<PAGE>
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________to_____________________
Commission file number 333-14217
---------------
CORE-MARK INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 91-1295550
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
395 OYSTER POINT BOULEVARD, SUITE 415
SOUTH SAN FRANCISCO, CA 94080
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (650) 589-9445
---------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
X Yes No
--- ---
At July 31, 1998, Registrant had outstanding 5,500,000 shares of Common Stock.
------------------------------------------------
<PAGE>
CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
FORWARD-LOOKING STATEMENTS OR INFORMATION
Certain statements contained in this quarterly report on Form 10-Q under
the caption "Management's Discussion and Analysis of Financial Condition and
Results of Operations," and elsewhere herein and in the documents incorporated
herein by reference are not statements of historical fact but are future-looking
or forward-looking statements that may constitute "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Certain, but not necessarily all, of such forward-looking statements
can be identified by the use of such forward-looking terminology as the words
"believes," "expects," "may," "will," "should," or "anticipates" (or the
negative of such terms) or other variations thereon or comparable terminology,
or because they involve discussions of Core-Mark International, Inc.'s (the
"Company's") strategy. Such forward-looking statements are based upon a number
of assumptions concerning future conditions that may ultimately prove to be
inaccurate. The ability of the Company to achieve the results anticipated in
such statements is subject to various risks and uncertainties and other factors
which may cause the actual results, level of activity, performance or
achievements of the Company or the industry in which it operates to be
materially different from any future results, level of activity, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the general state of the economy and business
conditions in the United States and Canada; adverse changes in consumer
spending; the ability of the Company to implement its business strategy,
including the ability to integrate recently acquired businesses into the
Company; the ability of the Company to obtain financing; competition; the level
of retail sales of cigarettes and other tobacco products; possible effects of
legal proceedings against manufacturers and sellers of tobacco products and the
effect of government regulations affecting such products. As a result of the
foregoing and other factors affecting the Company's business beyond the
Company's control, no assurance can be given as to future results, levels of
activity, performance or achievements and neither the Company nor any other
person assumes responsibility for the accuracy and completeness of these
statements.
<TABLE>
<CAPTION>
PAGE
PART I - FINANCIAL INFORMATION ----
- ------------------------------
<S> <C>
ITEM 1: FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of December 31, 1997 and June 30, 1998. . . . . . . . . . . . . 3
Condensed Consolidated Statements of Income for the three and six months ended June 30, 1997 and 1998. . 4
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 1997 and 1998. . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . 8
PART II - OTHER INFORMATION
- ---------------------------
Item 1: Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Item 2: Changes in Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 3: Defaults upon Senior Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 4: Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . 14
Item 5: Other Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 6: Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
2
<PAGE>
CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1997 1998
------------ --------
<S> <C> <C>
ASSETS (UNAUDITED)
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,281 $ 12,971
Receivables:
Trade accounts, less allowance for doubtful accounts of $2,950 and
$2,728, respectively. . . . . . . . . . . . . . . . . . . . . . . . . . 96,610 94,444
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,806 14,167
Inventories, net of LIFO allowance of $15,718 and $19,769, respectively. . . . 103,246 77,394
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . . . . . . 5,847 7,283
-------- --------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . 233,790 206,259
Property and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,633 59,069
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . (28,633) (31,241)
-------- --------
Net property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 28,000 27,828
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,277 8,431
Goodwill, net of accumulated amortization of $17,293 and $18,334, respectively. . . 66,513 65,472
-------- --------
$336,580 $307,990
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $50,737 $55,453
Cigarette and tobacco taxes payable. . . . . . . . . . . . . . . . . . . . . . 43,506 44,472
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,085 1,069
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,599 7,508
Other accrued liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . 28,647 27,594
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 131,574 136,096
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197,012 162,625
Other accrued liabilities and deferred income taxes . . . . . . . . . . . . . . . . 9,030 9,264
