and until the Termination
Date, the Seller shall have established deposit accounts (the "Blocked
Accounts") at the banks designated on Schedule 4.01(r) (each such bank a
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"Deposit Bank"). The Seller agrees that prior to the Facility Termination
Date the Operating Agent, and from and after the Facility Termination Date
the Collateral Agent, shall have exclusive dominion and control of each
Blocked Account and all monies, instruments and other property from time to
time on deposit therein. The Seller shall not make or cause to be made, or
have any ability to make or cause to be made, any withdrawals from any
Blocked Account except as provided in Section 6.01(b)(ii).
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(ii) The Seller and the Servicer have instructed all existing
Obligors of Transferred Receivables and shall instruct all future Obligors
of such Receivables, to make payments in respect thereof only (A) by check
or money order delivered to the Servicer's offices or to one or more
Blocked Accounts under the control of the Operating Agent or (B) by wire
transfer or moneygram directly to a Blocked Account. Schedule 4.01(r)
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lists all Blocked Accounts and all Deposit Banks at which the Seller
maintains Blocked Accounts as of the Closing Date, and such schedule
correctly identifies (1) with respect to each such Deposit Bank, the name,
address and telephone number thereof, and (2) with respect to each Blocked
Account, the name in which such account is held and the complete account
number therefor. The Seller and the Servicer shall endorse, to the extent
necessary, all checks or other instruments received so that the same can be
deposited in the Blocked Account, in the form so received (with all
necessary endorsements), on the first Business Day after the date of
receipt thereof. In addition, each of the Seller and the Servicer shall
deposit or cause to be deposited into a Blocked Account all cash, checks,
money orders or other proceeds of Transferred Receivables or Seller
Collateral received by it other than in a Blocked Account, in the form so
received (with all necessary endorsements), not later than the close of
business on the first Business
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Day following the date of receipt thereof, and until so deposited all such
items or other proceeds shall be held in trust for the benefit of the
Collateral Agent. Neither the Seller nor the Servicer shall make any
deposits into a Blocked Account except in accordance with the terms of this
Agreement or any other Related Document. Each of the Seller and the
Servicer also agrees to instruct each Deposit Bank, and the Seller and the
Servicer each hereby grants to each of the Operating Agent and the
Collateral Agent the authority to instruct such Deposit Bank, to transfer
to the Collection Account, on each Business Day in same day funds, all
available funds in any and all Blocked Accounts maintained with the Deposit
Bank, and until so transferred all such funds shall be held in trust for
the benefit of the Collateral Agent. Neither the Seller nor the Servicer
shall make any deposits into the Blocked Account except in accordance with
the terms of this Agreement or any other Related Document.
(iii) If, for any reason, a Blocked Account Agreement terminates
or any such Deposit Bank fails to comply with its obligations under the
Blocked Account Agreement to which it is a party, then the Seller shall
promptly notify all Obligors of Transferred Receivables who had previously
been instructed to make wire payments to the Blocked Account maintained at
any such Deposit Bank to make all future payments to a new Blocked Account
in accordance with this Section 6.01(a)(iii). The Seller shall not close
any Blocked Account unless it shall have (A) received the prior written
consent of the Operating Agent and the Collateral Agent, (B) established a
new account with the same Deposit Bank or with a new depositary institution
satisfactory to the Operating Agent and the Collateral Agent, (C) entered
into an agreement covering such new account with such Deposit Bank or with
such new depositary institution substantially in the form of such Blocked
Account Agreement or that is satisfactory in all respects to the Operating
Agent and the Collateral Agent (whereupon, for all purposes of this
Agreement and the other Related Documents, such new account shall become a
Blocked Account, such new agreement shall become a Blocked Account
Agreement and any new depositary institution shall become a Deposit Bank),
and (D) taken all such action as the Collateral Agent shall require to
grant and perfect a first priority Lien in such new Blocked Account to the
Purchaser under Section 8.01 of this Agreement. Except as permitted by
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this Section 6.01(a), neither the Seller nor the Servicer shall open any
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new Blocked Account without the prior written consent of the Operating
Agent and the Collateral Agent.
(c) Collection Account.
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(i) The Purchaser has established and shall maintain the
Collection Account with the Depositary. The Seller and the Purchaser agree
that prior to the Facility Termination Date the Operating Agent, and from
and after the Facility Termination Date the Collateral Agent, shall have
exclusive dominion and control of the Collection Account and all monies,
instruments and other property from time to time on deposit therein.
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(ii) Pursuant to Section 6.02, the Seller shall instruct each
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Deposit Bank to transfer, and the Seller hereby grants each of the
Operating Agent and the Collateral Agent the authority to instruct each
such Deposit Bank to transfer, on each Business Day in same day funds, all
available funds in each Blocked Account to the Collection Account. The
Purchaser, the Operating Agent and the Collateral Agent may deposit into
the Collection Account from time to time all monies, instruments and other
property received by any of them as proceeds of the Transferred
Receivables. On each Business Day prior to the Facility Termination Date
the Operating Agent shall instruct and cause the Depositary (which
instruction may be in writing or by telephone confirmed promptly thereafter
in writing) to release funds on deposit in the Collection Account in the
order of priority set forth in Section 6.03. On each Business Day from and
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after the Facility Termination Date the Collateral Agent shall apply all
amounts when received in the Collection Account in the order of priority
set forth in Section 6.05.
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(iii) If, for any reason, the Depositary wishes to resign as
depositary of the Collection Account or fails to carry out the instructions
of the Operating Agent or the Collateral Agent, then the Operating Agent or
the Collateral Agent shall promptly notify the Purchaser Secured Parties.
The Purchaser shall not close the Collection Account unless it shall have
(A) received the prior written consent of the Operating Agent and the
Collateral Agent, (B) established a new deposit account with the Depositary
or with a new depositary institution satisfactory to the Operating Agent
and the Collateral Agent, (C) entered into an agreement covering such new
account with such new depositary institution satisfactory in all respects
to the Operating Agent and the Collateral Agent (whereupon such new account
shall become the Collection Account for all purposes of this Agreement and
the other Related Documents), and (D) taken all such action as the
Collateral Agent shall require to grant and perfect a first priority Lien
in such new Collection Account to the Collateral Agent under the Collateral
Agent Agreement.
(d) Retention Account. The Purchaser has established and shall
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maintain the Retention Account with the Depositary. The Seller and the Purchaser
agree that prior to the Facility Termination Date the Operating Agent, and from
and after the Facility Termination Date the Collateral Agent, shall have
exclusive dominion and control of the Retention Account and all monies,
instruments and other property from time to time on deposit therein.
(e) Collateral Account. The Purchaser has established and shall
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maintain the Collateral Account with the Depositary. The Seller and the
Purchaser agree that the Operating Agent shall have exclusive dominion and
control of the Collateral Account and all monies, instruments and other property
from time to time on deposit therein.
Section 6.02. Funding of Collection Account.
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(a) As soon as practicable, and in any event no later than 10:00 a.m.
(New York time) on each Business Day:
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(i) the Operating Agent shall transfer or cause to be
transferred all Collections deposited in any Blocked Account prior to such
Business Day to the Collection Account;
(ii) the Purchaser or the Operating Agent shall, or shall cause
the Collateral Agent to, deposit in the Collection Account the amount, if
any, required pursuant to Section 2.04(b)(i);
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(iii) the Purchaser or the Operating Agent shall, or shall cause
the Collateral Agent to, deposit in the Collection Account any Seller LOC
Draws made on such Business Day;
(iv) if, on the immediately preceding Business Day, the
Operating Agent shall have notified the Seller of any Purchase Excess, then
the Seller shall deposit cash in the amount of such Purchase Excess in the
Collection Account;
(v) if on such Business Day the Seller is required to make
other payments under this Agreement not previously retained out of
Collections (including Additional Amounts and Indemnified Amounts not
previously paid), then the Seller shall deposit an amount equal to such
payments in the Collection Account;
(vi) if, on the immediately preceding Business Day, the CGS
Originator made a capital contribution or repurchased a Transferred
Receivable pursuant to Section 4.04 of the CGS Transfer Agreement, or made
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a payment as a result of any Dilution Factors pursuant to Section 4.02(o)
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of the CGS Transfer Agreement, then the Seller shall deposit cash in the
amount so received from the CGS Originator for such contribution,
repurchase or payment in the Collection Account; and
(vii) the Servicer shall deposit in the Collection Account the
Outstanding Balance of any Transferred Receivable the Servicer elects to
pay pursuant to Section 7.04.
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(viii) the Seller shall deposit in the Collection Account the
Outstanding Balance of any Transferred Receivable the Seller elects to pay
pursuant to Section 8.06(d).
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(b) If, on or before the second Business Day immediately preceding
any Settlement Date, the Operating Agent shall have notified the Seller of any
Retention Account Deficiency pursuant to Section 6.04(b), then the Seller shall
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deposit cash in the amount of such deficiency in the Collection Account no later
than 12:00 noon (New York time) on such Settlement Date.
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(c) From and after the Facility Termination Date, the Collateral
Agent shall transfer all amounts on deposit in the Retention Account as of that
date to the Collection Account.
Section 6.03. Daily Disbursements From the Collection Account and
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Related Sub-Accounts; Revolving Period. On each Business Day during the
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Revolving Period, and following the transfers made pursuant to Section 6.02, the
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Operating Agent shall disburse all amounts then on deposit in the Collection
Account and its related subaccounts in the following priority:
(a) with respect to amounts on deposit in the Collection Account:
(i) to the Retention Account for the account of the Purchaser,
the amount of any Retention Account Deficiency deposited pursuant to
Section 6.02(b);
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(ii) to the Deferred Purchase Price Sub-Account, the amount of
all Deferred Purchase Price Collections;
(iii) to the Capital Investment Sub-Account, the balance of any
amounts remaining after making the foregoing disbursements;
(b) with respect to amounts on deposit in the Deferred Purchase Price
Sub-Account after making the transfers required by Section 6.03(a):
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(i) to the Retention Account for the account of the Purchaser,
an amount equal to the sum of
(A) Daily Yield;
(B) the Yield Shortfall as of the immediately preceding
Business Day;
(C) the Servicing Fee;
(D) the Servicing Fee Shortfall as of the immediately
preceding Business Day;
(E) the Unused Facility Fee; and
(F) the Unused Facility Fee Shortfall as of the
immediately preceding Business Day;
(ii) to the Capital Investment Sub-Account, an amount equal to
the Dilution Funded Amount;
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(iii) if the Deferred Purchase Price Adjustment is less than
zero, then to the Capital Investment Sub-Account an amount equal to the
absolute value of the Deferred Purchase Price Adjustment;
(iv) to the Agent Account, in partial payment of the Deferred
Purchase Price, the balance of any amounts remaining after making the
foregoing disbursements; and
(c) with respect to amounts on deposit in the Capital Investment Sub-
Account after making the transfers required by Section 6.03(a):
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(i) to the Retention Account for the account of the Purchaser,
an amount equal to the sum of any Yield Shortfall, any Servicing Fee
Shortfall and any Unused Facility Fee Shortfall following the transfer made
pursuant to Section 6.03(b)(i);
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(ii) to the Collateral Account for the account of the Purchaser
(or, in the case of Indemnified Amounts or Additional Amounts for the
account of the applicable Purchaser Indemnified Person or Affected Party,
respectively), an amount equal to the deposits made in the Collection
Account pursuant to Section 6.02(a)(v) and not otherwise disbursed pursuant
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to Section 6.03(a)(i);
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(iii) to the Collateral Account for the account of the
Purchaser, an amount equal to any Purchase Excess;
(iv) if the Deferred Purchase Price Adjustment is greater than
zero, then to the Seller an amount equal to the Deferred Purchase Price
Adjustment as partial payment of the Deferred Purchase Price; and
(v) the balance of any amounts remaining after making the
foregoing disbursements, at the Seller's option, (A) to an account
previously designated by the Seller as payment of the Cash Purchase Price
for Purchases made on such day or (B) if, pursuant to a Repayment Notice,
the Seller has requested to reduce the Capital Investment of the Purchaser,
then to the Collateral Account for the account of the Purchaser, the lesser
of (1) the amount of such requested reduction of Capital Investment and (2)
such balance.
