EXHIBIT 10.1
RECEIVABLES PURCHASE AGREEMENT
Dated as of June 23, 2000
between
▇▇▇▇▇ FUNDING II, INC.
as Purchaser,
and
THE ▇▇▇▇▇ GROUP, INC.
as Originator
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS
SECTION 1.1. Certain Defined Terms 1
SECTION 1.2. Accounting and UCC Terms 3
ARTICLE II AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.1. Purchase and Contribution of Receivables 3
SECTION 2.2. Purchase Price 4
SECTION 2.3. Payment of Purchase Price 4
SECTION 2.4. Deemed Collections 5
SECTION 2.5. Adjustments 5
SECTION 2.6. Finance Charges 6
SECTION 2.7. Allocations of Collections 6
ARTICLE III CONDITIONS TO PURCHASES
SECTION 3.1. Conditions Precedent to Purchaser's Initial Purchase 6
SECTION 3.2. Conditions Precedent to All Purchases 7
SECTION 3.3. Conditions Precedent to Originator's Initial Sale 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of the Parties 8
SECTION 4.2. Additional Representations of the Originator 9
ARTICLE V GENERAL COVENANTS
SECTION 5.1. Affirmative Covenants of the Originator 11
SECTION 5.2. Negative Covenants of the Originator 15
ARTICLE VI ADMINISTRATION AND COLLECTION OF PURCHASED RECEIVABLES
SECTION 6.1. Collection Procedures 16
SECTION 6.2. Purchase Information 17
SECTION 6.3. Compliance Statements 17
SECTION 6.4. Allocations and Applications of Collections 17
SECTION 6.5. Termination 17
SECTION 6.6. Responsibilities of the Originator 18
ARTICLE VII PURCHASE TERMINATION EVENTS
SECTION 7.1. Purchase Termination Events 18
SECTION 7.2. Remedies. 19
ARTICLE VIII INDEMNIFICATION
SECTION 8.1. Indemnities by the Originator 20
ARTICLE IX THE ORIGINATOR NOTE
SECTION 9.1. Originator Note 21
SECTION 9.2. Restrictions on Transfer of Originator Note 22
ARTICLE X MISCELLANEOUS
SECTION 10.1. Amendments, Etc. 22
SECTION 10.2. Notices, Etc. 23
SECTION 10.3. No Waiver; Remedies 23
SECTION 10.4. Binding Effect; Governing Law 23
SECTION 10.5. Costs, Expenses and Taxes 23
SECTION 10.6. No Bankruptcy Petition 23
SECTION 10.7. Acknowledgment of Assignments 24
SECTION 10.8. Waiver of Setoff 24
SECTION 10.9. Severability 24
SECTION 10.10. Counterparts 24
SECTION 10.11. Grant of License to Use Trademarks 24
SECTION 10.12. Jurisdiction; Consent to Service of Process 25
SECTION 10.13. Third Party Beneficiaries 25
SECTION 10.14. Confirmation of Intent 25
SECTION 10.15. Confidentiality of Agreement 25
SECTION 10.16. Section and Paragraph Headings 25
EXHIBIT A Form of Originator Note A-1
EXHIBIT B Form of Purchase Report
SCHEDULE I Offices Where Books, Records, Etc. Evidencing Receivables Are Kept
SCHEDULE II List of Trade Names
SCHEDULE III Authorized Officers of Originator
SCHEDULE 10.2 Notice Addresses
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RECEIVABLES PURCHASE AGREEMENT
RECEIVABLES PURCHASE AGREEMENT, dated as of June 23, 2000, by and between THE
▇▇▇▇▇ GROUP, INC., a Tennessee corporation ("▇▇▇▇▇" or the "Originator"), as
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Originator, and ▇▇▇▇▇ FUNDING II, INC., a Tennessee corporation (the
"Purchaser"), as Purchaser.
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W I T N E S S E T H:
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WHEREAS, the Originator intends to sell Receivables to the Purchaser on the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, to obtain the necessary funds to purchase such Receivables, the
Purchaser, the Servicer, Three Pillars Funding Corporation and SunTrust
Equitable Securities Corporation, as Administrator, have entered into the Loan
Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and
agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Defined Terms. Capitalized terms used in this Agreement but
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not defined herein shall have the meanings assigned to such terms in the Loan
Agreement. This Agreement is the Receivables Purchase Agreement referred to in
the Loan Agreement. As used in this Agreement, the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Additional Receivable" shall mean any Receivable which shall be
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purchased by, or contributed to, the Purchaser on any Purchase Date
other than the Closing Date.
"Authorized Officers" shall mean those officers of the Originator
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designated in Schedule III hereto (or in such other Schedule as may be
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delivered to the parties hereto from time to time) as duly authorized
to execute and deliver this Agreement and any instruments or documents
in connection herewith on behalf of the Originator and to take, from
time to time, all other actions on behalf of the Originator in
connection herewith.
"Available Funds" has the meaning assigned to that term in Section
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2.3(b).
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"Business Day" shall mean a day on which each of the Originator and
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Purchaser is open at its respective address specified in this
Agreement for the purpose of conducting its business, except that, in
respect of such performance or rights under this Agreement as involve
the Administrator, such term shall have the meaning assigned to it by
the Loan Agreement.
"Contributed Receivables" has the meaning assigned to that term in
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Section 2.1(c).
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"Cost Discount" means, as of any Month End Date, the product of (i)
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the Days Sales Outstanding Ratio for the Due Period ending on such
Month End Date, times (ii) the Cost Rate for such Month End Date.
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"Cost Rate" for any Month End Date means an amount equal to (A) the
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percentage rate equal to the sum of (i) the LIBOR Rate for the Due
Period ending on such Month End Date, plus (ii) 4.50% divided by (B)
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360.
"Fair Market Value Discount" means, with respect to any Receivable,
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(i) the Unpaid Balance of such Receivable, times (ii) the sum of the
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most recently calculated Loss Discount, plus the most recently
calculated Cost Discount.
"Incipient Purchase Termination Event" shall mean any condition, act
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or event specified in Section 7.1 that, with the giving of notice or
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the lapse of time, or both, would become a Purchase Termination Event.
"Ineligible Receivable" has the meaning assigned to that term in
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Section 2.4(a).
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"Initial Contributed Receivables" has the meaning assigned to that
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term in Section 2.1(b).
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"Loan Agreement" shall mean the Loan Agreement, dated as of June 23,
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2000, among the Purchaser, as borrower, ▇▇▇▇▇, as servicer, Three
Pillars Funding Corporation, as lender, and SunTrust Equitable
Securities Corporation, as administrator, as amended, supplemented or
otherwise modified from time to time.
"Loss Discount" as of any Month End Date means the ratio, expressed as
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a percentage, of (i) the losses recognized for all Receivables during
the period equal to twelve Fiscal Months ending on such Month End Date
divided by (ii) the Collections on all Receivables received during
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such period.
"Purchase Date" means each Business Day occurring prior to the
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Purchase Termination Date.
"Purchase Price" has the meaning assigned to that term in Section
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2.2(a).
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"Purchase Report" means a report in the form of Exhibit B.
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"Purchase Termination Date" shall mean the date on which the
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Purchaser's obligation to purchase Receivables shall terminate
pursuant to Section 7.1.
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"Purchase Termination Event" has the meaning assigned to that term in
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Section 7.1.
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"Purchased Asset" has the meaning assigned to that term in Section
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2.1(a).
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SECTION 1.2. Accounting and UCC Terms. All accounting terms not specifically
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defined herein shall be construed in accordance with GAAP; and all terms used in
Article 9 of the UCC that are used but not specifically defined herein are used
herein as defined therein.
ARTICLE II
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 2.1. Purchase and Contribution of Receivables.
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(a) The Originator hereby sells, assigns, transfers and conveys to the
Purchaser on each Purchase Date, on the terms and subject to the conditions
specifically set forth herein, all of its respective right, title and interest,
in, to and under (i) all Receivables (other than Contributed Receivables), now
existing or arising hereafter and prior to the Purchase Termination Date, and
all payment and enforcement rights (but not any obligations) to, in and under
the related Contracts, (ii) all Collections and other monies due or to become
due with respect to the foregoing, (iii) all Related Security for the
Receivables, (iv) all of the Originator's rights and claims under the First Tier
Purchase Agreement, (v) all lockboxes and accounts to which Collections are
sent, and all funds and investments from time to time therein, (v) all books and
records related to the foregoing and (vi) all proceeds of the foregoing,
including, without limitation, insurance proceeds relating thereto
(collectively, the "Purchased Assets").
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(b) In consideration of the capital stock of the Purchaser issued to ▇▇▇▇▇, the
Originator agrees to contribute, and does hereby contribute to the Purchaser,
and the Purchaser hereby accepts from the Originator, all of the Originator's
right, title and interest in and to (i) Receivables, and all of the rights
described in clauses (ii) through (vi) of Section 2.1(a) related thereto,
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starting with the oldest such Receivable such that the aggregate Unpaid Balance
of all such Receivables shall be as close as possible to, but not less than,
$2,000,000 (the "Initial Contributed Receivables") and (ii) all other
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Contributed Receivables.
(c) On each Purchase Date, all of Originator's right, title and interest in and
to the newly created Receivables (other than Receivables indicated on a Purchase
Report as having been contributed by the Originator to the Purchaser (such
Receivables, together with the Initial Contributed Receivables, the "Contributed
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Receivables")) and the other Purchased Assets shall be sold, assigned,
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transferred and conveyed to the Purchaser by the sale, assignment, transfer and
conveyance set forth in paragraph (a) above without any further action by the
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Originator or the Purchaser; all Contributed Receivables (other than the Initial
Contributed Receivables) shall be contributed to the Purchaser on the date they
are created without further action by the Originator or the Purchaser.
(d) The parties to this Agreement intend that the transactions contemplated
hereby shall be, and shall be treated as, a purchase by the Purchaser and a sale
by the Originator of the Purchased Assets (or, in the case of Contributed
Receivables, as a contribution by the Originator to the Purchaser) and not as a
lending transaction. All sales and contributions of Receivables by the
Originator hereunder shall be without recourse to, or representation or warranty
of any kind (express or implied) by, the Originator, except as otherwise
specifically provided herein. The
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foregoing sale, assignment, transfer and conveyance does not constitute and is
not intended to result in a creation or assumption by the Purchaser of any
obligation of the Originator or any other Person in connection with the
Purchased Assets, including, without limitation any obligation to any Obligor.