-------- --------
Total liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 337,616 307,985
Commitments and contingencies:
Shareholders' equity:
Common stock; $.01 par value; 10,000,000 shares authorized;
5,500,000 shares issued and outstanding . . . . . . . . . . . . . . . . . 55 55
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . 26,121 26,121
Accumulated deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,286) (20,935)
Accumulated other comprehensive income:
Foreign currency translation adjustments. . . . . . . . . . . . . . . . . (2,879) (3,189)
Minimum pension liability adjustment . . . . . . . . . . . . . . . . . . . . . (2,047) (2,047)
-------- --------
Total shareholders' equity. . . . . . . . . . . . . . . . . . . . . . . . (1,036) 5
-------- --------
$336,580 $307,990
-------- --------
-------- --------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
-------------- --------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . $614,994 $609,051 $1,142,860 $1,172,271
Cost of goods sold. . . . . . . . . . . . . . 568,428 564,627 1,056,184 1,087,160
-------- -------- ---------- ----------
Gross profit. . . . . . . . . . . . . . . 46,566 44,424 86,676 85,111
Operating and administrative expenses . . . . 37,708 37,013 72,931 73,050
-------- -------- ---------- ----------
Operating income. . . . . . . . . . . . . 8,858 7,411 13,745 12,061
Interest expense, net . . . . . . . . . . . . 4,653 3,692 9,044 7,988
Debt refinancing costs. . . . . . . . . . . . 391 1,199 783 1,573
-------- -------- ---------- ----------
Income before income taxes. . . . . . . . 3,814 2,520 3,918 2,500
Income tax expense. . . . . . . . . . . . . . 1,525 1,158 1,567 1,149
-------- -------- ---------- ----------
Net income . . . . . . . . . . . . . . . $2,289 $1,362 $2,351 $1,351
-------- -------- ---------- ----------
-------- -------- ---------- ----------
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
CORE-MARK INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------
1997 1998
---- ----
<S> <C> <C>
CASH PROVIDED BY OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,351 $ 1,351
Adjustments to reconcile net income to
net cash provided by operating activities:
LIFO expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,007 4,051
Amortization of goodwill. . . . . . . . . . . . . . . . . . . . . . . . 1,032 1,041
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 2,726 3,211
Amortization of debt refinancing fees . . . . . . . . . . . . . . . . . 783 1,573
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . 121 64
Other adjustments for non-cash and non-operating activities . . . . . . 193 20
Changes in operating assets and liabilities, net of acquisitions. . . . 6,382 25,048
------- -------
Net cash provided by operating activities . . . . . . . . . . . . . . . . . 14,595 36,359
------- -------
INVESTING ACTIVITIES:
Net assets of acquired businesses . . . . . . . . . . . . . . . . . . . (21,361) --
Additions to property and equipment . . . . . . . . . . . . . . . . . . (6,196) (2,699)
------- -------
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . (27,557) (2,699)
------- -------
FINANCING ACTIVITIES:
Net borrowings (payments) under revolving credit agreement . . . . . . 3,998 (104,387)
Net proceeds from securitization of trade accounts receivable (see Note 6) -- 70,000
Debt refinancing fees . . . . . . . . . . . . . . . . . . . . . . . . . -- (1,273)
------- -------
Net cash provided by (used in) financing activities . . . . . . . . . . . . 3,998 (35,660)
------- -------
Effects of changes in foreign exchange rates. . . . . . . . . . . . . . . . 24 (310)
------- -------
Decrease in cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,940) (2,310)
Cash, beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . 25,769 15,281
------- -------
CASH, END OF PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,829 $12,971
------- -------
------- -------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash payments during the period for:
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $8,778 $7,868
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,248 1,110
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of June 30, 1998, the condensed
consolidated statements of income for the three-month and six-month periods
ended June 30, 1997 and 1998, and the condensed consolidated statements of cash
flows for the six-month periods ended June 30, 1997 and 1998, have been prepared
by Core-Mark International, Inc. (the "Company"). In the opinion of management,
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position of the Company at June 30, 1998 (subject
to year-end adjustments) with respect to the interim financial statements, and
of the results of its operations and cash flows for the interim periods then
ended, have been included. The results of operations for the interim periods are
not necessarily indicative of the operating results for the full year.
The condensed consolidated balance sheet as of December 31, 1997, is
derived from the audited financial statements but does not include all
disclosures required by generally accepted accounting principles. The notes
accompanying the consolidated financial statements of the Company included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1997
("1997 Form 10-K") include a description of the Company's significant accounting
policies and additional information pertinent to an understanding of both the
December 31, 1997 balance sheet and the interim financial statements included
herein.