Section 6.04. Disbursements From the Retention Account; Settlement
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Date Procedures; Revolving Period.
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(a) On each Settlement Date during the Revolving Period, the amounts
on deposit in the Retention Account shall be disbursed or retained by the
Operating Agent in the following priority:
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(i) to the Collateral Account for the account of the Purchaser
(or, if applicable, any Purchaser Indemnified Person), an amount equal to:
(A) the accrued and unpaid Daily Yield minus the Margin
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as of the end of the immediately preceding Settlement Period;
(B) the accrued and unpaid Unused Facility Fee as of the
end of the immediately preceding Settlement Period;
(C) all Additional Amounts incurred and payable to any
Affected Party as of the end of the immediately preceding Settlement
Period;
(D) all other amounts accrued and payable under this
Agreement (including Indemnified Amounts incurred and payable to any
Purchaser Indemnified Person) as of the end of the immediately
preceding Settlement Period to the extent not already transferred
pursuant to Section 6.03(c)(ii); and
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(E) if a Purchase Excess exists on such date, an amount
equal to such excess;
(ii) to the Operating Agent, the accrued and unpaid Margin as
of the end of the immediately preceding Settlement Period for distribution
to the applicable parties;
(iii) to the Servicer on behalf of the Seller, an amount equal
to its accrued and unpaid Servicing Fee as of the end of the immediately
preceding Settlement Period;
(iv) retained in the Retention Account, an amount equal to the
Accrued Monthly Yield, Accrued Unused Facility Fee and Accrued Servicing
Fee as of such date; and
(v) the balance remaining after retaining or disbursing the
foregoing amounts to the Agent Account.
(b) No later than the second Business Day immediately preceding each
Settlement Date, the Operating Agent shall determine and notify the Seller of
any Retention Account Deficiency for the preceding Settlement Period, and the
Seller shall deposit cash in the amount of such Retention Account Deficiency to
the Collection Account pursuant to Section 6.02(b).
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Section 6.05. Liquidation Settlement Procedures. On each Business
---------------------------------
Day from and after the Facility Termination Date until the Termination Date, the
Collateral Agent shall:
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(a) as soon as practicable, transfer all amounts then on deposit in
the Retention Account to the Collection Account;
(b) transfer all amounts in the Collection Account (including amounts
transferred from the Retention Account pursuant to Section 6.02(c)) in the
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following priority:
(i) to the Deferred Purchase Price Sub-Account, an amount
equal to all Deferred Purchase Price Collections; and
(ii) to the Capital Investment Sub-Account, the balance of any
amounts remaining after making the foregoing disbursement;
(c) transfer all amounts in the Deferred Purchase Price Sub-Account
(after making the transfers required by Section 6.05(b)), in the following
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priority:
(i) if an Event of Servicer Termination has occurred and a
Successor Servicer has assumed the responsibilities and obligations of the
Servicer in accordance with Section 11.02, then to the Successor Servicer
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an amount equal to its accrued and unpaid Successor Servicing Fees and
Expenses;
(ii) if on such Business Day Capital Investment is being
maintained through the issuance of Commercial Paper (to the extent such
Capital Investment exceeds Liquidity Loans then outstanding), to the
Collateral Account for the account of the Purchaser, an amount equal to
accrued and unpaid CP Interest Amount through and including the date of
maturity of the Commercial Paper maintaining such Capital Investment;
(iii) if Liquidity Loans are then outstanding, to the Liquidity
Agent on behalf of the Liquidity Lenders, an amount equal to accrued and
unpaid interest on the Liquidity Loans;
(iv) to the Capital Investment Sub-Account:
(A) an amount equal to the Dilution Funded Amount; and
(B) if Liquidity Loans or Seller LOC Draws are then
outstanding or if Capital Investment is being maintained through the
issuance of Commercial Paper, the balance of any amounts remaining
after making the disbursements set forth in Sections 6.05(c)(i)-
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(iv)(A);
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(v) to the Letter of Credit Agent, if there are any
outstanding Seller LOC Draws, an amount equal to accrued and unpaid
interest on such outstanding Seller LOC Draws;
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(vi) to the Collateral Account, an amount equal to (A) accrued
and unpaid Daily Yield minus (B) the aggregate amounts paid pursuant to
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Sections 6.05(c)(ii), (iii) and (v);
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(vii) to the Operating Agent, an amount equal to accrued and
unpaid Unused Facility Fees; and
(viii) if an Event of Servicer Termination shall not have
occurred, to the Servicer in an amount equal to its accrued and unpaid
Servicing Fee; and
(ix) upon payment in full of all amounts set forth in Sections
--------
6.05(d)(i) through (d)(vi) below, the balance of any amounts remaining to
---------- -------
the Agent Account as partial payment of the Deferred Purchase Price; and
(d) transfer all amounts in the Capital Investment Sub-Account, in
the following priority:
(i) to the Collateral Account for the account of the
Purchaser, an amount equal to:
(A) if on such Business Day Capital Investment is being
maintained through the issuance of Commercial Paper (to the extent
such Capital Investment exceeds Liquidity Loans then outstanding),
accrued and unpaid CP Interest Amount through and including such date
to the extent not paid under Sections 6.05(c)(ii) and 6.05(c)(vi); and
-------------------- -----------
(B) if on such Business Day Capital Investment is being
maintained through the issuance of Commercial Paper (to the extent
such Capital Investment exceeds Liquidity Loans then outstanding), the
principal of all Capital Investment in excess of such Liquidity Loans;
(ii) if Liquidity Loans are then outstanding, to the Liquidity
Agent on behalf of the Liquidity Lenders, an amount equal to:
(A) accrued and unpaid interest on the Liquidity Loans to
the extent not paid under Section 6.05(c)(iii);
--------------------
(B) the principal of outstanding Liquidity Loans; and
(C) any other unpaid amounts (other than Additional
Amounts and Indemnified Amounts), including any fees, owing to the
Liquidity Agent or Liquidity Lenders in connection with the Liquidity
Loans;
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(iii) to the Collateral Account for the account of the
Purchaser, an amount equal to:
(A) all accrued and unpaid Unused Facility Fees;
(B) all Additional Amounts incurred and payable to any
Affected Party; and
(C) all Indemnified Amounts incurred and payable to any
Purchaser Indemnified Person;
(iv) to the Letter of Credit Agent, if there are any
outstanding Seller LOC Draws, an amount equal to:
(A) accrued and unpaid interest on such outstanding Seller
LOC Draws to the extent not paid pursuant to Section 6.05(c)(v);
------------------
(B) the principal of such outstanding Seller LOC Draws;
and
(C) any other amounts, including fees, owing to the Letter
of Credit Agent in connection with such outstanding Seller LOC Draws;
(v) to the Collateral Account, an amount equal to (A) accrued
and unpaid Daily Yield, minus (B) the aggregate amounts paid pursuant to
-----
Sections 6.05(c)(ii), 6.05(c)(iii), 6.05(c)(v), 6.05(c)(vi), 6.05(d)(i)(A),
-------------------- ------------ ---------- ----------- -------------
6.05(d)(ii)(A) and 6.05(d)(iv)(A);
-------------- --------------
(vi) If an Event of Servicer Termination shall not have
occurred, to the Servicer in an amount equal to its accrued and unpaid
Servicing Fee; and
(vii) to the Agent Account, the balance of any funds remaining
after payment in full of all amounts set forth in Sections 6.05(d)(i)-
-------------------
(d)(vi).
-------
Section 6.06. Investment of Funds in Accounts. To the extent
-------------------------------
uninvested amounts are on deposit in the Collateral Account or the Retention
Account on any given day during the Revolving Period, the Operating Agent shall
invest all such amounts in Permitted Investments selected by the Operating Agent
that mature no later than (a) the immediately succeeding Business Day, in the
case of the Collateral Account, and (b) the immediately succeeding Settlement
Date, in the case of the Retention Account. From and after the Facility
Termination Date, any investment of such amounts shall be solely at the
discretion of the Operating Agent, subject to the restrictions described above.
Section 6.07. Termination Procedures.
----------------------
-31-
(a) On the earlier of (i) the first Business Day after the Facility
Termination Date on which the Capital Investment has been reduced to zero or
(ii) the Final Purchase Date, if the obligations to be paid pursuant to Section
-------
6.05 have not been paid in full, the Seller shall immediately deposit in the
- ----
Collection Account an amount sufficient to make such payments in full.
(b) On the Termination Date, all amounts on deposit in the Collection
Account and the Retention Account shall be disbursed to the Seller and all
ownership interests or Liens of the Purchaser in and to all Transferred
Receivables and all Liens of the Purchaser and the Collateral Agent in and to
the Seller Collateral shall be released by the Purchaser and the Collateral
Agent. Such disbursement shall constitute the final payment to which the Seller
is entitled pursuant to the terms of this Agreement.
ARTICLE VII
SERVICER PROVISIONS
Section 7.01. Appointment of the Servicer. The Purchaser hereby
---------------------------
appoints the Servicer as its agent, and the Seller hereby acknowledges such
appointment, to service the Transferred Receivables and enforce its rights and
interests in and under each Transferred Receivable and Contract therefor and to
serve in such capacity until the termination of its responsibilities pursuant to
Sections 9.02 or 11.01. In connection therewith, the Servicer hereby accepts
- ------------- -----
such appointment and agrees to perform the duties and obligations set forth
herein. The Servicer may, with the prior written consent of the Purchaser, the
Operating Agent and the Collateral Agent, subcontract with a Sub-Servicer for
the collection, servicing or administration of the Transferred Receivables;
provided, that (a) the Servicer shall remain liable for the performance of the
- --------
duties and obligations of the Sub-Servicer pursuant to the terms hereof and (b)
any Sub-Servicing Agreement that may be entered into and any other transactions
or services relating to the Transferred Receivables involving a Sub-Servicer
shall be deemed to be between the Sub-Servicer and the Servicer alone, and the
Purchaser, the Operating Agent and the Collateral Agent shall not be deemed
parties thereto and shall have no obligations, duties or liabilities with
respect to the Sub-Servicer.
Section 7.02. Duties and Responsibilities of the Servicer. Subject
-------------------------------------------
to the provisions of this Agreement, the Servicer shall conduct the servicing,
administration and collection of the Transferred Receivables and shall take, or
cause to be taken, all actions that (i) may be necessary or advisable to
service, administer and collect each Transferred Receivable from time to time,
(ii) the Servicer would take if the Transferred Receivables were owned by the
Servicer, and (iii) are consistent with industry practice for the servicing of
such Transferred Receivables.
Section 7.03. Collections on Receivables. (a) In the event that the
--------------------------
Servicer is unable to determine the specific Transferred Receivables on which
Collections have been received from the Obligor thereunder, the parties agree
for purposes of this Agreement only that such
-32-
Collections shall be deemed to have been received on such Receivables in the
order in which they were originated with respect to such Obligor. In the event
that the Servicer is unable to determine the specific Transferred Receivables on
which discounts, offsets or other non-cash reductions have been granted or made
with respect to the Obligor thereunder, the parties agree for purposes of this
Agreement only that such reductions shall be deemed to have been granted or made
(i) prior to a Termination Event, on such Receivables as determined by the
Servicer, and (ii) from and after the occurrence of a Termination Event, on
Eligible Receivables in the order in which they were originated with respect to
such Obligor.
(b) If the Servicer determines that amounts unrelated to the
Transferred Receivables (the "Unrelated Amounts") have been deposited in the
-----------------
Collection Account, then the Servicer shall provide written evidence thereof to
the Purchaser, the Operating Agent and the Collateral Agent no later than the
first Business Day following the day on which the Servicer had actual knowledge
thereof, which evidence shall be provided in writing and shall be otherwise
satisfactory to each such Affected Party. Upon receipt of any such notice, the
Operating Agent shall segregate the Unrelated Amounts and the same shall not be
deemed to constitute Collections on Transferred Receivables and shall not be
subject to the provisions of Article VI.