SECTION 2.2. Purchase Price. The amount payable by the Purchaser (the
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"Purchase Price") for the newly created Receivables sold on any Purchase Date to
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the Purchaser under this Agreement shall equal the aggregate Unpaid Balance of
such Receivables less the Fair Market Value Discount for such Receivables.
SECTION 2.3. Payment of Purchase Price.
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(a) On the Closing Date, the Purchaser shall pay the Purchase Price for the
purchase to be made from the Originator with respect to the Receivables existing
on or prior to the Closing Date (other than the Initial Contributed Receivables)
(i) in cash in an amount equal to the amount received by the Purchaser from the
Lender in connection with the first Loan made pursuant to the Loan Agreement and
(ii) by the issuance of an Originator Note in the initial principal amount equal
to the remainder of the Purchase Price owing after subtracting the amount paid
in cash.
(b) On each Purchase Date falling after the Closing Date until the Purchase
Termination Date, on the terms and subject to the conditions of this Agreement,
the Purchaser shall pay to the Originator the Purchase Price for the Receivables
and other Purchased Assets purchased from the Originator on such Purchase Date
as follows:
(i) First, by paying to the Originator a portion of the Purchase
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Price due by depositing into such account as the Originator shall
specify immediately available funds from monies held by or on behalf
of the Purchaser solely to the extent that such monies do not
constitute Collections that are required to be segregated and held by
the Servicer or distributed to the Administrator or the Lender
pursuant to the Loan Agreement on the next Distribution Date or
required to be paid to the Servicer as the Servicer's Fee on the next
Distribution Date, or otherwise necessary to pay current expenses of
the Purchaser (in its reasonable discretion) (such available monies,
the "Available Funds"), subject to the terms of the Loan Agreement.
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Any Collections that have been paid to, or retained by, the Originator
during any Due Period shall be credited towards the Purchaser's
obligation pursuant to this clause first; provided, however, that, if
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Collections paid to, or retained by, the Originator exceed the
Purchase Price for Receivables and the other Purchased Assets
purchased from the Originator for such Due Period, or, absent a cash
payment, the Purchaser shall not have sufficient cash to meet its
payment obligations pursuant to the Loan Agreement, the Originator
shall turn over such excess to the Purchaser; and
(ii) Second, to the extent any portion of the Purchase Price remains
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unpaid, the principal amount outstanding under the Originator Note
issued to the Originator automatically shall be increased in an amount
equal to such remaining Purchase Price.
To the extent that (x) the amount due pursuant to Section 2.2 with respect to
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all Receivables created or originated by the Originator that arose during the
corresponding Due Period is
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exceeded by (y) the amount paid to the Originator during such Due Period
pursuant to the foregoing sentences for such Receivables, and such excess is not
turned over to the Purchaser pursuant to clause first above, such excess shall
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be treated as a reduction in the principal amount of the Originator Note,
effective as of the last day of the related Due Period; provided, however, that
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if at any time the unpaid principal amount of the Originator Note has been
reduced to zero, the Originator shall pay the Purchaser the remainder owed with
respect thereto in immediately available funds.
(c) All payments hereunder shall be made not later than 3:00 p.m. (New York
time) on the date specified therefor in lawful money of the United States of
America in same day funds (i) if to the Originator, to the bank account
designated in writing by the Originator to the Purchaser and (ii) if to the
Purchaser, to the Collection Account. Whenever any payment to be made hereunder
shall be stated to be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day.
(d) Except as expressly set forth herein, the Originator shall not have any
right under this Agreement, by implication or otherwise, to repurchase from the
Purchaser any Purchased Asset or to rescind or otherwise retroactively affect
any purchase of any Purchased Asset after the Purchase Date relating thereto.
SECTION 2.4. Deemed Collections.
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If any of the representations or warranties of the Originator contained in
subsection (a) or (b) of Section 4.2 was not true with respect to any Receivable
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as of the applicable Purchase Date (any such Receivable, an "Ineligible
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Receivable"), the Originator shall pay to the Purchaser a deemed Collection
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equal to the Unpaid Balance of such Ineligible Receivable on the next Purchase
Date or, if the Purchase Termination Date has occurred, on the next Business
Day. Prior to the Purchase Termination Date, but subject to the next sentence,
such deemed Collection shall be paid (i) by reducing the Purchase Price payable
by the Purchaser to the Originator on the applicable Purchase Date pursuant to
Section 2.2 hereof, and (ii) to the extent such deemed Collection exceeds the
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Purchase Price payable on such Purchase Date, by reducing the amount of the
Originator Note on such Purchase Date (or, once the amount of the Originator
Note has been reduced to zero, by making a cash payment to an account designated
by the Purchaser). On or subsequent to the Purchase Termination Date or if such
amount is necessary to enable the Purchaser to make any payment required to be
made on such date under the Loan Agreement, such deemed Collection shall be paid
by wire transfer of cash to the Collection Account.
SECTION 2.5. Adjustments. The Originator may make an adjustment in the
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principal amount or finance or other charges accrued or payable with respect to
a Receivables, provided that such adjustment is made in accordance with the
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Collection Policy and the Loan Agreement. The aggregate amount of all such
adjustments made by the Originator subsequent to each Purchase Date shall be due
and payable to the Purchaser on the next Purchase Date following the date of
processing in respect thereof or, if the Purchase Termination Date has occurred,
on the next Business Day following such date of processing. The amounts due to
the Purchaser pursuant to the preceding sentence shall be paid on the due date
therefor (i) by reducing the Purchase Price, if any, payable by the Purchaser on
such date, and (ii) to the extent the amount due exceeds the
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Purchase Price payable on such date, or if a payment of cash is necessary so
that the Purchaser can make the payments due on the next Distribution Date
pursuant to the Loan Agreement, by wire transfer of cash to the Collection
Account.
SECTION 2.6. Finance Charges. Finance charges, late charge revenue, other fees
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and charges and other similar items, whenever created (whether prior to or after
the occurrence of a Purchase Termination Event) and whenever received (prior to
or after the occurrence of a Purchase Termination Event), accrued in respect of
Receivables shall be the property of the Purchaser and all Collections with
respect thereto shall be allocated and treated as Collections in respect of
Receivables.
SECTION 2.7. Allocations of Collections. For purposes of determining the
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Unpaid Balances of Receivables at any time, the Purchaser and the Originator
agree that the Originator shall apply all Collections on a Receivable by
Receivable basis.
ARTICLE III
CONDITIONS TO PURCHASES
SECTION 3.1. Conditions Precedent to Purchaser's Initial Purchase. The
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obligation of the Purchaser to purchase Receivables hereunder on the occasion of
the Closing Date is subject to the conditions precedent (any one or more of
which can be waived by the Purchaser) that (a) the Loan Agreement and the other
Transaction Documents shall be in full force and effect and all conditions to
the initial advance under the Loan Agreement shall have been satisfied or
waived, (b) the Purchaser shall have received on or before the Closing Date the
following, each (unless otherwise indicated) dated the day of such sale and in
form and substance satisfactory to the Purchaser and (c) the conditions set
forth in clauses (iii), (iv) and (v) shall have been satisfied:
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(i) a copy of duly adopted resolutions of the Board of Directors of
the Originator authorizing or ratifying the execution, delivery and
performance, respectively, of the Transaction Documents to which it is
a party, certified by the Secretary or Assistant Secretary of the
Originator;
(ii) a duly executed certificate of the Secretary or an Assistant
Secretary of the Originator certifying the names and true signatures
of the Authorized Officers authorized on behalf of the Originator to
sign the Transaction Documents to which it is a party;
(iii) the Administrator shall be satisfied with the Originator's
systems, computer programs, related materials, computer tapes, disks
and cassettes, procedures and record keeping relating to and required
for the collection of Receivables by the Purchaser, and the
Administrator shall be reasonably satisfied that the procedures of the
Originator for the preparation, storage and retrieval of such
materials are sufficient to permit the administration and collection
of the Receivables by a servicer without the participation of the
Originator or the Purchaser;
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(iv) the Originator shall have filed and recorded, at its own expense,
UCC-1 financing statements with respect to the Purchased Assets in
such manner and in such jurisdictions as are necessary or desirable to
perfect the Purchaser's ownership interest thereof under the UCC and
delivered a file-stamped copy of such UCC-1 financing statements or
other evidence of such filings to the Purchaser and the Administrator
on or prior to the date hereof; and all other action necessary or
desirable, in the opinion of the Purchaser or the Administrator, to
establish the Purchaser's ownership of the Purchased Assets shall have
been duly taken;
(v) the Purchaser and the Administrator shall have received
photocopies of reports of UCC searches in the central filing office of
the Originator and any necessary local offices of the Originator with
respect to the Purchased Assets reflecting the absence of Liens
thereon, except the Liens created hereunder, pursuant to the Loan
Agreement in favor of the Administrator and except for Liens as to
which the Purchaser has received executed UCC termination statements;
and
(vi) the Purchaser and the Administrator shall have received such
other documents, certificates and opinions as the Purchaser or the
Administrator may request.
SECTION 3.2. Conditions Precedent to All Purchases. The obligation of the
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Purchaser to pay for each Receivable on each Purchase Date (including the
Closing Date) shall be subject to the further conditions precedent (any one of
which can be waived by the Purchaser) that on such Purchase Date:
(a) the following statements shall be true (and the acceptance by the Originator
of the Purchase Price for any Receivables on any Purchase Date shall constitute
a representation and warranty by the Originator that on such Purchase Date such
statements are true):
(i) the representations and warranties of the Originator contained in
Sections 4.1 and 4.2 shall be correct on and as of such Purchase Date
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as though made on and as of such date; and
(ii)no Purchase Termination Event or Incipient Purchase Termination
Event shall have occurred and be continuing;
(b) the Originator shall have clearly and unambiguously marked its accounting
records evidencing the Receivables being purchased hereunder on such Purchase
Date with a legend stating that such Receivables have been sold to the Purchaser
in accordance with this Agreement;
(c) no material change shall have occurred after the Closing Date with respect
to the Originator's systems, computer programs, related materials, computer
tapes, disks and cassettes, procedures and record keeping relating to and
required for the collection of the Receivables by the Originator which makes
them not sufficient and satisfactory in order to permit the purchase,
administration and collection of the Receivables by the Purchaser in accordance
with the terms and intent of this Agreement; and
(d) the Purchaser shall have received such other approvals, opinions or
documents as the Purchaser may reasonably request.