2. INVENTORIES
The condensed consolidated financial statements have been prepared using
the LIFO method of accounting for inventories. The use of the LIFO method
resulted in an increase in cost of goods sold and a corresponding decrease in
inventories of $0.6 million and $3.3 million for the three months ended June 30,
1997 and 1998, respectively, and $1.0 million and $4.1 million for the six
months ended June 30, 1997 and 1998, respectively. Interim LIFO calculations
are based on management's estimates of year-end inventory levels and inflation
rates for the year.
3. EXCISE TAXES
State and provincial excise taxes paid by the Company on cigarettes were
$129.6 million and $116.4 million for the three months ended June 30, 1997 and
1998, respectively, and $243.4 million and $228.6 million for the six months
ended June 30, 1997 and 1998, respectively. These amounts are included in net
sales and cost of goods sold for the periods indicated.
4. ACQUISITION OF THE SOSNICK COMPANIES
On February 3, 1997, the Company consummated a transaction, pursuant to a
Purchase Agreement dated January 31, 1997, to acquire certain assets and the
business of two related companies, Melvin Sosnick Company and Capital Cigar
Company (collectively "Sosnick" or the "Sosnick Companies"), a wholesale
distributor to the convenience retail market in northern California and northern
Nevada. Sosnick operated in the same geographic marketplace as the Company and
provided similar products and services.
The Company's net sales for the six-month period ended June 30, 1997 would
have been $1,157 million if the acquisition had occurred as of January 1, 1997.
The Company's net sales for the three-month period ended June 30, 1997 includes
Sosnick sales for the entire period. The impact of the acquisition on net income
would not have been material for the six-month period ended June 30, 1997.
6
<PAGE>
5. NEW ACCOUNTING PRONOUNCEMENT
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This Statement
requires that all items recognized under accounting standards as components of
comprehensive earnings be reported in an annual financial statement that is
displayed with the same prominence as other annual financial statements. This
Statement also requires that an entity classify items of other comprehensive
earnings by their nature in an annual financial statement. Other comprehensive
loss represents foreign currency translation adjustments made during the
respective quarters. Comprehensive income will be presented in the Company's
annual financial statements and prior periods will be reclassified, as required.
The Company's total comprehensive income was as follows (in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income.................... $2,289 $1,362 $2,351 $1,351
Other comprehensive loss...... (282) (784) (330) (310)
------ ------ ------ ------
Total comprehensive income.. $2,007 $578 $2,021 $1,041
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
6. ASSET SECURITIZATION
On April 1, 1998, the Company entered into a transaction to securitize its
U.S. trade accounts receivable portfolio ("Accounts Receivable Facility"). In
connection with this transaction, the Company formed a wholly-owned special
purpose, bankruptcy-remote subsidiary (the "Special Purpose Company" or "SPC"),
to which the U.S. trade accounts receivable originated by the Company are sold
or contributed, without recourse, pursuant to a receivables sale agreement. The
receivables have been assigned, with a call option by the SPC, to a trust formed
pursuant to a pooling agreement. On April 1, 1998, the SPC issued two classes of
term certificates with an aggregate principal value of $55 million, and
variable certificates of up to $30 million representing fractional undivided
interests in the receivables and the proceeds thereof.
On a daily basis, collections related to sold receivables are
administered by the Company acting as servicer, pursuant to a servicing
agreement. Pursuant to supplements to the pooling agreement, certificate
holders' accrued interest expense and other securitization expenses are
reserved out of daily collections, before such remaining collections are
returned to the Company by the SPC to pay for the SPC's purchase of newly
originated receivables from the Company. The revolving period of the
securitization expires in January 2003, or earlier if an early amortization
event, as defined in the pooling agreement, occurs. The interest rate on the
fixed term certificates is 0.28% (Class A) and 0.65% (Class B) above the
Eurodollar Rate which was 5.66% as of June 30, 1998. The interest rate on the
variable certificates is 0.50% above the commercial paper rate (as defined in
the securitization agreement), which was 5.60% as of June 30, 1998.