----------
Section 7.04. Authorization of the Servicer. The Purchaser hereby
-----------------------------
authorizes the Servicer, and the Seller acknowledges such authorization, to take
any and all reasonable steps in its name and on its behalf necessary or
desirable and not inconsistent with the ownership of the Transferred Receivables
purchased by the Purchaser hereunder and the pledge thereof by the Purchaser to
the Collateral Agent pursuant to the Collateral Agent Agreement, in the
determination of the Servicer, to (a) collect all amounts due under any
Transferred Receivable, including endorsing its name on checks and other
instruments representing Collections on such Receivable, and execute and deliver
any and all instruments of satisfaction or cancellation or of partial or full
release or discharge and all other comparable instruments with respect to any
such Receivable and (b) after any Transferred Receivable becomes a Delinquent
Receivable and to the extent permitted under and in compliance with applicable
law and regulations, commence proceedings with respect to the enforcement of
payment of any such Receivable and the Contract therefor and adjust, settle or
compromise any payments due thereunder, in each case to the same extent as the
CGS Originator could have done if it had continued to own such Receivable. The
CGS Originator, the Seller and the Purchaser shall furnish the Servicer with any
powers of attorney and other documents necessary or appropriate to enable the
Servicer to carry out its servicing and administrative duties hereunder, and
shall cooperate with the Servicer to the fullest extent to collect the
Transferred Receivables and to assist the Servicer in the discharge of its
duties hereunder and under the other Related Documents. Notwithstanding anything
to the contrary contained herein, the Purchaser, the Operating Agent and the
Collateral Agent shall have the absolute and unlimited right to direct the
Servicer (whether the Servicer is CGS, the Parent Guarantor or otherwise) (i)
upon the first occurrence of an Incipient Termination Event or a Termination
Event, whether or not cured, to commence or settle any legal action to enforce
collection of any Transferred Receivable or (ii) to foreclose upon, repossess or
take any other action that the Operating Agent or the Collateral Agent deems
necessary or advisable with respect
-33-
thereto; provided, that in lieu of commencing any such action or taking other
--------
enforcement action, the Servicer may, at its option, elect to pay to the
Purchaser the Outstanding Balance of such Transferred Receivable. In no event
shall the Servicer be entitled to make any Affected Party a party to any
Litigation without such Affected Party's express prior written consent, or to
make the Seller a party to any Litigation without the Operating Agent's consent.
Section 7.05. Servicing Fees. As compensation for its servicing
--------------
activities and as reimbursement for its reasonable expenses in connection
therewith, the Servicer shall be entitled to receive the Servicing Fees in
accordance with Sections 6.04 and 6.05. The Servicer shall be required to pay
------------- ----
for all expenses incurred by it in connection with its activities hereunder
(including any payments to accountants, counsel or any other Person) and shall
not be entitled to any payment therefor other than the Servicing Fees.
Section 7.06. Covenants of the Servicer. The Servicer covenants and
-------------------------
agrees that from and after the Closing Date and until the Termination Date:
(a) Ownership of Transferred Receivables. The Servicer shall
------------------------------------
identify the Transferred Receivables clearly and unambiguously in its Servicing
Records to reflect that such Transferred Receivables have been sold or
contributed to the Seller and, following the Purchase thereof under this
Agreement, are owned by the Purchaser.
(b) Compliance with Credit and Collection Policies. The Servicer
----------------------------------------------
shall comply in all respects with the Credit and Collection Policies with
respect to each Transferred Receivable and the Contract therefor. The Servicer
shall not amend, waive or modify any item of the Credit and Collection Policies
without the prior written consent of the Operating Agent.
(c) Year 2000. On or prior to June 30, 1999, the Servicer shall
---------
complete Year 2000 Corrective Actions. On or before September 30, 1999, the
Servicer shall (i) complete Year 2000 Implementation Testing and (ii) shall
eliminate all Year 2000 Problems, except where the failure to correct the same
could not reasonably be expected to have a Material Adverse Effect, individually
or in the aggregate.
(d) Covenants in Other Related Documents. The Servicer shall
------------------------------------
perform, keep and observe all covenants applicable to it in its capacity as the
CGS Originator under the CGS Transfer Agreement and the other Related Documents
(including those covenants set forth in Sections 4.02 and 4.03 of the CGS
------------- ----
Transfer Agreement) and the Servicer hereby agrees to be bound by such covenants
in its capacity as the Servicer hereunder for the benefit of the Purchaser, the
Operating Agent and the Collateral Agent as if the same were set forth in full
herein.
Section 7.07. Reporting Requirements of the Servicer. The Servicer
--------------------------------------
hereby agrees that, from and after the Closing Date and until the Termination
Date, it shall deliver or cause to be delivered to the Purchaser, the Operating
Agent and the Collateral Agent the financial statements, notices, and other
information at the times, to the Persons and in the manner set forth
-34-
in Annex 7.07 (except if the Servicer is the CGS Originator, in which case the
----------
Service shall not be required to furnish the information required in paragraphs
----------
(a) and (b) therein).
- --- ---
ARTICLE VII
GRANT OF SECURITY INTERESTS
Section 8.01. Seller's Grant of Security Interest. The parties
-----------------------------------
hereto intend that each Purchase of Transferred Receivables to be made hereunder
shall constitute a purchase and sale of such Transferred Receivables and not a
loan. If, however, a court of competent jurisdiction determines that any
transaction provided for herein constitutes a loan and not a purchase and sale,
then the parties hereto intend that this Agreement shall constitute a security
agreement under applicable law. In such regard and, in any event, to secure the
prompt and complete payment, performance and observance of all Seller Secured
Obligations, and to induce the Purchaser to enter into this Agreement and
perform the obligations required to be performed by it hereunder in accordance
with the terms and conditions thereof, the Seller hereby grants, assigns,
conveys, pledges, hypothecates and transfers to the Purchaser a Lien upon all of
its right, title and interest in, to and under the following property, whether
now owned by or owing to, or hereafter acquired by or arising in favor of, the
Seller (including under any trade names, styles or derivations of the Seller),
and regardless of where located (all of which being hereinafter collectively
referred to as the "Seller Collateral"):
-----------------
(a) all Transferred Receivables, Contracts therefor and Collections
thereon;
(b) this Agreement, the CGS Transfer Agreement, the CGS Note, all
Blocked Account Agreements, the Lockbox Agreement and all other Related
Documents now or hereafter in effect relating to the purchase, servicing or
processing of Transferred Receivables (collectively, the "Seller Assigned
---------------
Agreements"), including (i) all rights of the Seller to receive moneys due and
- ----------
to become due thereunder or pursuant thereto, (ii) all rights of the Seller to
receive proceeds of any insurance, indemnity, warranty or guaranty with respect
thereto, (iii) all claims of the Seller for damages or breach with respect
thereto or for default thereunder and (iv) the right of the Seller to amend,
waive or terminate the same and to perform and to compel performance and
otherwise exercise all remedies thereunder;
(c) all of the following (collectively, the "Seller Blocked Account
----------------------
Collateral"):
- ----------
(i) the Blocked Accounts, and all funds on deposit therein and
all certificates and instruments, if any, from time to time representing or
evidencing the Blocked Accounts or such funds,
(ii) the Collection Account, the Retention Account and all
funds on deposit therein and all certificates and instruments, if any, from
time to time representing or evidencing the Collection Account, the
Retention Account or such funds,
-35-
(iii) all Investments from time to time of amounts in the
Collection Account and the Retention Account, and all certificates,
instruments and investment property, if any, from time to time representing
or evidencing such Investments,
(iv) all notes, certificates of deposit and other instruments
from time to time delivered to or otherwise possessed by the Purchaser or
any assignee or agent on behalf of the Purchaser in substitution for or in
addition to any of the then existing Seller Blocked Account Collateral, and
(v) all interest, dividends, cash, instruments, investment
property and other property from time to time received, receivable or
otherwise distributed with respect to or in exchange for any and all of the
then existing Seller Blocked Account Collateral;
(d) all other property that may from time to time hereafter be
granted and pledged by the Seller or by any Person on its behalf under this
Agreement, including any deposit with the Purchaser, the Operating Agent or the
Collateral Agent of additional funds by the Seller; and
(e) to the extent not otherwise included, all proceeds and products
of the foregoing and all accessions to, substitutions and replacements for, and
profits of, each of the foregoing Seller Collateral (including proceeds that
constitute property of the types described in Sections 8.01(a) through (d).
---------------- ---
Section 8.02. Seller's Certification. The Seller hereby certifies
----------------------
that (a) the benefits of the representations, warranties and covenants of each
of the CGS Originator and the Parent Guarantor made to the Seller under the CGS
Transfer Agreement have been assigned by the Seller to the Purchaser hereunder;
(b) the rights of the Seller under the CGS Transfer Agreement to require a
capital contribution or payment of a Rejected Amount from the CGS Originator or
the Parent Guarantor may be enforced by the Purchaser and the Collateral Agent;
and (c) the CGS Transfer Agreement provides that the representations, warranties
and covenants described in Sections 4.01, 4.02 and 4.03 thereof, the
------------- ---- ----
indemnification and payment provisions of Article V thereof and the provisions
---------
of Sections 4.03(j), 8.03 and 8.14 thereof shall survive the sale of the
---------------- ---- ----
Transferred Receivables and the termination of the CGS Transfer Agreement and
this Agreement. The Seller hereby acknowledges that the Purchaser has assigned
to the Collateral Agent under the Collateral Agent Agreement the benefits of the
representations, warranties and covenants certified in Section 8.02(a) to have
---------------
been assigned to the Purchaser.
Section 8.03. Consent to Assignment. Each of the Seller and the
---------------------
Servicer acknowledges and consents to the grant by the Purchaser to the
Collateral Agent pursuant to the Collateral Agent Agreement of a Lien upon all
of the Purchaser's right, title and interest in, to and under the Seller
Collateral and acknowledges the rights of the Collateral Agent thereunder and
the covenants made by the Purchaser in favor of the Collateral Agent set forth
therein, and further acknowledges and consents that, upon the occurrence and
during the continuance of an Incipient
-36-
Termination Event or a Termination Event, the Collateral Agent shall be entitled
to enforce the provisions of the Seller Assigned Agreements and shall be
entitled to all the rights and remedies of the Purchaser thereunder. In
addition, each of the Seller and the Servicer hereby authorizes the Collateral
Agent to rely on the representations and warranties made by it in the Seller
Assigned Agreements to which it is a party and in any other certificates or
documents furnished by it to any party in connection therewith.
Section 8.04. Delivery of Collateral. All certificates or
----------------------
instruments representing or evidencing the Seller Collateral shall be delivered
to and held by or on behalf of the Collateral Agent pursuant to the terms of the
Collateral Agent Agreement and shall be in suitable form for transfer by
delivery or shall be accompanied by duly executed instruments of transfer or
assignment in blank, all in form and substance satisfactory to the Collateral
Agent. The Collateral Agent shall have the right, at any time in its discretion
following the occurrence and during the continuation of a Termination Event and
without notice to the Seller or the Purchaser, to transfer to or to register in
the name of the Collateral Agent or any of its nominees any or all of the Seller
Collateral. In addition, the Collateral Agent shall have the right at any time
to exchange certificates or instruments representing or evidencing Seller
Collateral for certificates or instruments of smaller or larger denominations.