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SECTION 3.3. Conditions Precedent to Originator's Initial Sale. The obligation
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of the Originator to make its initial sale is subject to the conditions
precedent that the Originator shall have received on or before the date of such
sale the following, each (unless otherwise indicated) dated the day of such sale
and in form and substance satisfactory to such Originator:
(a) a copy of duly adopted resolutions of the Board of Directors of the
Purchaser authorizing this Agreement, the documents to be delivered by the
Purchaser hereunder and the transactions contemplated hereby, certified by the
Secretary or Assistant Secretary of the Purchaser; and
(b) a duly executed certificate of the Secretary or Assistant Secretary of the
Purchaser certifying the names and true signatures of the officers authorized on
its behalf to sign this Agreement and the other documents to be delivered by it
hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of the Parties. The Purchaser and
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the Originator each represents and warrants as to itself as follows:
(a) Each of the Originator and the Purchaser has been duly organized and is
validly existing and in good standing under the laws of the state of its
organization, with full corporate power and authority to own its properties and
to conduct its business as presently conducted. Each of the Originator and the
Purchaser is duly qualified to do business and is in good standing as a foreign
entity (or is exempt from such requirements), and has obtained all necessary
licenses and approvals, in the jurisdiction where its principal place of
business and chief executive office are located and in each other jurisdiction
in which failure to so qualify or to obtain such licenses and approvals would
have a material adverse effect on the conduct of the Originator's or the
Purchaser's business or on the ability of the Originator or the Purchaser, as
the case may be, to perform its obligations under this Agreement.
(b) The sale and contribution of Receivables and the other Purchased Assets
pursuant to this Agreement, the performance of its obligations under this
Agreement and the consummation of the transactions herein contemplated have been
duly authorized by all requisite corporate action and will not conflict with or
result in a breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge or
encumbrance (other than pursuant to this Agreement or the other Transaction
Documents) upon any of its property or assets, pursuant to the terms of any
indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which it is a party or by which it is bound or to which any of its
property or assets is subject, nor will such action result in any violation of
the provisions of its organizational documents or of any statute or any order,
rule or regulation of any federal or state court or governmental agency or body
having jurisdiction over it or any of its properties; and no consent, approval,
authorization, order, registration or qualification of or with any such court or
any such regulatory authority or other such governmental agency or body is
required to be
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obtained by or with respect to the Originator or the Purchaser for the sale or
contribution of Receivables and the other Purchased Assets or the consummation
of the transactions contemplated by this Agreement.
(c) This Agreement has been duly executed and delivered by the Originator and
the Purchaser and constitutes a valid and legally binding obligation of the
Originator and the Purchaser, respectively, enforceable against the Originator
and the Purchaser, respectively, in accordance with its terms, except that the
enforceability thereof may be subject to (a) the effects of any applicable
bankruptcy, insolvency, reorganization, receivership, conservatorship or other
laws, regulations and administrative orders affecting the rights of creditors
generally and (b) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or law).
(d) There is no pending or, to its knowledge after due inquiry, threatened
action or proceeding affecting it or any of its Subsidiaries before any court,
governmental agency or arbitrator, that may reasonably be expected to materially
and adversely affect its condition (financial or otherwise), operations,
properties or prospects, or its ability to perform its obligations under this
Agreement, or that purports to affect the legality, validity or enforceability
of this Agreement. None of the transactions contemplated hereby is or is
threatened to be restrained or enjoined (temporarily, preliminarily or
permanently).
SECTION 4.2. Additional Representations of the Originator. The Originator
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additionally represents and warrants as follows:
(a) Eligible Receivable. Unless otherwise specified in the applicable Purchase
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Report, all Receivables sold, contributed and assigned to the Purchaser
hereunder on the Closing Date are Eligible Receivables as of the Closing Date
and all Receivables sold and assigned to the Purchaser hereunder on any Purchase
Date subsequent to the Closing Date will be Eligible Receivables as of such
Purchase Date.
(b) Sale of Receivables. The Originator is, as of the time of the transfer to
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the Purchaser of each Receivable being sold or contributed to the Purchaser on
the Closing Date, and will be, as of the time of the transfer to the Purchaser
of each Receivable sold or contributed to the Purchaser on any subsequent
Purchase Date, the sole owner of such Receivable, free from any lien, security
interest, encumbrance or other right, title or interest of any Person. Each
Receivable existing on the Closing Date has been, and in the case of Additional
Receivables sold or contributed hereafter, such Additional Receivables will be,
on the applicable Purchase Date, conveyed to the Purchaser free and clear of any
Lien. There is no effective financing statement (or similar statement or
instrument of registration under the law of any jurisdiction) now on file or
registered in any public office filed by or against the Originator or any
Subsidiary of the Originator or purporting to be filed on behalf of the
Originator or any Subsidiary of the Originator covering any interest of any kind
in any Purchased Assets which are being, or which hereafter will be, sold or
contributed to the Purchaser, other than those filed to effect the assignment of
the Receivables to the Originator on the Closing Date, and the Originator will
not execute nor will there be on file in any public office any effective
financing statement (or similar statement or instrument of registration under
the laws of any jurisdiction) or statements relating
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to such Purchased Assets, except in each case any financing statements filed in
respect of and covering the purchase of the Purchased Assets by the Purchaser
pursuant to this Agreement and the security interest created pursuant to the
Loan Agreement. All filings and recordings (including pursuant to the UCC)
required to perfect the title of the Purchaser in each Purchased Asset sold or
contributed hereunder have been accomplished and are in full force and effect
and the Originator shall, at its expense, perform all acts and execute all
documents necessary or reasonably requested by the Purchaser or the
Administrator at any time and from time to time to evidence, perfect, maintain
and enforce the title or the security interest of the Purchaser or the
Administrator in the Purchased Assets and the priority thereof.
(c) Accuracy of Information. All information heretofore furnished by, or on
-----------------------
behalf of, Originator to the Purchaser or the Administrator in connection with
any Transaction Document, or any transaction contemplated thereby, is true and
accurate in every material respect (without omission of any information
necessary to prevent such information from being materially misleading).
(d) Location of Office and Records. The principal place of business and chief
------------------------------
executive office of the Originator, and the office where all Documents are kept,
is located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
(e) Trade Names. Set forth on Schedule II hereto is a complete and accurate
----------- -----------
list of the trade names of the Originator and its Subsidiaries for the five-year
period preceding the date of this Agreement.
(f) Financial Statements. The Originator has heretofore furnished to the
--------------------
Purchaser and the Administrator copies of its consolidated and consolidating
balance sheets and statements of income and changes in financial condition as of
and for the Fiscal Years ended in December of 1998 and December of 1999, audited
by and accompanied by the opinion of Ernst & Young, independent public
accountants. Except as disclosed in writing to the Administrator prior to the
date of this Agreement, such financial statements present fairly in all material
respects the financial condition and results of operations of the Originator and
its consolidated subsidiaries as of such dates and for such periods; such
balance sheets and the notes thereto disclose all liabilities, direct or
contingent, of the Originator and its consolidated subsidiaries as of the dates
thereof required to be disclosed by GAAP and such financial statements were
prepared in accordance with GAAP applied on a consistent basis. Since April 1,
2000, there has been no material adverse change in the condition (financial or
otherwise), operations, properties, assets or prospects of the Originator,
except as disclosed in writing to the Administrator on or prior to the date
hereof.
(g) No Consent. No action, consent or approval of, registration or filing with
----------
or any other action by any Governmental Authority is or will be required in
connection with execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated by this Agreement, except such as
have been made or obtained and are in full force and effect.
(h) Administrator Can Perform. Upon the delivery by the Originator to the
-------------------------
Administrator of the computer tapes, disks, cassettes and related materials (in
a generally acceptable readable format)
10
relating to the administration of the Receivables pursuant to Section 6.2, the
-----------
Administrator shall have been furnished with all materials and data which are
available, or obtainable by the Originator without undue burden, and which are
necessary to permit immediate collection of the Receivables by the
Administrator, or any party designated by the Administrator, without the
participation of the Originator in such collection.
(i) Security Interest of Purchaser. This Agreement constitutes a valid sale,
------------------------------
transfer and assignment to the Purchaser of all right, title and interest in the
Purchased Assets. Upon the filing of the financing statements described in
Section 3.1(iv), the Purchaser shall have a first priority perfected ownership
---------------
interest in the Purchased Assets and the Contributed Receivables (except to the
extent such first priority perfected security interest was assigned to the
Administrator pursuant to the Loan Agreement). Except as otherwise provided in
this Agreement, neither the Originator nor any Subsidiary thereof (other than
Purchaser) nor any Person claiming through or under the Originator or any
Subsidiary thereof (other than Purchaser) has any claim to or interest in the
Collection Account or any Lock Box Account.
(j) No Material Adverse Change. Since April 1, 2000, there has been no material
--------------------------
adverse change in the collectibility of the Receivables or the Originator's
ability to perform its obligations under any Transaction Document.
(k) Solvency. Both before and after giving effect to the transactions
--------
contemplated herein, the Originator is Solvent.