Section 8.05. Seller Remains Liable. It is expressly agreed by the
---------------------
Seller that, anything herein to the contrary notwithstanding, the Seller shall
remain liable under any and all of the Transferred Receivables, the Contracts
therefor, the Seller Assigned Agreements and any other agreements constituting
the Seller Collateral to which it is a party to observe and perform all the
conditions and obligations to be observed and performed by it thereunder. The
Purchaser, the Operating Agent, the Collateral Agent and the other Purchaser
Secured Parties shall not have any obligation or liability under any such
Receivables, Contracts or agreements by reason of or arising out of this
Agreement or the Collateral Agent Agreement or the granting herein or therein of
a Lien thereon or the receipt by the Purchaser, the Collateral Agent or any
Purchaser Secured Party of any payment relating thereto pursuant hereto or
thereto. The exercise by the Purchaser or the Collateral Agent of any of its
respective rights under this Agreement or the Collateral Agent Agreement shall
not release the CGS Originator, the Seller or the Servicer from any of their
respective duties or obligations under any such Receivables, Contracts or
agreements. None of the Purchaser, the Operating Agent, the Collateral Agent or
any of the Purchaser Secured Parties shall be required or obligated in any
manner to perform or fulfill any of the obligations of the CGS Originator, the
Seller or the Servicer under or pursuant to any such Receivable, Contract or
agreement, or to make any payment, or to make any inquiry as to the nature or
the sufficiency of any payment received by it or the sufficiency of any
performance by any party under any such Receivable, Contract or agreement, or to
present or file any claims, or to take any action to collect or enforce any
performance or the payment of any amounts that may have been assigned to it or
to which it may be entitled at any time or times.
Section 8.06. Covenants of the Seller and the Servicer Regarding the
------------------------------------------------------
Seller Collateral.
- -----------------
-37-
(a) Offices and Records. The Seller shall maintain its principal
-------------------
place of business and chief executive office and the office at which it stores
its Records at the respective locations specified in Schedule 4.01(b) or, upon
----------------
30 days' prior written notice to the Purchaser, the Operating Agent and the
Collateral Agent, at such other location in a jurisdiction where all action
requested by the Purchaser, the Operating Agent or the Collateral Agent pursuant
to Section 14.15 shall have been taken with respect to the Seller Collateral.
-------------
The Seller shall also maintain each location where Seller Collateral is located
and each office at which it stores its Records only at the respective locations
specified in Schedule 4.01(b) or at such other substituted or additional
----------------
locations with respect to which the Seller shall, not later than 30 days after
establishing such location, (x) have notified the Purchaser, the Operating Agent
and the Collateral Agent thereof, and (y) have taken all action necessary or
otherwise requested by the Purchaser, the Operating Agent or the Collateral
Agent pursuant to Section 12.15 with respect to the Seller Collateral. Each of
-------------
the Seller and the Servicer shall, at its own cost and expense, maintain
adequate and complete records of the Transferred Receivables and the Seller
Collateral, including records of any and all payments received, credits granted
and merchandise returned with respect thereto and all other dealings therewith.
Each of the Seller and the Servicer shall mark conspicuously with a legend, in
form and substance satisfactory to the Collateral Agent, its books and records,
computer tapes, computer disks and credit files pertaining to the Seller
Collateral, and its file cabinets or other storage facilities where it maintains
information pertaining thereto, to evidence this Agreement and the assignment
and Liens granted pursuant to this Article VIII. Upon the occurrence and during
------------
the continuance of a Termination Event, the Seller and Servicer shall deliver
and turn over such books and records to the Collateral Agent or its
representatives at any time on demand of the Collateral Agent. Prior to the
occurrence of a Termination Event and upon notice from the Collateral Agent, the
Seller and the Servicer shall permit any representative of the Operating Agent
or the Collateral Agent to inspect such books and records and shall provide
photocopies thereof to the Operating Agent and the Collateral Agent as more
specifically set forth in Section 8.06(b).
---------------
(b) Access. Each of the Seller and the Servicer shall, at its own
------
expense, during normal business hours, from time to time upon one Business Day's
prior notice as frequently as the Operating Agent or the Collateral Agent
determines to be appropriate: (i) provide the Purchaser, the Operating Agent or
the Collateral Agent and any of their respective officers, employees and agents
access to its properties (including properties utilized in connection with the
collection, processing or servicing of the Transferred Receivables), facilities,
advisors and employees (including officers) and to the Seller Collateral, (ii)
permit the Purchaser, the Operating Agent or the Collateral Agent and any of
their respective officers, employees and agents to inspect, audit and make
extracts from its books and records, including all Records, (iii) permit the
Purchaser, the Operating Agent or the Collateral Agent and their respective
officers, employees and agents to inspect, review and evaluate the Transferred
Receivables and the Seller Collateral and (iv) permit the Purchaser, the
Operating Agent or the Collateral Agent and their respective officers, employees
and agents to discuss matters relating to the Transferred Receivables or its
performance under this Agreement or the other Related Documents or its affairs,
finances and accounts with any of its officers, directors, employees,
representatives or agents (in each case,
-38-
with those persons having knowledge of such matters) and with its independent
certified public accountants. If (A) an Incipient Termination Event or a
Termination Event shall have occurred and be continuing or (B) the Operating
Agent, in good faith, believes that an Incipient Termination Event or a
Termination Event is imminent or deems the Purchaser's rights or interests in
the Transferred Receivables, the Seller Assigned Agreements or any other Seller
Collateral insecure, then each of the Seller and the Servicer shall, at its own
expense, provide such access at all times and without advance notice and provide
the Purchaser, the Operating Agent or the Collateral Agent with access to its
suppliers and customers. Each of the Seller and the Servicer shall make
available to the Operating Agent or the Collateral Agent and their respective
counsel, as quickly as is possible under the circumstances, originals or copies
of all books and records, including Records, that the Operating Agent or the
Collateral Agent may request. Each of the Seller and the Servicer shall deliver
any document or instrument necessary for the Operating Agent or the Collateral
Agent, as they may from time to time request, to obtain records from any service
bureau or other Person that maintains records for the Seller or the Servicer,
and shall maintain duplicate records or supporting documentation on media,
including computer tapes and discs owned by the Seller or the Servicer.
(c) Communication with Accountants. Each of the Seller and the
------------------------------
Servicer authorizes the Purchaser, the Operating Agent and the Collateral Agent
to communicate directly with its independent certified public accountants and
authorizes and shall instruct those accountants and advisors to disclose and
make available to the Purchaser, the Operating Agent and the Collateral Agent
any and all financial statements and other supporting financial documents,
schedules and information relating to the Seller or the Servicer (including
copies of any issued management letters) with respect to its business, financial
condition and other affairs.
(d) Collection of Transferred Receivables. Except as otherwise
-------------------------------------
provided in this Section 8.06(d), the Servicer shall continue to collect or
---------------
cause to be collected, at its sole cost and expense, all amounts due or to
become due to the Seller under the Transferred Receivables, the Seller Assigned
Agreements and any other Seller Collateral. In connection therewith, the
Servicer shall take such action as it, and from and after the occurrence and
during the continuance of a Termination Event, the Collateral Agent, may deem
necessary or desirable to enforce collection of the Transferred Receivables, the
Seller Assigned Agreements and the other Seller Collateral; provided, that the
--------
Seller or Servicer may, rather than commencing any such action or taking any
other enforcement action, at its option, elect to pay to the Purchaser the
Outstanding Balance of any such Transferred Receivable; provided further, that
-------- -------
if (i) an Incipient Termination Event or a Termination Event shall have occurred
and be continuing or (ii) the Operating Agent, in good faith, believes that an
Incipient Termination Event or a Termination Event is imminent or deems the
Purchaser's rights or interests in the Transferred Receivables, the Seller
Assigned Agreements or any other Seller Collateral insecure, then the Collateral
Agent may, without prior notice to the Seller or Servicer, notify any Obligor
under any Transferred Receivable or obligors under the Seller Assigned
Agreements of the assignment of such Transferred Receivables or Seller Assigned
Agreements, as the case may be, to the Purchaser hereunder and direct that
payments of all amounts due or to become due to the Seller thereunder be made
directly to the Collateral
-39-
Agent or any servicer, collection agent or lockbox or other account designated
by the Collateral Agent and, upon such notification and at the sole cost and
expense of the Servicer, the Collateral Agent may enforce collection of any such
Transferred Receivable or the Seller Assigned Agreements and adjust, settle or
compromise the amount or payment thereof.
(e) Performance of Seller Assigned Agreements. Each of the Seller
-----------------------------------------
and the Servicer shall (i) perform and observe all the terms and provisions of
the Seller Assigned Agreements to be performed or observed by it, maintain the
Seller Assigned Agreements in full force and effect, enforce the Seller Assigned
Agreements in accordance with their terms and take all action as may from time
to time be requested by the Collateral Agent in order to accomplish the
foregoing, and (ii) upon the request of and as directed by the Operating Agent
or the Collateral Agent, make such demands and requests to any other party to
the Seller Assigned Agreements as are permitted to be made by the Seller or the
Servicer thereunder.
ARTICLE IX.
TERMINATION EVENTS
Section 9.01. Termination Events. If any of the following events
------------------
(each, a "Termination Event") shall occur (regardless of the reason therefor):
-----------------
(a) the Seller or the Parent Guarantor shall (i) fail to make any
payment of any Seller Secured Obligation when due and payable and the same shall
remain unremedied for one Business Day or more, or (ii) fail or neglect to
perform, keep or observe any other provision of this Agreement or the other
Related Documents (other than any provision embodied in or covered by any other
clause of this Section 9.01) and the same shall remain unremedied for five
------------
Business Days or more after written notice thereof shall have been given by the
Operating Agent or the Collateral Agent to the Seller;
(b) a default or breach shall occur under the CGS Transfer Agreement,
any other agreement, document or instrument to which the CGS Originator, the
Parent Guarantor, the Seller or the Servicer is a party or by which any such
Person or its property is bound that is not cured within any applicable grace
period therefor, and such default or breach (i) involves the failure to make any
payment when due in respect of any Debt (other than the Seller Secured
Obligations) of any such Person which, except with respect to the Seller, is in
excess of $5,000,000 in the aggregate, or (ii) causes, or permits any holder of
such Debt or a trustee or agent to cause, Debt or a portion thereof which,
except with respect to the Seller, is in excess of $5,000,000 in the aggregate
to become due prior to its stated maturity or prior to its regularly scheduled
dates of payment, regardless of whether such default is waived, or such right is
exercised, by such holder, trustee or agent;
(c) a case or proceeding shall have been commenced against the CGS
Originator, the Parent Guarantor, the Seller or the Servicer seeking a decree or
order in respect of
-40-
any such Person (i) under the Bankruptcy Code or any other applicable federal,
state or foreign bankruptcy or other similar law, (ii) appointing a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official)
for any such Person or for any substantial part of such Person's assets, or
(iii) ordering the winding-up or liquidation of the affairs of any such Person;
(d) the CGS Originator, the Parent Guarantor, the Seller or the
Servicer shall (i) file a petition seeking relief under the Bankruptcy Code or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) consent or fail to object in a timely and appropriate manner to the
institution of proceedings thereunder or to the filing of any such petition or
to the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) for any such Person or
for any substantial part of such Person's assets, (iii) make an assignment for
the benefit of creditors, or (iv) take any corporate action in furtherance of
any of the foregoing;
(e) (i) the CGS Originator, the Parent Guarantor, the Seller or
the Servicer admits in writing its inability to, or is generally unable to, pay
its Debts as such Debts become due, or (ii) the fair market value of the CGS
Originator's or the Seller's liabilities exceeds the fair
market value of its assets;
(f) a final judgment or judgments for the payment of money in
excess of $1,000,000 in the aggregate at any time outstanding shall be rendered
against the CGS Originator, the Parent Guarantor, any Affiliate of the CGS
Originator, the Parent Guarantor or the Servicer and the same shall not, within
30 days after the entry thereof, have been discharged or execution thereof
stayed or bonded pending appeal, or shall not have been discharged prior to the
expiration of any such stay;
(g) a judgment or order for the payment of money shall be
rendered against the Seller;
(h) (i) any information contained in any Investment Base
Certificate is untrue or incorrect in any respect, or, any information given
with respect to Reserves in the Investment Base Certificate is not made in good
faith and is not based on reasonable estimates, or (ii) any representation or
warranty of the CGS Originator or the Parent Guarantor or the Seller herein or
in any other Related Document or in any written statement, report, financial
statement or certificate (other than an Investment Base Certificate) made or
delivered by the CGS Originator or the Parent Guarantor or the Seller to any
Affected Party hereto or thereto is untrue or incorrect in any material respect
as of the date when made or deemed made;
(i) any Governmental Authority (including the IRS or the PBGC)
shall file notice of a Lien with regard to any assets of the CGS Originator or
the Parent Guarantor (other than a Lien (i) limited by its terms to assets other
than Receivables and (ii) not materially adversely affecting the financial
condition of the CGS Originator or the Parent Guarantor or Callaway Golf Sales
Company's ability to perform as Servicer hereunder);
-41-
(j) any Governmental Authority (including the IRS or the PBGC)
shall file notice of a Lien with regard to any of the assets of the Seller;
(k) the Operating Agent or the Collateral Agent shall have
determined (and so notified the Seller) that any event or condition that has had
or could reasonably be expected to have or result in a Material Adverse Effect
has occurred;
(l) (i) a default or breach shall occur under any provision of
Section 4.05 of the CGS Transfer Agreement, (ii) a default or breach shall occur
- ------------
under any provision of Sections 4.02(o), 4.04, 5.01 or 8.14 of the CGS Transfer
---------------- ---- ---- ----
Agreement or Sections 4.02(g), 4.04, 5.01 or 8.14 of the Odyssey Transfer
---------------- ---- ---- ----
Agreement and the same shall remain unremedied for one Business Day or more
after the occurrence thereof, (iii) a default or breach shall occur under any
other provision of the CGS Transfer Agreement or the Odyssey Transfer Agreement
and the same shall remain unremedied for five Business Days or more after
written notice thereof shall have been given by the Operating Agent or the
Collateral Agent to the Seller or (iv) the CGS Transfer Agreement shall for any
reason cease to evidence the transfer to the Seller of the legal and equitable
title to, and ownership of, the Transferred Receivables;
(m) except as otherwise expressly provided herein, any Blocked
Account Agreement or the CGS Transfer Agreement shall have been modified,
amended or terminated without the prior written consent of the Purchaser, the
Operating Agent and the Collateral Agent;
(n) an Event of Servicer Termination shall have occurred;
(o) the Operating Agent shall have determined that the funding of
Transferred Receivables hereunder is impracticable for any reason whatsoever,
including as a result of (i) a drop in or withdrawal of any of the ratings
assigned to the Commercial Paper, (ii) the imposition of Additional Amounts,
(iii) restrictions on the amount of Transferred Receivables the Purchaser may
finance or (iv) the inability of Redwood to issue Commercial Paper;
(p) (i) with respect to the Transferred Receivables, (A) prior to
their Purchase hereunder, the Seller shall cease to hold valid and properly
perfected title to and sole record and beneficial ownership in such Transferred
Receivables or (B) after their Purchase hereunder, (1) the Purchaser shall cease
to hold either (a) valid and properly perfected title to and sole record and
beneficial ownership in such Transferred Receivables or (b) a first priority,
perfected Lien in such Transferred Receivables; or (ii) the Purchaser and the
Collateral Agent shall cease to hold a first priority, perfected Lien in the
Seller Collateral;
(q) a Seller LOC Draw shall have occurred;
(r) the obligations of the Liquidity Lenders to make Liquidity
Loans shall have terminated and not otherwise been replaced;
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(s) a default or breach of any of the covenants set forth in
Annex W of the CGS Transfer Agreement or Annex 5;
(t) an event of default under the Collateral Agent Agreement or
any other Program Document shall have occurred;
(u) the short term debt rating of a Liquidity Lender shall have
been downgraded by a Rating Agency and such Liquidity Lender shall not have been
replaced in accordance with the terms of the Liquidity Loan Agreement within 30
days thereafter;
(v) the Purchase Discount Rate shall be less than 50% for two
consecutive Settlement Periods;
(w) the Seller shall amend its bylaws or its certificate or
articles of incorporation without the express prior written consent of the
Purchaser, the Operating Agent and the Collateral Agent;
(x) GFC shall have received an Election Notice pursuant to
Section 2.01(d) of the CGS Transfer Agreement;
- ---------------
(y) the Seller shall fail to maintain the Default Ratio, the
Delinquency Ratio, or the Dilution Ratio or Receivable Collection Turnover as
set forth in Annex 5; or
-------
(z) any material provision of any Related Document shall for any
reason cease to be valid, binding and enforceable in accordance with its terms
(or the CGS Originator, the Parent Guarantor or the Seller shall challenge the
enforceability of any Related Document or shall assert in writing, or engage in
any action or inaction based on any such assertion, that any provision of any of
the Related Documents has ceased to be or otherwise is not valid, binding and
enforceable in accordance with its terms);
then, and in any such event, the Operating Agent shall, at the request of, or
may, with the consent of, the Purchaser or the Collateral Agent, by notice to
the Seller, declare the Facility Termination Date to have occurred without
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Seller; provided, that the Facility Termination Date shall
--------
automatically occur (i) upon the occurrence of any of the Termination Events
described in Sections 9.01(c), (d), (e), (q), (r), (t), (u), or (x) or (ii)
---------------- --- --- --- --- --- ---
three days after the occurrence of the Termination Event described in Section
-------
9.01(a)(i) if the same shall not have been remedied by such time, in each case
- ----------
without demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Seller.
Section 9.02. Events of Servicer Termination. If any of the
------------------------------
following events (each, an "Event of Servicer Termination") shall occur
-----------------------------
(regardless of the reason therefor):
-43-
(a) the Servicer shall fail or neglect to perform, keep or
observe any provision of this Agreement or the other Related Documents (whether
in its capacity as the CGS Originator or the Servicer) and the same shall remain
unremedied for three (3) Business Days or more after written notice thereof
shall have been given by the Purchaser, the Operating Agent or the Collateral
Agent to the Servicer;
(b) any representation or warranty of the Servicer herein or in
any other Related Document or in any written statement, report, financial
statement or certificate made or delivered by the Servicer to the Purchaser, the
Operating Agent or the Collateral Agent hereto or thereto is untrue or incorrect
in any material respect as of the date when made or deemed made;
(c) the Operating Agent or the Collateral Agent shall have
determined that any event or condition that materially adversely affects the
ability of the Servicer to collect the Transferred Receivables or to otherwise
perform hereunder has occurred;
(d) a Termination Event shall have occurred or this Agreement
shall have been terminated;
(e) a deterioration has taken place in the quality of servicing
of Transferred Receivables or other Receivables serviced by the Servicer that
either the Operating Agent or the Collateral Agent, each in its sole discretion,
determines to be material, and such material deterioration has not been
eliminated within 30 days after written notice thereof shall have been given by
the Operating Agent or the Collateral Agent to the Servicer;
(f) the Servicer shall assign or purport to assign any of its
obligations hereunder or under the CGS Transfer Agreement without the prior
written consent of the Operating Agent and the Collateral Agent;
(g) a Change of Control shall have occurred; or
(h) the Seller's board of directors shall have determined that it
is in the best interests of the Seller to terminate the duties of the Servicer
hereunder and shall have given the Servicer, the Purchaser, the Operating Agent
and the Collateral Agent at least 30 days' written notice thereof;
then, and in any such event, the Operating Agent shall, at the request of, or
may, with the consent of, the Purchaser or the Collateral Agent, by delivery of
a Servicer Termination Notice to the Seller and the Servicer, terminate the
servicing responsibilities of the Servicer hereunder, without demand, protest or
further notice of any kind, all of which are hereby waived by the Servicer. Upon
the delivery of any such notice, all authority and power of the Servicer under
this Agreement and the CGS Transfer Agreement shall pass to and be vested in the
Successor Servicer acting pursuant to Section 11.02; provided, that
------------- --------
notwithstanding anything to the contrary herein, the Servicer agrees to continue
to follow the procedures set forth in Section 7.02 with respect to
------------
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Collections on the Transferred Receivables until a Successor Servicer has
assumed the responsibilities and obligations of the Servicer in accordance with
Section 11.02.
- -------------
ARTICLE X.
REMEDIES
Section 10.01. Actions Upon Termination Event. If any Termination
------------------------------
Event shall have occurred and be continuing and the Operating Agent shall have
declared the Facility Termination Date to have occurred or the Facility
Termination Date shall be deemed to have occurred pursuant to Section 9.01, then
------------
the Collateral Agent may exercise in respect of the Seller Collateral, in
addition to any and all other rights and remedies granted to it hereunder, under
any other Related Document or under any other instrument or agreement securing,
evidencing or relating to the Seller Secured Obligations or otherwise available
to it, all of the rights and remedies of a secured party upon default under the
UCC (such rights and remedies to be cumulative and nonexclusive), and, in
addition, may take the following actions:
(a) The Collateral Agent may, without notice to the Seller except as
required by law and at any time or from time to time, charge, offset or
otherwise apply amounts payable to the Seller from the Collection Account, any
Blocked Account, the Retention Account or any part of such accounts in
accordance with the priorities set forth in Sections 6.05 and 6.07 against all
------------- ----
or any part of the Seller Secured Obligations.
(b) The Collateral Agent may, without notice except as specified
below, solicit and accept bids for and sell the Seller Collateral or any part
thereof in one or more parcels at public or private sale, at any exchange,
broker's board or any of the Purchaser's, Operating Agent's or Collateral
Agent's offices or elsewhere, for cash, on credit or for future delivery, and
upon such other terms as the Collateral Agent may deem commercially reasonable.
The Collateral Agent shall have the right to conduct such sales on the Seller's
premises or elsewhere and shall have the right to use any of the Seller's
premises without charge for such sales at such time or times as the Collateral
Agent deems necessary or advisable. The Seller agrees that, to the extent notice
of sale shall be required by law, at least ten Business Days' notice to the
Seller of the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notification. The
Collateral Agent shall not be obligated to make any sale of Seller Collateral
regardless of notice of sale having been given. The Collateral Agent may adjourn
any public or private sale from time to time by announcement at the time and
place fixed for such sale, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Every such sale shall operate
to divest all right, title, interest, claim and demand whatsoever of the Seller
in and to the Seller Collateral so sold, and shall be a perpetual bar, both at
law and in equity, against the CGS Originator, the Seller, any Person claiming
the Seller Collateral sold through the CGS Originator or the Seller, and their
respective successors or assigns. The Collateral Agent shall deposit the net
proceeds of any such sale in the Collection Account and such proceeds shall be
disbursed in accordance with Section 6.05.
------------
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(c) Upon the completion of any sale under Section 10.01(b), the
----------------
Seller or the Servicer shall deliver or cause to be delivered to the purchaser
or purchasers at such sale on the date thereof, or within a reasonable time
thereafter if it shall be impracticable to make immediate delivery, all of the
Seller Collateral sold on such date, but in any event full title and right of
possession to such property shall vest in such purchaser or purchasers upon the
completion of such sale. Nevertheless, if so requested by the Collateral Agent
or by any such purchaser, the Seller shall confirm any such sale or transfer by
executing and delivering to such purchaser all proper instruments of conveyance
and transfer and releases as may be designated in any such request.
(d) At any sale under Section 10.01(b), the Purchaser, the Operating
----------------
Agent, the Collateral Agent or any other Purchaser Secured Party may bid for and
purchase the property offered for sale and, upon compliance with the terms of
sale, may hold, retain and dispose of such property without further
accountability therefor.
(e) The Collateral Agent may exercise, at the sole cost and expense
of the Seller, any and all rights and remedies of the Seller under or in
connection with the Seller Assigned Agreements or the other Seller Collateral,
including any and all rights of the Seller to demand or otherwise require
payment of any amount under, or performance of any provisions of, the Seller
Assigned Agreements.