ARTICLE V
GENERAL COVENANTS
SECTION 5.1. Affirmative Covenants of the Originator. So long as the Purchaser
---------------------------------------
shall have any interest in any Purchased Asset, the Originator shall, unless the
Purchaser otherwise consents in writing:
(a) Financial Statements, Reports, Etc. Deliver or cause to be delivered to the
----------------------------------
Purchaser and the Administrator:
(i) as soon as available and in any event within 95 days after the end
of each Fiscal Year of the Originator, a balance sheet of the
Originator as of the end of such year and statements of income and
retained earnings and of source and application of funds of the
Originator for the period commencing at the end of the previous Fiscal
Year and ending with the end of such year, in each case setting forth
comparative figures for the previous Fiscal Year, certified without
material qualification in a manner satisfactory to the Purchaser and
the Administrator by Ernst & Young or other nationally recognized,
independent public accountants acceptable to the Administrator (it
being understood that delivery of the Originator's Form 10-K for such
Fiscal Year filed with the Securities and Exchange Commission will
satisfy the foregoing requirement), together with a certificate of
such accounting firm stating that in the course of the regular audit
of the business of the Originator, which audit was conducted in
accordance with GAAP, such accounting
11
firm has obtained no knowledge that a Purchase Termination Event or
Incipient Purchase Termination Event has occurred and is continuing, or if,
in the opinion of such accounting firm, such a Purchase Termination Event
or Incipient Purchase Termination Event has occurred and is continuing, a
statement as to the nature thereof;
(ii) as soon as available and in any event within 50 days after the end of
each fiscal quarter, quarterly balance sheets and quarterly statements of
source and application of funds and quarterly statements of income and
retained earnings of the Originator, certified by the chief financial or
executive officer or controller of the Originator (which certification
shall state that such balance sheets and statements fairly present the
financial condition and results of operations for such fiscal quarter,
subject to year-end audit adjustments) (it being understood that delivery
of the Originator's Form 10-Q filed with the Securities and Exchange
Commission for such fiscal quarter will satisfy the foregoing requirement),
delivery of which balance sheets and statements shall be accompanied by a
certificate of such chief financial or executive officer or controller to
the effect that no Purchase Termination Event or Incipient Purchase
Termination Event has occurred and is continuing; and
(iii) as soon as possible and in any event within one Business Day after
any officer of the Originator becomes aware of the occurrence of a Servicer
Event of Default, a Purchase Termination Event or Incipient Purchase
Termination Event or an event that, with the giving of notice or time
elapse, or both, would constitute a Servicer Event of Default, an officer's
certificate of the Originator setting forth details of such event and the
action that the Servicer or the Originator, as the case may be, proposes to
take with respect thereto.
(b) Compliance with Laws, Etc. Comply, and cause all of the Receivables to
--------------------------
comply, in all material respects with all applicable laws, rules, regulations
and orders applicable to the Originator and the Receivables, including, without
limitation, rules and regulations relating to truth in lending, retail
installment sales, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices, privacy environmental matters,
labor, taxation and ERISA, where in any such case failure to so comply could
reasonably be expected to have an adverse impact on the Receivables or the
amount of Collections thereunder, or on the ability of the Originator to perform
its obligations hereunder or under the other Transaction Documents to which it
is a party.
(c) Preservation of Corporate Existence. Preserve and maintain in all
-----------------------------------
material respects its corporate existence, corporate rights (charter and
statutory) and franchises.
(d) Inspection Rights. Permit the Purchaser, the Administrator or their duly
-----------------
authorized representatives, attorneys or auditors to inspect the Receivables,
the Documents and the related accounts, records and computer systems, software
and programs used or maintained by the Originator at such times as the Purchaser
or the Administrator may reasonably request. Upon instructions from the
Purchaser or the Administrator, the Originator shall release any reasonably
requested Document to the Purchaser or the Administrator, as the case may be.
(e) Keeping of Records and Books of Account. Maintain and implement, or cause
---------------------------------------
to be
12
maintained or implemented, administrative and operating procedures necessary or
advisable for the administration of all Receivables, and, until the delivery to
the Purchaser or its designee, keep and maintain, or cause to be kept and
maintained, all documents, books, records and other information necessary or
advisable for the administration of all Receivables.
(f) Performance and Compliance with Receivables. Duly fulfill all obligations on
-------------------------------------------
its part to be fulfilled under or in connection with the Receivables and the
related Contracts, including complying with all requirements of law applicable
thereto, and will do nothing to impair the right, title and interest of the
Purchaser in the Purchased Assets; provided, however, that an adjustment or
-------- -------
compromise of a Receivable pursuant to Section 2.5 shall not be deemed to be a
-----------
violation of this paragraph.
(g) Location of Records. Keep the chief executive office of the Originator
-------------------
located at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, and keep
originals or duplicates of any Documents that it maintains at, and only at, said
offices, and the Originator will not move its chief executive office or permit
any Documents and books evidencing the Purchased Receivables that it may
maintain to be moved unless (i) the Originator shall have given to the Purchaser
and the Administrator not less than 45 days' prior written notice thereof,
clearly describing the new location, and (ii) the Originator shall have taken
such action, satisfactory to the Purchaser and the Administrator, to maintain
the title or ownership of the Purchaser and any security interest of, or any
filing in respect of title of, the Purchaser or the Administrator in the
Purchased Assets at all times fully perfected and in full force and effect. The
Originator may not, in any event, move the location where it conducts any
administration of the Receivables from ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, without the prior written consent of the Administrator.
(h) Collection Policy. Comply in all material respects with the Collection
-----------------
Policy.
(i) Insurance. Keep its insurable properties adequately insured at all times by
---------
financially sound and responsible insurers; maintain such other insurance, to
such extent and against such risks, including fire and other risks insured
against by extended coverage, as is customary with companies of the same or
similar size in the same or similar businesses; maintain in full force and
effect public liability insurance against claims for personal injury or death or
property damage occurring upon, in, about or in connection with the use of any
properties owned, occupied or controlled by it or any Subsidiary, as the case
may be, in such amounts and with such deductibles as are customary with
companies of the same or similar size in the same or similar businesses and in
the same geographic area; and maintain such other insurance as may be required
by law.
(j) Obligations and Taxes. Pay and discharge promptly when due all material
---------------------
obligations incurred or arising, all sales tax and all material taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its property before the same shall become in
default, as well as all material lawful claims for labor, materials and supplies
or otherwise which, if unpaid, might become a Lien or charge upon such
properties or any part thereof; provided, however, that it and each Subsidiary
-------- -------
shall not be required to pay and discharge or to cause to be paid and discharged
any such tax, assessment, charge, levy or claim so long as
13
the validity or amount thereof shall be contested in good faith by appropriate
proceedings and for which the Originator shall have set aside on its books
adequate reserves with respect thereto in accordance with GAAP.
(k) Obligations with Respect to Receivables. Use all reasonable measures to
---------- ----------------------------
assist the Purchaser in preventing or minimizing any loss being realized on a
Receivable in which the Purchaser owns an interest and take all reasonable steps
to assist the Purchaser in recovering the full amount of such loss. The
Originator shall, at its own expense, take any such steps as are necessary to
maintain perfection of the security interest created by each Receivable in the
related goods and merchandise subject thereto.
(l) Furnishing Copies, Etc. Furnish to the Purchaser and the Administrator (i)
----------------------
upon the Purchaser's or the Administrator's request, a certificate of the chief
financial or executive officer of the Originator certifying, as of the date
thereof, that no Purchase Termination Event has occurred and is continuing and
(ii) promptly following request therefor, such other information, documents,
records or reports with respect to the Purchased Assets or the conditions or
operations, financial or otherwise, of the Originator, as the Purchaser or the
Administrator may from time to time reasonably request.
(m) Obligation to Record and Report. To the fullest extent permitted by GAAP
-------------------------------
and by applicable law, record each purchase of Purchased Assets hereunder as a
sale on its books and records, reflect each such purchase in its financial
statements as a sale and recognize gain or loss, as the case may be, on each
such purchase.
(n) Continuing Compliance with the Uniform Commercial Code. At its expense
------------------------------------------------------
perform all acts and execute all documents necessary or reasonably requested by
the Purchaser or the Administrator at any time to evidence, perfect, maintain
and enforce the title or the security interest of the Purchaser or the
Administrator in the Purchased Assets and the priority thereof. The Originator
will execute and deliver financing statements relating to or covering the
Purchased Assets (reasonably satisfactory in form and substance to the
Purchaser) and, where permitted by law, the Originator will authorize the
Administrator to file one or more financing statements signed only by the
Administrator. The Originator shall cause its computer records, master data
processing records and other books and records relating to the Receivables to be
marked, with a legend stating that the Receivables have been sold, assigned and
transferred to the Purchaser. The Originator shall deliver the Receivable Files
related to each Receivable to the Administrator upon request by the Purchaser or
the Administrator; provided that while any Document is in custody of the
--------
Originator, the Originator will hold the same for the benefit of the Purchaser.
The Originator will not execute any effective financing statement (or similar
statement or instrument of registration under the laws of any jurisdiction) or
statements relating to any Purchased Assets, except any financing statements
filed or to be filed in respect of and covering the purchase of the Purchased
Assets by the Purchaser pursuant to this Agreement and the security interest
created in favor of the Administrator pursuant to the Loan Agreement.
(o) Proceeds of Purchased Receivables. In the event that the Originator
---------------------------------
receives any amounts in respect of Receivables, deposit or otherwise credit, or
cause to be deposited or otherwise credited, such amounts in accordance with the
procedures set forth in Section 11.2 of the Loan Agreement.
14
(p) Further Action Evidencing Purchases. Provide such cooperation, information
-----------------------------------
and assistance, and prepare and supply the Purchaser, the Servicer and the
Administrator with such data regarding the performance by the Obligors of their
obligations under the Receivables and the performance by the Originator of its
obligations under the Transaction Documents, as may be reasonably requested by
the Purchaser, the Servicer and the Administrator from time to time.
(q) Trade Names. Promptly notify the Purchaser and the Administrator of any new
-----------
trade names of the Originator (but in any event, not more frequently than once a
month).
SECTION 5.2. Negative Covenants of the Originator. So long as the Purchaser
------------------------------------
shall have any interest in any Receivables, the Originator shall not, unless the
Purchaser otherwise consents in writing:
(a) Liens. Sell, assign (by operation of law or otherwise) or otherwise dispose
-----
of, or create or suffer to exist any Lien upon or with respect to, any Purchased
Asset, or assign any right to receive proceeds in respect thereof except as
------
created or imposed by this Agreement or the Loan Agreement.
(b) Change in Business. Make any material change in the nature of its business
------------------
as carried on at the date hereof or engage in or conduct any business or
activity that is materially inconsistent with the floor covering and relating
businesses.