Section 10.02. Exercise of Remedies. No failure or delay on the part
--------------------
of the Collateral Agent in exercising any right, power or privilege under this
Agreement and no course of dealing between the CGS Originator, the Seller, the
Servicer or the Operating Agent, on the one hand, and the Collateral Agent, on
the other hand, shall operate as a waiver of such right, power or privilege, nor
shall any single or partial exercise of any right, power or privilege under this
Agreement preclude any other or further exercise of such right, power or
privilege or the exercise of any other right, power or privilege. The rights and
remedies under this Agreement are cumulative, may be exercised singly or
concurrently, and are not exclusive of any rights or remedies that the
Collateral Agent would otherwise have at law or in equity. No notice to or
demand on any party hereto shall entitle such party to any other or further
notice or demand in similar or other circumstances, or constitute a waiver of
the right of the party providing such notice or making such demand to any other
or further action in any circumstances without notice or demand.
Section 10.03. Power of Attorney. On the Closing Date, each of the
-----------------
Seller and the Servicer shall execute and deliver a power of attorney
substantially in the form attached hereto as Exhibit 10.03 (each, a "Power of
------------- --------
Attorney"). The power of attorney granted pursuant to each Power of Attorney is
- --------
a power coupled with an interest and shall be irrevocable until all of the
Seller Secured Obligations are indefeasibly paid or otherwise satisfied in full.
The powers conferred on the Collateral Agent under each Power of Attorney are
solely to protect the Purchaser's Liens upon and interests in the Seller
Collateral and shall not impose any duty upon the Collateral Agent to exercise
any such powers. The Collateral Agent shall not be accountable
-46-
for any amount other than amounts that it actually receives as a result of the
exercise of such powers and none of the Collateral Agent's officers, directors,
employees, agents or representatives shall be responsible to the Seller or the
Servicer for any act or failure to act, except in respect of damages
attributable solely to their own gross negligence or willful misconduct as
finally determined by a court of competent jurisdiction.
Section 10.04. Continuing Security Interest. This Agreement shall
----------------------------
create a continuing Lien in the Seller Collateral until the conditions to the
release of the Liens of the Purchaser and the Collateral Agent thereon set forth
in Section 6.07(b) have been satisfied.
---------------
ARTICLE XI.
SUCCESSOR SERVICER PROVISIONS
Section 11.01. Servicer Not to Resign. The Servicer shall not
----------------------
resign from the obligations and duties hereby imposed on it except upon a
determination that (a) the performance of its duties hereunder has become
impermissible under applicable law or regulation and (b) there is no reasonable
action that the Servicer could take to make the performance of its duties
hereunder become permissible under applicable law. Any such determination shall
(i) with respect to clause (a) above, be evidenced by an opinion of counsel to
----------
such effect and (ii) with respect to clause (b) above, be evidenced by an
----------
Officer's Certificate to such effect, in each case delivered to the Purchaser,
the Collateral Agent and the Operating Agent. No such resignation shall become
effective until a Successor Servicer shall have assumed the responsibilities and
obligations of the Servicer in accordance with Section 11.02.
-------------
Section 11.02. Appointment of the Successor Servicer. In
-------------------------------------
connection with the termination of the Servicer's responsibilities or the
resignation by the Servicer under this Agreement pursuant to Sections 9.02 or
-------------
11.01, the Operating Agent shall (a) succeed to and assume all of the Servicer's
- -----
responsibilities, rights, duties and obligations as Servicer (but not in any
other capacity, including specifically not the obligations of the Servicer set
forth in Section 12.02) under this Agreement (and except that the Operating
-------------
Agent makes no representations and warranties pursuant to Section 4.02) and (b)
------------
may at any time appoint a successor servicer to the Servicer that shall be
acceptable to the Collateral Agent and shall succeed to all rights and assume
all of the responsibilities, duties and liabilities of the Servicer under this
Agreement (the Operating Agent, in such capacity, or such successor servicer
being referred to as the "Successor Servicer"); provided, that the Successor
------------------ --------
Servicer shall have no responsibility for any actions of the Servicer prior to
the date of its appointment or assumption of duties as Successor Servicer. In
selecting a Successor Servicer, the Operating Agent may obtain bids from any
potential Successor Servicer and may agree to any bid it deems appropriate. The
Successor Servicer shall accept its appointment by executing, acknowledging and
delivering to the Operating Agent and the Collateral Agent an instrument in form
and substance acceptable to the Operating Agent and the Collateral Agent.
-47-
Section 11.03. Duties of the Servicer. The Servicer covenants and
----------------------
agrees that, following the appointment of, or assumption of duties by, a
Successor Servicer:
(a) The Servicer shall terminate its activities as Servicer
hereunder in a manner that facilitates the transfer of servicing duties to the
Successor Servicer and is otherwise acceptable to the Purchaser and the
Collateral Agent and, without limiting the generality of the foregoing, shall
timely deliver (i) any funds to the Collateral Agent that were required to be
remitted to the Collateral Agent for deposit in the Collection Account and (ii)
all Servicing Records and other information with respect to the Transferred
Receivables to the Successor Servicer at a place selected by the Successor
Servicer. The Servicer shall account for all funds and shall execute and deliver
such instruments and do such other things as may be required to vest and confirm
in the Successor Servicer all rights, powers, duties, responsibilities,
obligations and liabilities of the Servicer.
(b) The Servicer shall terminate each existing Sub-Servicing
Agreement and the Successor Servicer shall not be deemed to have assumed any of
the Servicer's interests therein
or to have replaced the Servicer as a party thereto.
Section 11.04. Effect of Termination or Resignation. Any
------------------------------------
termination of or resignation by the Servicer hereunder shall not affect any
claims that the Seller, the Purchaser, the Operating Agent or the Collateral
Agent may have against the Servicer for events or actions taken or not taken by
the Servicer arising prior to any such termination or resignation.
ARTICLE XII.
INDEMNIFICATION
Section 12.01. Indemnities by the Seller.
-------------------------
(a) Without limiting any other rights that the Purchaser, the
Operating Agent, the Collateral Agent, the Liquidity Agent, any Liquidity
Lender, the Letter of Credit Agent or any Letter of Credit Provider or any of
their respective officers, directors, employees, attorneys, agents or
representatives (each, a "Purchaser Indemnified Person") may have hereunder or
----------------------------
under applicable law, the Seller hereby agrees to indemnify and hold harmless
each Purchaser Indemnified Person from and against any and all Indemnified
Amounts that may be claimed or asserted against or incurred by any such
Purchaser Indemnified Person in connection with or arising out of the
transactions contemplated under this Agreement or under any other Related
Document or any actions or failures to act in connection therewith, including
any and all legal costs and expenses arising out of or incurred in connection
with disputes between or among any parties to any of the Related Documents;
provided, that the Seller shall not be liable for any indemnification to a
- --------
Purchaser Indemnified Person to the extent that any such Indemnified Amount (x)
results solely from (i) with respect to any Purchaser Indemnified Person other
than the Purchaser, such Purchaser Indemnified Person's gross negligence or (ii)
with respect to any
-48-
Purchaser Indemnified Person, such Purchaser Indemnified Person's willful
misconduct, in each case as finally determined by a court of competent
jurisdiction, or (y) constitutes recourse for uncollectible or uncollected
Transferred Receivables. Without limiting the generality of the foregoing, the
Seller shall pay on demand to each Purchaser Indemnified Person any and all
Indemnified Amounts relating to or resulting from:
(A) reliance on any representation or warranty made or
deemed made by the Seller (or any of its officers) under or in
connection with this Agreement or any other Related Document or on any
other information delivered by the Seller pursuant hereto or thereto
that shall have been incorrect in any material respect when made or
deemed made or delivered;
(B) the failure by the Seller to comply with any term,
provision or covenant contained in this Agreement, any other Related
Document or any agreement executed in connection herewith or therewith,
any applicable law, rule or regulation with respect to any Transferred
Receivable or the Contract therefor, or the nonconformity of any
Transferred Receivable or the Contract therefor with any such applicable
law, rule or regulation; or
(C) (1) the failure to vest and maintain vested in the
Seller or the Purchaser valid and properly perfected title to and sole
record and beneficial ownership of the Receivables that constitute
Transferred Receivables, together with all Collections in respect
thereof, free and clear of any Adverse Claim, (2) the failure to
maintain or transfer to the Purchaser a first, priority, perfected Lien
in the Seller Collateral and (3) the failure to maintain or transfer to
the Collateral Agent a first priority, perfected Lien therein;
(D) any dispute, claim, offset or defense of any Obligor
(other than its discharge in bankruptcy or a dispute, claim, offset or
defense which is finally determined by a court of competent jurisdiction
to be non-meritorious) to the payment of any Transferred Receivable that
is the subject of a Purchase hereunder (including a defense based on
such Receivable or the Contract therefor not being a legal, valid and
binding obligation of such Obligor enforceable against it in accordance
with its terms), or any other claim resulting from the sale of the
merchandise or services giving rise to such Receivable or the furnishing
of or failure to furnish such merchandise or services or relating to
collection activities with respect to such Receivable (if such
collection activities were performed by Callaway Golf Sales Company or
any of its Affiliates acting as the Servicer), except to the extent that
such dispute, claim, offset or defense results solely from any action or
inaction on the part of any Purchaser Indemnified Person;
(E) any products liability claim or other claim arising
out of or in connection with merchandise, insurance or services that is
the subject of any Contract with respect to any Transferred Receivable;
-49-
(F) the commingling of Collections with respect to
Transferred Receivables by the Seller at any time with its other funds
or the funds of any other Person; or
(G) any failure by the Seller to cause the filing of, or
any delay in filing, financing statements or other similar instruments
or documents under the UCC of any applicable jurisdiction or any other
applicable laws with respect to any Transferred Receivable that is the
subject of a Purchase hereunder, whether at the time of any such
Purchase or at any subsequent time.
(b) Any Indemnified Amounts subject to the indemnification
provisions of this Section 12.01 not paid in accordance with Article VI shall be
------------- ----------
paid by the Seller to the Purchaser Indemnified Person entitled thereto within
five Business Days following demand therefor.
Section 12.02. Indemnities by the Servicer.
---------------------------
(a) Without limiting any other rights that a Purchaser
Indemnified Person may have hereunder or under applicable law, the Servicer
hereby agrees to indemnify and hold harmless each Purchaser Indemnified Person
from and against any and all Indemnified Amounts that may be claimed or asserted
against or incurred by any such Purchaser Indemnified Person in connection with
or arising out of any breach by the Servicer of its obligations hereunder or
under any other Related Document; provided, that the Servicer shall not be
--------
liable for any indemnification to a Purchaser Indemnified Person to the extent
that any such Indemnified Amount (x) results solely from (i) with respect to any
Purchaser Indemnified Person other than the Purchaser, such Purchaser
Indemnified Person's gross negligence or (ii) with respect to any Purchaser
Indemnified Person, such Purchaser Indemnified Person's willful misconduct, in
each case as finally determined by a court of competent jurisdiction, or (y)
constitutes recourse for uncollectible or uncollected Transferred Receivables.
Without limiting the generality of the foregoing, the Servicer shall pay on
demand to each Purchaser Indemnified Person any and all Indemnified Amounts
relating to or resulting from:
(A) reliance on any representation or warranty made or
deemed made by the Servicer (or any of its officers) under or in
connection with this Agreement or any other Related Document or on any
other information delivered by the Servicer pursuant hereto or thereto
that shall have been incorrect in any material respect when made or
deemed made or delivered;
(B) the failure by the Servicer to comply with any term,
provision or covenant contained in this Agreement, any other Related
Document or any agreement executed in connection herewith or therewith,
any applicable law, rule or regulation with respect to any Transferred
Receivable or the Contract therefor, or the nonconformity of any
Transferred Receivable or the Contract therefor with any such applicable
law, rule or regulation;
-50-
(C) the imposition of any Adverse Claim with respect to
any Transferred Receivable or the Seller Collateral as a result of any
action taken by the Servicer hereunder; or
(D) the commingling of Collections with respect to
Transferred Receivables by the Servicer at any time with its other funds
or the funds of any other Person.