(c) Extension or Amendment of Purchased Receivables. Extend, amend or otherwise
-----------------------------------------------
modify, or attempt or purport to extend, amend or, otherwise modify, the terms
of any Receivables other than in accordance with the Collection Policy and the
terms of the Loan Agreement.
(d) Change in Payment Instructions to Obligors. Instruct the Obligors on any
------------------------------------------
Receivables to make any payments with respect to such Receivables to any place
other than a Lock Box or a Lock Box Account, unless the related Obligor is
delinquent in payment, in which case the Servicer may direct such Obligor to
make direct payment to the Servicer (and the Servicer shall deposit such payment
in the Collection Account pursuant to the Loan Agreement).
(e) Sale of Receivables. Sell Receivables or transfer any interest in the
-------------------
Receivables to any Person other than the Purchaser.
(f) Cause a Default. Take any action which would cause the Purchaser to be in
---------------
default under the Loan Agreement, a copy of which has been furnished to
Originator, unless such action shall have been approved and the default waived
by prior written approval of the Administrator and the Purchaser.
(g) Mergers; Sales of Assets. Sell all or substantially all of its property and
------------------------
assets to, or consolidate with or merge into, any other corporation, if the
effect of such sale or merger would cause a "default" or "an event of default"
under this Agreement or the Loan Agreement.
15
(h) No Amendments. (i) Amend, supplement or otherwise modify this Agreement or
-------------
(ii) otherwise take or fail to take any action under this Agreement that could
adversely affect the Purchaser's interests hereunder or the Administrator's
interests under the Loan Agreement.
(i) Accounting Changes. Make any material change (i) in accounting treatment
------------------
and reporting practices except as permitted or required by GAAP, (ii) in tax
reporting treatment except as permitted or required by law, (iii) in the
calculation or presentation of financial and other information contained in any
reports delivered hereunder, or (iv) in any financial policy of the Originator
if such change could have an adverse effect on the Receivables or the collection
thereof.
(j) Maintenance of Separate Existence. (i) Fail to do all things necessary to
---------------------------------
maintain its corporate existence separate and apart from the Purchaser
including, without limitation, holding regular meetings of its shareholders and
Board of Directors (or executing unanimous written consents in lieu thereof) and
maintaining appropriate books and records (including current minute books); (ii)
except as required by applicable law, suffer any limitation on the authority of
its own directors and officers or partners to conduct its business and affairs
in accordance with their independent business judgment, or authorize or suffer
any Person other than its own officers and directors to act on its behalf with
respect to matters (other than matters customarily delegated to others under
powers of attorney) for which a corporation's own officers and directors would
customarily be responsible; (iii) fail to (A) maintain or cause to be maintained
by an agent of the Originator under the Originator's control physical possession
of all its books and records, (B) maintain capitalization adequate for the
conduct of its business, (C) account for and manage all of its liabilities
separately from those of any other Person, including, without limitation,
payment by it of all payroll and other administrative expenses and taxes from
its own assets, (D) segregate and identify separately all of its assets from
those of any other Person, (E) maintain employees, or pay its employees,
officers and agents for services performed for the Originator or (F) allocate
shared overhead fairly and reasonably; or (iv) commingle its funds with those of
the Purchaser or use the Purchaser's funds for other than the uses permitted
hereunder.
ARTICLE VI
ADMINISTRATION AND COLLECTION OF PURCHASED RECEIVABLES
SECTION 6.1. Collection Procedures.
---------------------
(a) On or before the Closing Date, the Originator and the Purchaser shall have
established and shall maintain thereafter the system of collecting and
processing Collections of Receivables in accordance with Section 11.2 of the
Loan Agreement.
(b) Any funds held by the Originator representing Collections of Receivables
shall, until deposited in the Collection Account or applied to the Purchase
Price of Receivables in accordance with this Agreement, be held in trust by the
Originator for and as the Administrator's property.
16
(c) The Originator hereby irrevocably waives any right to set off against, or
otherwise deduct from, any Collections.
(d) The Originator acknowledges that the Originator shall have no right, title
or interest in and to the Collection Account and hereby subordinates its rights
in each Lock Box Account to the Administrator.
SECTION 6.2. Purchase Information.
--------------------
(a) On each Reporting Date, the Originator shall prepare and deliver to the
Purchaser and the Administrator a duly completed Purchase Report with respect to
Receivables created during the immediately preceding Due Period and with respect
to activity in such Receivables.
(b) The Purchaser and the Originator agree that, upon request of the Purchaser,
the Originator shall provide the Purchaser with all information required to
prepare periodic reports that may be required to be furnished to the
Administrator pursuant to the Loan Agreement, as promptly as possible on each
Business Day on the basis of the sales and collections figures transmitted the
previous day to the Originator's central computer processing center.
(c) Upon discovery of any error in any report furnished to Purchaser or the
Administrator, the Administrator, the Purchaser and the Originator shall confer
and shall agree upon any necessary adjustments to correct any such errors.
Until correction of such error, all Collections relating to such errors shall be
retained in the Collection Account, to the extent such Collections have been
deposited in the Collection Account pursuant to the terms hereof. Unless the
Administrator has received actual notice of any discrepancy, the Administrator
and the Purchaser may rely on such reports for all purposes hereunder.
SECTION 6.3. Compliance Statements. The Originator shall deliver, or cause to
---------------------
be delivered, to the Purchaser and the Administrator, on or before the date that
is 95 days after the end of each Fiscal Year, an officer's certificate signed by
the Chief Executive Officer, the President or any Vice President of the
Originator, dated as of the last day of the preceding Fiscal Year, stating that
(a) a review of the activities of the Originator during the preceding 12 Fiscal
Month period and of its performance under this Agreement has been made under
such officer's supervision and (b) to the best of such officer's knowledge,
based on such review, the Originator has fulfilled its obligations under this
Agreement throughout such Fiscal Year and has complied in all respects with the
Collection Policy, or, if there has been a default in the fulfillment of any
such obligation, specifying each such default known to such officer and the
nature and status thereof.
SECTION 6.4. Allocations and Applications of Collections. Collections shall be
-------------------------------------------
allocated and distributed by the Administrator in accordance with the provisions
of the Loan Agreement and Section 2.7.
-----------
SECTION 6.5. Termination. The Originator's obligation to sell Receivables
-----------
under this Agreement shall terminate on the Purchase Termination Date; provided,
--------
however, that finance charges, late charges and other fees, charges and similar
-------
items in respect of the Receivables sold or contributed prior to the Purchase
Termination Date shall continue to be the property of the
17
Purchaser after the Purchase Termination Date notwithstanding that such amounts
may arise or accrue after the Purchase Termination Date.
SECTION 6.6. Responsibilities of the Originator. Notwithstanding anything
----------------------------------
herein to the contrary (i) the Originator shall perform all its obligations
under the Collection Policy related to the Receivables to the same extent as if
such Receivables had not been transferred to the Purchaser hereunder, (ii) the
exercise by the Purchaser of any of its rights hereunder shall not relieve the
Originator from its obligations with respect to the Receivables and (iii) except
as provided by law, the Purchaser shall not have any obligation or liability
with respect to any Receivables or the underlying Contracts, nor shall the
Purchaser be obligated to perform any of the obligations or duties of the
Originator thereunder.
ARTICLE VII
PURCHASE TERMINATION EVENTS
SECTION 7.1. Purchase Termination Events. If any of the following events
---------------------------
(each, a "Purchase Termination Event") shall occur and be continuing:
--------------------------
(a) any representation or warranty made or deemed made by or on behalf of the
Originator under or in connection with this Agreement or any Purchase Report or
other information or report delivered by the Originator pursuant hereto shall
prove to have been false or incorrect in any material respect when made or
deemed made; provided, however, that the falsity or incorrectness of any
-------- -------
representation made pursuant to Section 4.2(a) with respect to any Receivable
--------------
shall not constitute a Purchase Termination Event so long as the Originator has
complied with its obligations in respect of such Receivable pursuant to Section
-------
2.4;
---
(b) the Originator shall fail to (i) perform or observe any term, covenant or
agreement contained in Section 5.1(c), 5.1(d), 5.1(g), 5.1(h), 5.1(i), 5.1(j),
-------------- ------ ------ ------ ------ ------
5.1(k), 5.1(l), 5.1(m) or 5.1(n), or (ii) make any payment or deposit to be made
------ ------ ------ ------
by it hereunder within three Business Days after the same became due and
payable;
(c) the Originator shall fail to perform or observe any other term, covenant or
agreement contained in this Agreement on its part to be performed or observed
and any such failure shall remain unremedied for ten days following the
discovery thereof;
(d) the Originator shall generally not pay its debts as such debts become due,
or shall admit in writing its inability to pay its debts generally, shall make a
general assignment for the benefit of creditors, or shall take any corporate
action to authorize any of the actions set forth above in this subsection (d) or
--------------
the Originator shall be the subject of an Event of Bankruptcy;
(e) the Originator transfers, sells or otherwise disposes of (whether in one
transaction or a series of transactions) all or substantially all of its assets;
or
(f) the Loan Agreement shall cease to be in full force and effect, a Significant
Event shall have occurred under the Loan Agreement or the Lender's Commitment
under the Loan Agreement
18
shall be terminated;
then, and in any such event, the Purchaser may, by notice to the Originator,
declare its obligation to purchase Receivables from the Originator to be
terminated, whereupon such obligation shall forthwith be terminated; provided,
--------
however, that in the case of any event described in subsection (d) above, such
------- --------------
termination shall automatically occur upon the happening of such event. No
termination under this Section 7.1 of the Purchaser's obligation to purchase
-----------
Receivables shall affect the then-existing obligations of the Originator
hereunder (other than the Originator's obligations to sell Receivables to the
Purchaser pursuant hereto).
SECTION 7.2. Remedies. If a Purchase Termination Event has occurred and is
--------
continuing:
(a) The Purchaser (and its assignees) shall have all of the rights and remedies
provided to a secured creditor or a purchaser of accounts or chattel paper under
the UCC by applicable law in respect thereto.