(b) Any Indemnified Amounts subject to the indemnification
provisions of this Section 12.02 not paid in accordance with Article VI shall be
------------- ----------
paid by the Servicer to the Purchaser Indemnified Person entitled thereto within
five Business Days following demand
therefor.
Section 12.03. Limitation of Damages; Purchaser Indemnified
--------------------------------------------
Persons. NO PURCHASER INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY
- -------
OTHER PARTY TO THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT, ANY SUCCESSOR,
ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON OR ANY OTHER PERSON ASSERTING
CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES THAT MAY BE ALLEGED AS A RESULT OF ANY TRANSACTION
CONTEMPLATED HEREUNDER OR THEREUNDER.
ARTICLE XIII.
OPERATING AGENT AND COLLATERAL AGENT
Section 13.01. Authorization and Action. (a) The Operating Agent
------------------------
may take such action and carry out such functions under this Agreement as are
authorized to be performed by it pursuant to the terms of this Agreement, any
other Related Document or the Operating Agent Agreement or otherwise
contemplated hereby or thereby or are reasonably incidental thereto; provided,
--------
that the duties of the Operating Agent hereunder shall be determined solely by
the express provisions of this Agreement, and, other than the duties set forth
in Section 13.02, any permissive right of the Operating Agent hereunder shall
-------------
not be construed as a duty.
(b) The Collateral Agent may take such action and carry out such
functions under this Agreement as are authorized to be performed by it pursuant
to the terms of this Agreement, any other Related Document or the Collateral
Agent Agreement or otherwise contemplated hereby or thereby or are reasonably
incidental thereto; provided, that the duties of the Collateral Agent hereunder
--------
shall be determined solely by the express provisions of this Agreement, and,
other than the duties set forth in Section 13.02, any permissive right of the
-------------
Collateral Agent hereunder shall not be construed as a duty.
-51-
Section 13.02. Reliance. None of the Operating Agent, the
--------
Collateral Agent, any of their respective Affiliates or any of their respective
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by any of them under or in connection with this Agreement,
the other Related Documents or the Program Documents, except for damages solely
caused by its or their own gross negligence or willful misconduct as finally
determined by a court of competent jurisdiction. Without limiting the generality
of the foregoing, and notwithstanding any term or provision hereof to the
contrary, the Seller, the Servicer and the Purchaser hereby acknowledge and
agree that each of the Operating Agent and the Collateral Agent (a) acts as
agent hereunder for the Purchaser (and, with respect to the Collateral Agent,
the Affected Parties) and has no duties or obligations to, shall incur no
liabilities or obligations to, and does not act as an agent in any capacity for,
the Seller (other than, with respect to the Collateral Agent, under the Power of
Attorney with respect to remedial actions) or the CGS Originator, (b) may
consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts, (c) makes no representation or warranty hereunder to any
Affected Party and shall not be responsible to any such Person for any
statements, representations or warranties made in or in connection with this
Agreement, the other Related Documents or the Program Documents, (d) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement, the other Related
Documents or the Program Documents on the part of the Seller, the Servicer or
the Purchaser or to inspect the property (including the books and records) of
the Seller, the Servicer or the Purchaser, (e) shall not be responsible to the
Seller, the Servicer or the Purchaser for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the other
Related Documents or any other instrument or document furnished pursuant hereto
or thereto, (f) shall incur no liability under or in respect of this Agreement,
the other Related Documents or the Program Documents by acting upon any notice,
consent, certificate or other instrument or writing believed by it to be genuine
and signed, sent or communicated by the proper party or parties and (g) shall
not be bound to make any investigation into the facts or matters stated in any
notice or other communication hereunder and may rely on the accuracy of such
facts or matters. Notwithstanding the foregoing, each of the Operating Agent and
the Collateral Agent acknowledges that it has a duty to transfer funds between
and among the Deposit Accounts and the Collection Account, and make investments
of funds on deposit in the Retention Account and the Collateral Account, in
accordance with Article VI and the instructions of the Servicer.
----------
Section 13.03. GE Capital and Affiliates. GE Capital and its
-------------------------
Affiliates may generally engage in any kind of business with any Obligor, the
CGS Originator, the Seller, the Servicer or the Purchaser, any of their
respective Affiliates and any Person who may do business with or own securities
of such Persons or any of their respective Affiliates, all as if GE Capital were
not the Operating Agent or the Collateral Agent and without the duty to account
therefor to any Obligor, the CGS Originator, the Seller, the Servicer, the
Purchaser or any other Person.
ARTICLE XIV.
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MISCELLANEOUS
Section 14.01. Notices. Except as otherwise provided herein,
-------
whenever it is provided herein that any notice, demand, request, consent,
approval, declaration or other communication shall or may be given to or served
upon any of the parties by any other parties, or whenever any of the parties
desires to give or serve upon any other parties any communication with respect
to this Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be deemed to
have been validly served, given or delivered (a) upon the earlier of actual
receipt and three Business Days after deposit in the United States Mail,
registered or certified mail, return receipt requested, with proper postage
prepaid, (b) upon transmission, when sent by facsimile or other similar
facsimile transmission (with such facsimile or facsimile promptly confirmed by
delivery of a copy by personal delivery or United States Mail as otherwise
provided in this Section 14.01), (c) one Business Day after deposit with a
-------------
reputable overnight courier with all charges prepaid or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address or facsimile number set forth under its name on
the signature page hereof or to such other address (or facsimile number) as may
be substituted by notice given as herein provided; provided, that each such
--------
declaration or other communication shall be deemed to have been validly
delivered to the Collateral Agent hereunder upon delivery to the Operating Agent
in accordance with the terms of this Section 14.01. The giving of any notice
-------------
required hereunder may be waived in writing by the party entitled to receive
such notice. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to any Person
(other than the Purchaser, the Operating Agent and the Collateral Agent)
designated in any written notice provided hereunder to receive copies shall in
no way adversely affect the effectiveness of such notice, demand, request,
consent, approval, declaration or other communication. Notwithstanding the
foregoing, whenever it is provided herein that a notice is to be given to any
other party hereto by a specific time, such notice shall only be effective if
actually received by such party prior to such time, and if such notice is
received after such time or on a day other than a Business Day, such notice
shall only be effective on the immediately succeeding Business Day.
Section 14.02. Binding Effect; Assignability. This Agreement
-----------------------------
shall be binding upon and inure to the benefit of the Seller, the Servicer, the
Purchaser, the Operating Agent and the Collateral Agent and their respective
successors and permitted assigns. Neither the Seller nor the Servicer may
assign, transfer, hypothecate or otherwise convey any of their respective rights
or obligations hereunder or interests herein without the express prior written
consent of the Purchaser, the Operating Agent and the Collateral Agent and
unless the Rating Agency Condition shall have been satisfied with respect to any
such assignment. Any such purported assignment, transfer, hypothecation or other
conveyance by the Seller or the Servicer without the prior express written
consent of the Purchaser, the Operating Agent and the Collateral Agent shall be
void. The Purchaser, the Operating Agent or the Collateral Agent may, at any
time, assign any of its rights and obligations hereunder or interests herein to
any Person and any such assignee may further assign at any time its rights and
obligations hereunder or interests herein (including any
-53-
rights it may have in and to the Transferred Receivables and the Seller
Collateral and any rights it may have to exercise remedies hereunder), in each
case without the consent of the CGS Originator, the Seller or the Servicer. The
Seller acknowledges and agrees that, upon any such assignment, the assignee
thereof may enforce directly, without joinder of the Purchaser, all of the
obligations of the Seller hereunder.
Section 14.03. Termination; Survival of Seller Secured
---------------------------------------
Obligations Upon Facility Termination Date.
- ------------------------------------------
(a) This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall remain
in full force and effect until the
Termination Date.
(b) Except as otherwise expressly provided herein or in any other
Related Document, no termination or cancellation (regardless of cause or
procedure) of any commitment made by any Affected Party under this Agreement
shall in any way affect or impair the obligations, duties and liabilities of the
Seller or the rights of any Affected Party relating to any unpaid portion of the
Seller Secured Obligations, due or not due, liquidated, contingent or
unliquidated or any transaction or event occurring prior to such termination, or
any transaction or event, the performance of which is required after the
Facility Termination Date. Except as otherwise expressly provided herein or in
any other Related Document, all undertakings, agreements, covenants, warranties
and representations of or binding upon the Seller or the Servicer, and all
rights of any Affected Party hereunder, all as contained in the Related
Documents, shall not terminate or expire, but rather shall survive any such
termination or cancellation and shall continue in full force and effect until
the Termination Date; provided, that the rights and remedies provided for herein
--------
with respect to any breach of any representation or warranty made by the Seller
or the Servicer pursuant to Article IV, the indemnification and payment
----------
provisions of Article XII and Sections 14.04, 14.05 and 14.06 shall be
----------- -------------- ----- ----
continuing and shall survive the Termination Date.
Section 14.04. Costs, Expenses and Taxes. (a) The Seller shall
-------------
reimburse the Purchaser, the Operating Agent and the Collateral Agent for all
out-of-pocket expenses incurred in connection with the negotiation and
preparation of this Agreement and the other Related Documents (including the
reasonable fees and expenses of all of its special counsel, advisors,
consultants and auditors retained in connection with the transactions
contemplated thereby and advice in connection therewith). The Seller shall
reimburse the Purchaser, the Operating Agent and the Collateral Agent for all
fees, costs and expenses, including the fees, costs and expenses of counsel or
other advisors (including environmental and management consultants and
appraisers) for advice, assistance, or other representation in connection with:
(i) the forwarding to the Seller or any other Person on
behalf of the Seller by the Purchaser of any payments for Purchases made
by it hereunder;
-54-
(ii) any amendment, modification or waiver of, consent
with respect to, or termination of this Agreement or any of the other
Related Documents or advice in connection with the administration
thereof or their respective rights hereunder or thereunder;
(iii) any Litigation, contest or dispute (whether
instituted by the Seller, the Purchaser, the Operating Agent, the
Collateral Agent or any other Person as a party, witness, or otherwise)
in any way relating to the Seller Collateral, any of the Related
Documents or any other agreement to be executed or delivered in
connection herewith or therewith, including any Litigation, contest,
dispute, suit, case, proceeding or action, and any appeal or review
thereof, in connection with a case commenced by or against the Seller or
any other Person that may be obligated to the Purchaser, the Operating
Agent or the Collateral Agent by virtue of the Related Documents,
including any such Litigation, contest, dispute, suit, proceeding or
action arising in connection with any work-out or restructuring of the
transactions contemplated hereby during the pendency of one or more
Termination Events;
(iv) any attempt to enforce any remedies of the
Purchaser, the Operating Agent or the Collateral Agent against the
Seller or any other Person that may be obligated to them by virtue of
any of the Related Documents, including any such attempt to enforce any
such remedies in the course of any work-out or restructuring of the
transactions contemplated hereby during the pendency of one or more
Termination Events;
(v) any work-out or restructuring of the transactions
contemplated hereby during the pendency of one or more Termination
Events; and
(vi) efforts to (A) monitor the Purchases or any of the
Seller Secured Obligations, (B) evaluate, observe or assess the CGS
Originator, the Seller or the Servicer or their respective affairs, and
(C) verify, protect, evaluate, assess, appraise, collect, sell,
liquidate or otherwise dispose of any of the Seller Collateral;
including all attorneys' and other professional and service providers' fees
arising from such services, including those in connection with any appellate
proceedings, and all expenses, costs, charges and other fees incurred by such
counsel and others in connection with or relating to any of the events or
actions described in this Section 14.04, all of which shall be payable, on
-------------
demand, by the Seller to the Purchaser, the Operating Agent or the Collateral
Agent, as applicable. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include: fees, costs and expenses of
accountants, environmental advisors, appraisers, investment bankers, management
and other consultants and paralegals; court costs and expenses; photocopying and
duplication expenses; court reporter fees, costs and expenses; long distance
telephone charges; air express charges; telegram or facsimile charges;
secretarial overtime
-55-
charges; and expenses for travel, lodging and food paid or incurred in
connection with the performance of such legal or other advisory services.