(b) The Purchaser (and its assignees) may at any time (i) notify the respective
Obligors of the Purchaser's ownership of the Receivables and may direct that
payment of all amounts due or to become due under the Receivables be made
directly to the Purchaser or its designee or (ii) give notice, or require that
the Originator, at the Originator's expense, give notice of such ownership to
each such Obligor and direct that all payments be made directly to the Purchaser
or its designee.
(c) The Purchaser (and its assignees) may elect to (i) ▇▇▇ for collection on any
Receivables or (ii) sell any Receivables to any Person for a price that is
acceptable to the Purchaser (or its assignees). In connection with any such
sale, the Purchaser or its assignees shall have the right to assign its rights
under this Agreement to a third party. Any such Receivable shall cease to be a
Receivable for all purposes under this Agreement as of the effective date of
such sale.
(d) The Originator shall, upon the Purchaser's (or its assignee's) request and
at the Originator's expense (i) assemble all of the Originator's documents,
instruments and other records (including, without limitation, credit files and
computer tapes or disks) that (A) evidence or will evidence or record
Receivables sold or contributed by the Originator, (B) evidence the underlying
Contracts relating to such Receivables and (C) are otherwise necessary or
desirable to effect Collections of such Receivables and (ii) deliver such
documents to the Purchaser or its designee at a place designated by the
Purchaser or, at the Purchaser's option, provide the Purchaser or its designee
with access thereto.
(e) The Originator hereby irrevocably authorizes the Purchaser or its designee
or assignees to take any and all steps in the Originator's name and on the
Originator's behalf necessary or desirable, in the reasonable opinion of the
Purchaser, designee or assignee, to collect all amounts due under the
Receivables and the other Purchased Assets, including, without limitation,
endorsing the Originator's name on checks and other instruments representing
Collections, enforcing the Receivables and the other Purchased Assets and
exercising all rights and remedies in respect thereof.
19
(f) The Originator will (i) deliver to the Purchaser, its designees or assignees
all computer programs, material and data necessary to the immediate collection
of the Receivables by the Purchaser, or a party designated by the Purchaser,
with or without the participation of the Originator and (ii) make such
arrangements with respect to the collection of the Receivables as may be
reasonably required by the Administrator.
ARTICLE VIII
INDEMNIFICATION
SECTION 8.1. Indemnities by the Originator. Without limiting any other rights
-----------------------------
that the Purchaser may have hereunder or under applicable law, the Originator
hereby agrees to indemnify the Purchaser (and its assignees) and each
Indemnified Party, on an after-tax basis, from and against any and all claims,
losses and liabilities (including reasonable attorneys' fees) (all the foregoing
being collectively referred to as "Indemnified Amounts") arising out of or
-------------------
resulting from this Agreement or in respect of any Receivable, any related
Contract or any other Purchased Asset, excluding, however, Indemnified Amounts
to the extent resulting from gross negligence or willful misconduct on the part
of the Purchaser or such Indemnified Party, as the case may be. Without limiting
or being limited by the foregoing, the Originator shall pay on demand to the
Purchaser or any Indemnified Party any and all amounts necessary to indemnify
such Person from and against any and all Indemnified Amounts relating to or
resulting from:
(a) reliance on any representation or warranty or statement made or deemed made
by the Originator (or any of their respective officers) under or in connection
with this Agreement or in any certificate, report or document delivered pursuant
hereto that, in any such case, shall have been false or incorrect when made or
deemed made;
(b) the failure by the Originator to comply with any applicable law, rule or
regulation with respect to any Receivable or the related Contract, or the
nonconformity of any Receivable or the related Contract with any such applicable
law, rule or regulation;
(c) the failure to have filed, or any delay in filing, financing statements or
other similar instruments or documents under the Uniform Commercial Code of any
applicable jurisdiction or other applicable laws with respect to the Purchaser's
interest in any Purchased Asset;
(d) any dispute, claim, offset or defense (other than discharge in bankruptcy of
the Obligor) of the Obligor to the payment of any Receivable (including, without
limitation, a defense based on such Receivable or the related Contract not being
a legal, valid and binding obligation of such Obligor enforceable against it in
accordance with its terms), or any other claim resulting from the sale of the
merchandise or services related to any such Receivable or the furnishing or
failure to furnish such merchandise or services;
(e) any failure of the Originator to perform its duties or obligations under
this Agreement or the applicable Contract;
(f) any products liability or warranty claim arising out of or in connection
with merchandise, insurance or services that are the subject of any Receivable;
20
(g) the commingling of Collections of Receivables at any time with other funds
of the Originator, regardless or whether such commingling shall be permitted by
the Transaction Documents;
(h) any investigation, litigation or proceeding related to this Agreement or in
respect of any Receivable or any Contract;
(i) the payment by the Purchaser of any taxes owed by the Originator, including,
but not limited to, federal, state or local income taxes, excise taxes or
business taxes; or
(j) the failure to vest, and maintain vested, in the Purchaser a valid and
enforceable (A) ownership interest or (B) a first priority perfected security
interest in the items described in Section 2.1(a) (except to the extent such
-----------
first priority perfected security interest was assigned to the Administrator
pursuant to the Loan Agreement).
Notwithstanding the foregoing, the Originator shall not under any circumstances
indemnify the Purchaser (or its assignees) for any Indemnified Amounts that
result solely from a default by an Obligor with respect to a Receivable other
than as described in clause (d) above or resulting from the circumstances
----------
described in clause (b) or (e) above.
---------- ---
ARTICLE IX
THE ORIGINATOR NOTE
SECTION 9.1. Originator Note.
---------------
(a) On the Closing Date, the Purchaser shall issue to the Originator a revolving
subordinated note in the form attached hereto as Exhibit B (the "Originator
--------- ----------
Note"). The principal amount of the Originator Note outstanding from time to
----
time shall be determined in accordance with Sections 2.3, 2.4 and 2.5. It is
-------- --- --- ---
understood and agreed that no cash shall be paid to the Originator in respect of
the Originator Note as a result of the principal amount of the Originator Note
decreasing pursuant to the calculations in Sections 2.4 and 2.5. Anything to the
-------- --- ---
contrary notwithstanding, the Purchaser shall have the right (but not the
obligation) to offset or adjust the Originator Note by any amounts owed by the
Originator to the Purchaser under this Agreement.
(b) Until the Obligations have been indefeasibly paid in full in cash, no
payments (whether for principal or interest) may be made, directly or
indirectly, by the Purchaser on the Originator Note except from amounts released
from the Collection Account pursuant to the Loan Agreement. The Originator
agrees not to ask, demand, ▇▇▇ for or take or receive from the Purchaser in cash
or other property by set-off (including, without limitation, from or by way of
collateral), payment of all or any part of the Originator Note, except as
permitted by the Loan Agreement. The Originator agrees that upon any
distribution of all or any of the assets of the Purchaser to creditors of the
Purchaser upon the dissolution, winding up, total or partial liquidation,
arrangement, reorganization, adjustment, protection, relief, or composition of
the Purchaser or its debts, any payment or distribution of any kind in respect
of the Originator Note that otherwise would be payable or deliverable upon or
with respect to the Originator Note, directly or
21
indirectly, by set-off or in any other manner, including, without limitation,
from or by way of collateral, shall be paid or delivered directly to the
Administrator for application (in the case of cash) to or as collateral (in the
case of non-cash property or securities) for the payment or prepayment in full
of, the Obligations until the Obligations shall have been indefeasibly paid in
full in cash. All payments or distributions upon or with respect to the
Originator Note that are received by the Originator contrary to the provisions
of the Loan Agreement or the Originator Note shall be received in trust for the
benefit of the Secured Parties, shall be segregated from other funds and
property held by the Originator and shall be forthwith paid over to the
Administrator in the same form as so received (with any necessary endorsement)
to be applied (in the case of cash) to, or held as collateral (in the case of
non-cash property or securities) for the payment or prepayment in full of, the
Obligations until the Obligations shall have been indefeasibly paid in full in
cash. The Originator agrees that no payment or distribution to the Secured
Parties pursuant to the provisions of the Originator Note shall entitle the
Originator to exercise any rights or subrogation in respect thereof until the
Obligations shall have been indefeasibly paid in full in cash. The Originator
and the Purchaser each hereby waives promptness, diligence, notice of acceptance
and any other notice with respect to any of the Obligations and the Originator
Note and any requirement that any Secured Party protect, secure, perfect or
insure any security interest or lien on any property subject thereto or exhaust
any right or take any action against the Purchaser or any other Person or any
Collateral.
(c) The Originator agrees and confirms that the Originator Note represents
solely the right to receive certain amounts from funds available to the
Purchaser under the Loan Agreement and that the Originator Note does not
represent a security interest in the Receivables or their proceeds. No payments
may be received, directly or indirectly, by the Originator (and if received, the
Originator agrees to return such payments to the Purchaser) on the Originator
Note unless all amounts required pursuant to the Loan Agreement to be paid have
been paid.
(d) The Originator agrees and confirms that the Administrator shall not have any
duty whatsoever to the Originator as holder of the Originator Note and that the
Administrator shall not be liable to the Originator for any action taken or
omitted to be taken with respect to the Originator Note.
SECTION 9.2. Restrictions on Transfer of Originator Note. Neither the
-------------------------------------------
Originator Note, nor any right of the Originator to receive payments thereunder,
shall be assigned, transferred, exchanged, pledged, hypothecated, participated
or otherwise conveyed.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Amendments, Etc. No amendment, modification or waiver of any
---------------
provision of this Agreement, or consent to any departure by the Originator
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Purchaser and the Administrator and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given. The Administrator shall give the Rating Agencies
prompt notice of any such amendment.
22
SECTION 10.2. Notices, Etc. All notices and other communications provided for
------------
hereunder shall be in writing (including telegraphic, facsimile or cable
communication) and mailed, telegraphed, transmitted, cabled or delivered, at its
address set forth on Schedule 10.2; or, as to each party, at such other address
-------------
as shall be designated by such party in a written notice to the other parties.
All such notices and communications shall when mailed or telecopied be effective
when deposited in the mails, or transmitted by telecopier, respectively, except
that notices to the Purchaser pursuant to Article II shall not be effective
----------
until received by the Purchaser.