(b) In addition, the Seller shall pay on demand any and all
stamp, sales, excise and other taxes (excluding income taxes) and fees payable
or determined to be payable in connection with the execution, delivery, filing
or recording of this Agreement or any other Related Document, and the Seller
agrees to indemnify and save each Purchaser Indemnified Person harmless from and
against any and all liabilities with respect to or resulting from any delay or
failure to pay such taxes and fees.
Section 14.05. Confidentiality.
---------------
(a) Except to the extent otherwise required by applicable law, as
required to be filed publicly with the Securities and Exchange Commission, or
unless the Operating Agent shall otherwise consent in writing, the Seller and
the Servicer agree to maintain the confidentiality of this Agreement (and all
drafts hereof and documents ancillary hereto) in its communications with third
parties other than any Affected Party or any Purchaser Indemnified Person and
otherwise and not to disclose, deliver or otherwise make available to any third
party (other than its directors, officers, employees, accountants or counsel)
the original or any copy of all or any part of this Agreement (or any draft
hereof and documents ancillary hereto) except to an Affected Party or a
Purchaser Indemnified Person.
(b) The Seller and the Servicer each agree that it shall not (and
shall not permit any of its Subsidiaries to) issue any news release or make any
public announcement pertaining to the transactions contemplated by this
Agreement and the other Related Documents without the prior written consent of
the Purchaser and the Operating Agent (which consent shall not be unreasonably
withheld) unless such news release or public announcement is required by law, in
which case the Seller or the Servicer, as applicable, shall consult with the
Purchaser and the Operating Agent prior to the issuance of such news release or
public announcement. The Seller may, however, disclose the general terms of the
transactions contemplated by this Agreement and the other Related Documents to
trade creditors, suppliers and other similarly-situated Persons so long as such
disclosure is not in the form of a news release or public announcement.
Section 14.06. No Proceedings. Each of the Seller and the
--------------
Servicer hereby agrees that, from and after the Closing Date and until the date
one year plus one day following the date on which the Commercial Paper with the
latest maturity has been indefeasibly paid in full in cash, it will not,
directly or indirectly, institute or cause to be instituted against the
Purchaser any proceeding of the type referred to in Sections 9.01(c) and
----------------
9.01(d).
- -------
Section 14.07. Complete Agreement; Modification of Agreement;
----------------------------------------------
Intercreditor Agreement. This Agreement and the other Related Documents
- -----------------------
constitute the complete agreement among the parties hereto with respect to the
subject matter hereof and thereof, supersede all prior agreements and
understandings relating to the subject matter hereof and thereof, and may not be
-56-
modified, altered or amended except as set forth in Section 14.08. The rights of
the Purchaser, the Operating Agent and the Collateral Agent hereunder and under
the other Related Documents with respect to the "Lenders" and the "Agent" party
to the Credit Facility are subject to the terms of the Intercreditor Agreement
to the extent provided therein.
Section 14.08. Amendments and Waivers. No amendment,
----------------------
modification, termination or waiver of any provision of this Agreement or any of
the other Related Documents, or any consent to any departure by the Seller or
the Servicer therefrom, shall in any event be effective unless the same shall be
in writing and signed by each of the parties hereto or thereto provided, that
(i) the Operating Agent shall notify each of the Rating Agencies concurrently
with the execution of any amendment to any provision of this Agreement or any of
the other Related Documents, and (ii) it shall be a condition precedent to the
effectiveness of any material amendment to any provision of this Agreement or
any of the other Related Documents that the Rating Agency Condition shall have
been satisfied in respect thereof.
Section 14.09. No Waiver; Remedies. The failure by the Purchaser,
-------------------
the Operating Agent or the Collateral Agent, at any time or times, to require
strict performance by the Seller or the Servicer of any provision of this
Agreement or the Purchase Assignment shall not waive, affect or diminish any
right of the Purchaser, the Operating Agent or the Collateral Agent thereafter
to demand strict compliance and performance herewith or therewith. Any
suspension or waiver of any breach or default hereunder shall not suspend, waive
or affect any other breach or default whether the same is prior or subsequent
thereto and whether the same or of a different type. None of the undertakings,
agreements, warranties, covenants and representations of the Seller or the
Servicer contained in this Agreement or any Purchase Assignment, and no breach
or default by the Seller or the Servicer hereunder or thereunder, shall be
deemed to have been suspended or waived by the Purchaser, the Operating Agent or
the Collateral Agent unless such waiver or suspension is by an instrument in
writing signed by an officer of or other duly authorized signatory of the
Purchaser, the Operating Agent and the Collateral Agent and directed to the
Seller or the Servicer, as applicable, specifying such suspension or waiver. The
rights and remedies of the Purchaser, the Operating Agent and the Collateral
Agent under this Agreement shall be cumulative and nonexclusive of any other
rights and remedies that the Purchaser, the Operating Agent and the Collateral
Agent may have under any other agreement, including the other Related Documents,
by operation of law or otherwise. Recourse to the Seller Collateral shall not be
required.
SECTION 14.10. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF
-------------------------------------------------
JURY TRIAL.
- ----------
(A) THIS AGREEMENT AND EACH OTHER RELATED DOCUMENT (EXCEPT TO THE
EXTENT THAT ANY RELATED DOCUMENT EXPRESSLY PROVIDES TO THE CONTRARY) AND THE
OBLIGATIONS ARISING HEREUNDER AND THEREUNDER SHALL IN ALL RESPECTS, INCLUDING
ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND
-57-
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (WITHOUT REGARD TO THE CONFLICT OF LAW PROVISIONS THEREOF) AND ANY
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
(B) EACH PARTY HERETO HEREBY CONSENTS AND AGREES THAT THE
STATE OR FEDERAL COURTS LOCATED IN THE BOROUGH OF MANHATTAN IN NEW YORK CITY
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THEM PERTAINING TO THIS AGREEMENT OR TO ANY MATTER ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OTHER RELATED DOCUMENT; PROVIDED, THAT EACH
--------
PARTY HERETO ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE
HEARD BY A COURT LOCATED OUTSIDE OF THE BOROUGH OF MANHATTAN IN NEW YORK CITY;
PROVIDED FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
- ----------------
PRECLUDE THE PURCHASER, THE OPERATING AGENT OR THE COLLATERAL AGENT FROM
BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION TO REALIZE
ON THE SELLER COLLATERAL OR ANY OTHER SECURITY FOR THE SELLER SECURED
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE
PURCHASER, THE OPERATING AGENT OR THE COLLATERAL AGENT. EACH PARTY HERETO
SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND EACH PARTY HERETO HEREBY WAIVES ANY OBJECTION
THAT SUCH PARTY MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER
VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF SUCH LEGAL
----- --- ----------
OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. EACH PARTY HERETO
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS
ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS,
COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH BENEATH ITS NAME ON THE
SIGNATURE PAGES HEREOF AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON
THE EARLIER OF SUCH PARTY'S ACTUAL RECEIPT THEREOF OR THREE DAYS AFTER DEPOSIT
IN THE UNITED STATES MAIL, PROPER POSTAGE PREPAID. NOTHING IN THIS SECTION SHALL
AFFECT THE RIGHT OF ANY PARTY HERETO TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.
(C) BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX
FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN
EXPERIENCED AND EXPERT PERSON AND
-58-
THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER RELATED
DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Section 14.11. Counterparts. This Agreement may be executed in
------------
any number of separate counterparts, each of which shall collectively and
separately constitute one agreement.
Section 14.12. Severability. Wherever possible, each provision of
------------
this Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
Section 14.13. Section Titles. The section titles and table of
--------------
contents contained in this Agreement are and shall be without substantive
meaning or content of any kind whatsoever and are not a part of the agreement
between the parties hereto.
Section 14.14. Limited Recourse. The obligations of the Purchaser
----------------
under this Agreement and all Related Documents are solely the corporate
obligations of the Purchaser. No recourse shall be had for the payment of any
amount owing in respect of Purchases or for the payment of any fee hereunder or
any other obligation or claim arising out of or based upon this Agreement or any
other Related Document against any Stockholder, employee, officer, director,
agent or incorporator of the Purchaser. Any accrued obligations owing by the
Purchaser under this Agreement shall be payable by the Purchaser solely to the
extent that funds are available therefor from time to time in accordance with
the provisions of Article VI of the Collateral Agent Agreement and Article VI of
---------- ----------
this Agreement (and such accrued obligations shall not be extinguished until
paid in full).
Section 14.15. Further Assurances.
------------------
(a) Each of the Seller and the Servicer shall, at its sole cost
and expense, upon request of the Purchaser, the Operating Agent or the
Collateral Agent, promptly and duly execute and deliver any and all further
instruments and documents and take such further action that may be necessary or
desirable or that the Purchaser, the Operating Agent or the Collateral Agent may
request to (i) perfect, protect, preserve, continue and maintain fully the
Purchases made and the
-59-
right, title and interests (including Liens) granted to the Purchaser under this
Agreement, (ii) enable the Purchaser, the Operating Agent or the Collateral
Agent to exercise and enforce its rights under this Agreement, any of the other
Related Documents or the Collateral Agent Agreement or (iii) otherwise carry out
more effectively the provisions and purposes of this Agreement or any other
Related Document. Without limiting the generality of the foregoing, the Seller
shall, upon request of the Purchaser, the Operating Agent or the Collateral
Agent, (A) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or notices
that may be necessary or desirable or that the Purchaser, the Operating Agent or
the Collateral Agent may request to perfect, protect and preserve the Purchases
made and the Liens granted pursuant to this Agreement, free and clear of all
Adverse Claims, (B) mark, or cause the Servicer to mark, each Contract
evidencing each Transferred Receivable with a legend, acceptable to the
Purchaser, the Operating Agent and the Collateral Agent evidencing that the
Purchaser has purchased all right and title thereto and interest therein as
provided herein, (C) mark, or cause the Servicer to mark, its master data
processing records evidencing such Transferred Receivables with such a legend
and (D) notify or cause the Servicer to notify Obligors of the transfer of
Transferred Receivables effected hereunder.
(b) Without limiting the generality of the foregoing, the Seller
hereby authorizes the Purchaser and the Collateral Agent, and the Purchaser
hereby authorizes the Collateral Agent, to file one or more financing or
continuation statements, or amendments thereto or assignments thereof, relating
to all or any part of the Transferred Receivables, including Collections with
respect thereto, or the Seller Collateral without the signature of the Seller
or, as applicable, the Purchaser to the extent permitted by applicable law. A
carbon, photographic or other reproduction of this Agreement or of any notice or
financing statement covering the Transferred Receivables, the Seller Collateral
or any part thereof shall be sufficient as a notice or financing statement where
permitted by law.
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IN WITNESS WHEREOF, the parties have caused this Receivables
Purchase and Servicing Agreement to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
GOLF FUNDING CORPORATION
By /s/ David A. Rane
-----------------------------
Name___________________________
Title__________________________
Address:
--------
2285 Rutherford Road
Carlsbad, California 92008
Attention: President
REDWOOD RECEIVABLES CORPORATION
By /s/ David A. Rane
---------------------------
Name_________________________
Assistant Secretary
Address:
-------
c/o General Electric Capital Corporation
3001 Summer Street, 2nd Floor
Stamford, Connecticut 06927
Telephone: (203) 961-5488
Facsimile: (203) 961-2953
CALLAWAY GOLF SALES COMPANY
By /s/ David A. Rane
----------------------------
Name___________________________
Title _________________________
Address:
-------
2285 Rutherford Road
Carlsbad, California 92008
Attention: President
Telecopy: (760) 929-8120
GENERAL ELECTRIC CAPITAL CORPORATION,
as Operating Agent and Collateral Agent
By /s/ Denis M. Creeden
-----------------------------
Name
---------------------------
Duly Authorized Signatory
Address:
-------
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Vice President - Portfolio/Callaway
Telephone: (203) 316-7607
Facsimile: (203) 316-7821