SECTION 10.3. No Waiver; Remedies. No failure on the part of the Purchaser to
-------------------
exercise, and no delay in exercising, any right under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 10.4. Binding Effect; Governing Law. This Agreement shall be
-----------------------------
binding upon and inure to the benefit of the Originator and the Purchaser and
their respective successors and assigns, except that the Originator shall not
have the right to assign its rights hereunder or any interest herein without the
prior written consent of the Purchaser and the Administrator. This Agreement
shall create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until such
time, after the Purchase Termination Date, until the Purchaser shall not have
any interest in any Purchased Asset and all obligations of the Originator
hereunder shall have been paid in full; provided, however, that the
-------- -------
indemnification provisions of Article VIII shall be continuing and shall survive
------------
any termination of this Agreement. This Agreement and the Originator Note shall
be governed by, and construed in accordance with, the laws of the State of
Tennessee.
SECTION 10.5. Costs, Expenses and Taxes. In addition to the rights of
-------------------------
indemnification granted to the Purchaser under Article VIII, the Originator
------------
agrees to pay on demand all costs and expenses of the Purchaser and the
Administrator in connection with the preparation, execution and delivery of this
Agreement, the Loan Agreement and the other agreements and documents to be
delivered hereunder and thereunder, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Purchaser and the
Administrator with respect thereto and with respect to advising the Purchaser
and the Administrator as to their rights and remedies under this Agreement, and
all costs and expenses (including, without limitation, reasonable counsel fees
and expenses), in connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Agreement and the documents to be
delivered hereunder. In addition, the Originator agrees to pay any and all stamp
and other taxes and fees payable or determined to be payable in connection with
the execution, delivery, filing and recording of this Agreement or the other
documents to be delivered hereunder, and agrees to hold the Purchaser harmless
from and against any and all liabilities with respect to or resulting from any
delay in paying or omitting to pay such taxes and fees.
SECTION 10.6. No Bankruptcy Petition. The Originator covenants and agrees
----------------------
that prior to the date which is one year and one day after the payment in full
of all Senior Indebtedness (as defined in the Originator Note) it will not
institute against, or join any other Person in instituting against, the
Purchaser or the Lender any bankruptcy, reorganization, arrangement, insolvency
or
23
liquidation proceedings, or other proceedings under any federal or state
bankruptcy or similar law. This Section 10.6 shall survive the termination of
------------
this Agreement.
SECTION 10.7. Acknowledgment of Assignments. The Originator hereby
-----------------------------
acknowledges and consents to the assignment by the Purchaser of the Purchased
Assets and the rights of the Purchaser under this Agreement to the Administrator
pursuant to the Loan Agreement. The Originator further acknowledges that, in
accordance with the terms of the Loan Agreement, the Administrator may, under
certain circumstances, exercise some or all of the rights of the Purchaser
hereunder.
SECTION 10.8. Waiver of Setoff. Except as expressly set forth in this
----------------
Agreement, all payments hereunder by the Originator to the Purchaser or by the
Purchaser to the Originator shall be made without setoff, counterclaim or other
defense and each of the Purchaser and the Originator hereby waives any and all
of its rights to assert any right of setoff, counterclaim or other defense to
the making of a payment due hereunder to the Originator or the Purchaser, as the
case may be; provided, however; that, notwithstanding the foregoing, the
-------- -------
Purchaser hereby reserves any and all of its rights to assert any such right of
setoff, counterclaim or other defense against the Originator with respect to the
Purchase Price of Receivables purchased from the Originator.
SECTION 10.9. Severability. Wherever possible, each provision of this
------------
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such 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 10.10. Counterparts. This Agreement and any amendment or supplement
------------
hereto or any waiver granted in connection herewith may be executed in any
number of counterparts and by the different parties on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same agreement.
SECTION 10.11. Grant of License to Use Trademarks. For the sole purpose of
----------------------------------
enabling the Purchaser (or its assignees) to perform the functions of servicing
and collecting the Receivables upon a Purchase Termination Event, the Originator
hereby grants to the Purchaser (or its assignees) an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation to the
Originator) to use, license, or sublicense any copyright, trade name, trademark
or similar rights or properties now owned or hereafter acquired by the
Originator, and wherever the same may be located, and including in such license
reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer and automatic machinery software and
programs used for the compilation or printout thereof. The aforementioned
servicing and collecting functions shall be performed in accordance with
customary business practices and in a manner which will not materially adversely
affect any of such licenses or licensed items.
24
SECTION 10.12. Jurisdiction; Consent to Service of Process.
-------------------------------------------
(a) The Originator and the Purchaser hereby submit to the nonexclusive
jurisdiction of any United States District Court for the Southern District of
New York and of any New York state court sitting in New York, New York for
purposes of all legal proceedings arising out of, or relating to, the
Transaction Documents or the transactions contemplated thereby. The Originator
and the Purchaser hereby irrevocably waive, to the fullest extent possible, any
objection it may now or hereafter have to the venue of any such proceeding and
any claim that any such proceeding has been brought in an inconvenient forum.
Nothing in this Section 10.12 shall affect the right of the Administrator or
-------------
Lender to bring any action or proceeding against the Originator and the
Purchaser or its property in the courts of other jurisdictions.
(b) TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO IRREVOCABLY
WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF, OR IN CONNECTION WITH, ANY TRANSACTION DOCUMENT OR ANY MATTER
ARISING THEREUNDER.
SECTION 10.13. Third Party Beneficiaries. Each of the Secured Parties shall
-------------------------
be third-party beneficiaries of this Agreement.
SECTION 10.14. Confirmation of Intent. It is the express intent of the
----------------------
parties hereto that the sale and contribution to the Purchaser pursuant to
Section 2.1 hereof of all of the Originator's right, title and interest, in, to
-----------
and under all Purchased Assets and the Contributed Receivables shall be treated
under applicable state law and Federal bankruptcy law as a sale or contribution,
as the case may be, by the Originator to the Purchaser. However, if it is
determined contrary to the express intent of the parties that the transfer is
not a sale or contribution, as the case may be, and that all or any portion of
the assets described in Section 2.1 continue to be property of the Originator,
-----------
then the Originator hereby grants to the Purchaser a security interest in all of
the Originator's right, title and interest in, to and under all such assets and
this Agreement shall constitute a security agreement under applicable law. The
Originator, the Purchaser and the Administrator shall, to the extent consistent
with the Loan Agreement and this Agreement, take such action as may be necessary
to ensure that, if this Agreement were deemed to create a security interest in
the assets described in Section 2.1, such interest would be deemed to be a
-----------
perfected security interest of first priority under applicable law and will be
maintained as such throughout the terms of this Agreement and the Loan
Agreement.
SECTION 10.15. Confidentiality of Agreement. Unless otherwise consented to
----------------------------
by the Administrator, the Originator hereby agrees that it will not disclose the
contents of any Transaction Document, or any other confidential or proprietary
information furnished by the Administrator, the Lender or the Purchaser, to any
Person other than its Affiliates (which Affiliates shall have executed an
agreement satisfactory in form and in substance to the Administrator to be bound
by the provisions of this Section 10.15), auditors and attorneys or as required
-------------
by applicable law.
SECTION 10.16. Section and Paragraph Headings. Section and paragraph headings
------------------------------
used in this Agreement are provided solely for convenience of reference and
shall not affect the meaning or interpretation of any provision of this
Agreement.
25
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
▇▇▇▇▇ FUNDING II, INC.,
as Purchaser
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
THE ▇▇▇▇▇ GROUP, INC.,
as Originator
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President and
Chief Financial Officer
26
EXHIBIT A
---------
ORIGINATOR NOTE
---------------
New York, New York
June 23, 2000
FOR VALUE RECEIVED, ▇▇▇▇▇ FUNDING II, INC., a Tennessee corporation ("SPE")
---
promises to pay to The ▇▇▇▇▇ Group, Inc. ("▇▇▇▇▇") at the office of ▇▇▇▇▇, the
-----
principal sum equal to the aggregate amount due and owing to ▇▇▇▇▇ pursuant to
Section 2.3 of the Receivables Purchase Agreement as adjusted from time to time
pursuant to Sections 2.4 and 2.5 of the Receivables Purchase Agreement (as the
same may be increased or decreased from time to time), on the date which is
twelve months following the Purchase Termination Date under the Receivables
Purchase Agreement.
Section 1.01. Receivables Purchase Agreement. This Note is an "Originator Note"
------------------------------
described in, and is subject to the terms and conditions set forth in, the
Receivables Purchase Agreement, dated as of June 23, 2000 (as amended,
supplemented, or otherwise modified from time to time, the "Receivables
-----------
Purchase Agreement"), between SPE, as the Purchaser, and ▇▇▇▇▇, as Originator.
------------------
Reference is hereby made to the Receivables Purchase Agreement for a statement
of certain other rights and obligations of SPE and ▇▇▇▇▇. In the case of any
conflict between the terms of this Note and the terms of the Receivables
Purchase Agreement, the terms of the Receivables Purchase Agreement shall
control.
Section 1.02. Definitions. Capitalized terms used (but not defined) herein
-----------
have the meanings ascribed thereto in the Receivables Purchase Agreement or in
the Loan Agreement (as defined in the Receivables Purchase Agreement). In
addition, as used herein, the following terms have the following meanings:
"Final Maturity Date" means the date that falls one year and one day
-------------------
after the later of (x) the Purchase Termination Date and (y) the date on
which the principal amount of the Loans shall have been reduced to zero and
all other amounts payable by SPE to Lender, the Administrator, the Affected
Parties and Indemnified Parties under the Transaction Documents shall have
been paid in full.
"Junior Liabilities" means all obligations of SPE to ▇▇▇▇▇ under this
------------------
Note.
"Senior Agent" means the Administrator.
------------
"Senior Indebtedness" means all (a) obligations of SPE under the Loan
-------------------
Agreement dated as of June 23, 2000 (as in effect from time to time, the
"Loan Agreement") among SPE, ▇▇▇▇▇, Three Pillars Funding Corporation (the
--------------
"Lender") and SunTrust Equitable Securities Corporation, as administrator
------
(the "Administrator") and any renewal, extension, restatement or refunding
-------------
thereof and (b) all obligations of SPE to the Senior Interest Holders,
howsoever created, arising or evidenced, whether direct or indirect,
absolute or contingent, now or hereafter existing, or due or to become due
on or before the Final Maturity Date.
"Senior Interest Holders" means, collectively, the Senior Agent and
-----------------------
the Indemnified Parties.
"Subordination Provisions" means, collectively, clauses (a) through
------------------------ -----------
(k) of Section 1.07 hereof.
--- ------------
Section 1.03. Interest. Subject to the Subordination Provisions, SPE
--------
promises to pay interest on the aggregate unpaid principal amount of this Note
outstanding on each day at a variable rate per annum equal to the sum of the
--- -----
LIBOR Rate for the applicable Due Period, plus 0.50%.
A-1
Section 1.04. Interest Payment Dates. Subject to the Subordination
----------------------
Provisions, SPE shall pay accrued interest on this Note on each Distribution
Date and on the Final Maturity Date (or, if any such day is not a Business Day,
the next succeeding Business Day). SPE also shall pay accrued interest on the
principal amount of each prepayment hereof on the date of each such prepayment.
Section 1.05. Basis of Computation. Interest accrued hereunder shall
--------------------
be computed for the actual number of days elapsed on the basis of a 360-day
year.
Section 1.06. Principal Payment Dates. Subject to the Subordination
-----------------------
Provisions, any unpaid principal of this Note shall be paid on the Final
Maturity Date (or, if such date is not a Business Day, the next succeeding
Business Day). Subject to the Subordination Provisions, the principal amount of
and accrued interest on this Note may be prepaid on any Business Day without
premium or penalty.
Section 1.07. Subordination Provisions. SPE covenants and agrees, and
------------------------
▇▇▇▇▇, by its acceptance of this Note, likewise covenants and agrees, that the
payment of all Junior Liabilities is hereby expressly subordinated in right of
payment to the payment and performance of the Senior Indebtedness to the extent
and in the manner set forth in the following clauses of this Section 1.07. To
------------
the extent this Section 1.07 conflicts with the terms of the Loan Agreement, the
------------
terms of the Loan Agreement shall control.
(a) No payment or other distribution of SPE's assets of any kind or
character, whether in cash, securities, or other rights or property, shall be
made on account of this Note except to the extent such payment or other
distribution is (i) permitted under the Loan Agreement and (ii) made pursuant to
Section 1.04 or 1.06 of this Note;
------------ ----
(b) If an Event of Bankruptcy has occurred with respect to SPE or the
Purchase Termination Date has occurred, then the Senior Indebtedness shall first
be paid and performed in full and in cash before ▇▇▇▇▇ shall be entitled to
receive and to retain any payment or distribution in respect of the Junior
Liabilities. In order to implement the foregoing: (x) all payments and
distributions of any kind or character in respect of the Junior Liabilities to
which ▇▇▇▇▇ would be entitled except for this subsection 1.07 shall be made
---------------
directly to the Senior Agent (for the benefit of the Senior Interest Holders);
and (y) ▇▇▇▇▇ hereby irrevocably agrees that the Senior Agent, in the name of
▇▇▇▇▇ or otherwise, may demand, ▇▇▇ for, collect, receive and receipt for any
and all such payments or distributions, and file, prove and vote or consent in
any such proceeding with respect to any and all claims of ▇▇▇▇▇ relating to the
Junior Liabilities, in each case until the Senior Indebtedness shall have been
paid and performed in full and in cash.
(c) In the event that ▇▇▇▇▇ receives any payment or other
distribution of any kind or character from SPE or from any other source
whatsoever, in respect of the Junior Liabilities, other than as expressly
permitted by the terms of this Note, such payment or other distribution shall be
received in trust for the Senior Interest Holders and shall be turned over by
▇▇▇▇▇ to the Senior Agent (for the benefit of the Senior Interest Holders)
forthwith. All payments and distributions received by the Senior Agent in
respect
A-2
of this Note, to the extent received in or converted into cash, may be applied
by the Senior Agent (for the benefit of the Senior Interest Holders) first to
the payment of any and all reasonable expenses (including, without limitation,
reasonable attorneys' fees and other legal expenses) paid or incurred by the
Senior Agent or the Senior Interest Holders in enforcing these Subordination
Provisions, or in endeavoring to collect or realize upon the Junior Liabilities,
and any balance thereof shall, solely as between ▇▇▇▇▇ and the Senior Interest
Holders, be applied by the Senior Agent toward the payment of the Senior
Indebtedness in a manner determined by the Senior Agent to be in accordance with
the Loan Agreement; but as between the Purchaser and its creditors, no such
payments or distributions of any kind or character shall be deemed to be
payments or distributions in respect of the Senior Indebtedness.
(d) Upon the final payment in full and in cash of all Senior
Indebtedness, ▇▇▇▇▇ shall be subrogated to the rights of the Senior Interest
Holders to receive payments or distributions from SPE that are applicable to the
Senior Indebtedness until the Junior Liabilities are paid in full.
(e) These Subordination Provisions are intended solely for the
purpose of defining the relative rights of ▇▇▇▇▇, on the one hand, and the
Senior Interest Holders, on the other hand. Nothing contained in the
Subordination Provisions or elsewhere in this Note is intended to or shall
impair, as between SPE, its creditors (other than the Senior Interest Holders)
and ▇▇▇▇▇, SPE's obligation, which is unconditional and absolute, to pay the
Junior Liabilities as and when the same shall become due and payable in
accordance with the terms hereof and of the Receivables Purchase Agreement or to
affect the relative rights of ▇▇▇▇▇ and creditors of SPE (other than the Senior
Interest Holders).
(f) ▇▇▇▇▇ shall not, until the Senior Indebtedness have been finally
paid and performed in full and in cash, (i) cancel, waive, forgive, transfer or
assign, or commence legal proceedings to enforce or collect, or subordinate to
any obligation of SPE, howsoever created, arising or evidenced, whether direct
or indirect, absolute or contingent, or now or hereafter existing, or due or to
become due, other than the Senior Indebtedness, the Junior Liabilities, or any
rights in respect thereof or (ii) convert the Junior Liabilities into an equity
interest in the Purchaser, unless, in the case of each of clauses (i) and (ii)
----------- ----
above, ▇▇▇▇▇ shall have received the prior written consent of the Senior Agent
in each case.
(g) ▇▇▇▇▇ shall not, without the advance written consent of the
Senior Agent, commence, or join with any other Person in commencing, any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings,
or other proceedings under any federal or state bankruptcy or similar law, with
respect to SPE until at least one year and one day shall have passed since the
Senior Indebtedness shall have been finally paid and performed in full and in
cash.
(h) If, at any time, any payment (in whole or in part) made with
respect to any Senior Indebtedness is rescinded or must be restored or returned
by a Senior Interest Holder (whether in connection with any Event of Bankruptcy
or otherwise), these Subordination Provisions shall continue to be effective or
shall be reinstated, as the case
A-3
may be, as though such payment had not been made.
(i) Each of the Senior Interest Holders may, from time to time, to
the extent consistent with the Transaction Documents, at its sole discretion,
without notice to ▇▇▇▇▇, and without waiving any of its rights under these
Subordination Provisions, take any or all of the following actions: (i) retain
or obtain an interest in any property to secure any of the Senior Indebtedness;
(ii) retain or obtain the primary or secondary obligations of any other obligor
or obligors with respect to any of the Senior Indebtedness; (iii) extend or
renew for one or more periods (whether or not longer than the original period),
alter or exchange any of the Senior Indebtedness, or release or compromise any
obligation of any nature with respect to any of the Senior Indebtedness; (iv)
amend, supplement, or otherwise modify any Transaction Document; and (v) release
its security interest in, or surrender, release or permit any substitution or
exchange for all or any part of any rights or property securing any of the
Senior Indebtedness, or extend or renew for one or more periods (whether or not
longer than the original period), or release, compromise, alter or exchange any
obligations of any nature of any obligor with respect to any such rights or
property.
(j) ▇▇▇▇▇ hereby waives: (i) notice of acceptance of these
Subordination Provisions by any of the Senior Interest Holders; (ii) notice of
the existence, creation, non-payment or non-performance of all or any of the
Senior Indebtedness; and (iii) all diligence in enforcement, collection or
protection of, or realization upon the Senior Indebtedness, or any thereof, or
any security therefor.
(k) These Subordination Provisions constitute a continuing offer from
SPE to all Persons who become the holders of, or who continue to hold, Senior
Indebtedness; and these Subordination Provisions are made for the benefit of the
Senior Interest Holders, and the Senior Agent may proceed to enforce such
provisions on behalf of each of such Persons.
Section 1.08. Amendments, Etc. No failure or delay on the part of
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▇▇▇▇▇ in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power or right
preclude any other or further exercise thereof or the exercise of any other
power or right. No amendment, modification or waiver of, or consent with
respect to, any provision of this Note shall in any event be effective unless
(a) the same shall be in writing and signed and delivered by SPE and ▇▇▇▇▇, and
(b) all consents required for such actions under the Transaction Documents shall
have been received by the appropriate Persons.
Section 1.09. Limitation on Interest. Notwithstanding anything in this
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Note to the contrary, SPE shall never be required to pay unearned interest on
any amount outstanding hereunder, and shall never be required to pay interest on
the principal amount outstanding hereunder, at a rate in excess of the maximum
interest rate that may be contracted for, charged or received without violating
applicable federal or state law.
Section 1.10. No Negotiation. This Note is not negotiable.
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Section 1.11. Governing Law. THIS NOTE SHALL GOVERNED BY, AND
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CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF TENNESSEE.
Section 1.12. Captions. Paragraph captions used in this Note are
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provided solely for convenience of reference only and shall not affect the
meaning or interpretation of any provision of this Note.
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IN WITNESS WHEREOF, the undersigned has caused this Note to be executed by
its officer thereunto duly authorized on the date first above written.
▇▇▇▇▇ FUNDING II, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
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SCHEDULE I
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OFFICES WHERE BOOKS, RECORDS, ETC.
EVIDENCING RECEIVABLES ARE KEPT
SCHEDULE II
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LIST OF TRADE NAMES
SCHEDULE III
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AUTHORIZED OFFICERS OF ORIGINATOR