In connection with the securitization of accounts receivable, the Company
amended its Revolving Credit Facility. The amendment reduced the available
credit facility from $175 million to $120 million, reduced its interest rates
from 1.5% to 1.0% above the Prime Rate, and from 2.5% to 2.0% above the
Eurodollar Rate, as defined in the amendment, and extended the maturity through
April, 2003. As a result of this modification, the Company wrote off $0.9
million of unamortized refinancing costs relating to the Revolving Credit
Facility in the second quarter of 1998.
The net result of the (i) securitization of the Company's U.S. trade
accounts receivable portfolio and (ii) the modification of the Revolving Credit
Facility was to lower the Company's cost of borrowings, and to increase its
variable-rate borrowing capacity from $175 million to $205 million. The Company
incurred approximately $1.7 million for legal, professional and other costs
related to the transactions described above. These costs were capitalized and
classified as other assets and are being amortized over the term of these
transactions.
7
<PAGE>
The following discussion should be read in conjunction with Management's
Discussion and Analysis included in the Company's 1997 Form 10-K.
GENERAL
The Company is one of the largest broad-line, full-service wholesale
distributors of packaged consumer products to the convenience retail industry
in western North America. The products distributed by the Company include
cigarettes, food products such as candy, fast food, snacks, groceries and
non-alcoholic beverages, and non-food products such as film, batteries and
other sundries, health and beauty care products and tobacco products other
than cigarettes. In the six-month period ended June 30, 1998, approximately
67%, 22% and 11% of the Company's net sales were derived from cigarettes,
food products and non-food products, respectively.
TOBACCO INDUSTRY BUSINESS ENVIRONMENT
Manufacturers and distributors of cigarettes and other tobacco products in
the United States are currently facing a number of significant issues that
affect the business environment in which they operate including proposed
additional governmental regulation (see Part II, Item 1. "Legal Proceedings -
Regulatory Matters"); actual and proposed excise tax increases (see "Impact of
Tobacco Taxes"); increased litigation involving health and other effects of
cigarette smoking and other uses of tobacco (see Part II, Item 1. "Legal
Proceedings - Legal Matters"); and proposed legislative action to resolve
certain regulatory and litigation issues affecting the U.S. tobacco industry
described below.
In June 1997, a so called "national settlement" of many of these issues
was proposed (referred to herein as the "Proposed Settlement") following
negotiations among major U.S. tobacco manufacturers, state attorneys general,
representatives of the public health community and attorneys representing
plaintiffs in certain smoking and health litigation. The Proposed Settlement
can be implemented only by federal legislation. In April 1998, the Senate
Commerce Committee overwhelmingly approved a Bill sponsored by Senator McCain
(the "McCain Bill"), which would have replaced the Proposed Settlement. The
McCain Bill would have substantially changed the Proposed Settlement by,
among other things, enacting substantial increases to federal excise taxes on
tobacco products without affording the tobacco manufacturers and other
industry participants protection from private litigation, which is a
significant aspect of the Proposed Settlement. In June 1998, the bill
sponsored by Senator McCain failed to pass the Senate.
The major U.S. cigarette manufacturers disclosed in a report dated
October 8, 1997 to a U.S. Senate task force that, if the Proposed Settlement
were enacted in its then current form, among other things, prices of
cigarettes would increase significantly and cigarette consumption would
decline, although it is not possible to forecast, with any degree of
confidence, the magnitude of the decline in consumption. Although the Company
cannot predict whether federal legislation reflecting the Proposed Settlement
will be enacted or if other legislation, similar to the McCain Bill, would be
enacted, the Company believes that any form of federal legislation will cause
significant increases in the prices of cigarettes. In addition, although no
new federal legislation has been enacted or any type of national settlement
agreed to, the U.S. cigarette manufacturers have continued to settle lawsuits
individually, and have been raising the wholesale prices of cigarettes to
fund the cost of such settlements.
The Company believes that significant increases in the prices of
cigarettes would negatively affect the Company's business of distributing
tobacco products by decreasing the volume of sales of tobacco products and
as a result of the impact of increases in cigarette prices on its working
capital (see "Liquidity and Capital Resources"). The Company does not believe
it is able to quantify the impact that the Proposed Settlement or other
future legislation or governmental regulation affecting cigarettes and other
tobacco products will have on future sales of cigarettes and other tobacco
products. However, based upon various industry estimates of wholesale price
increases which would result from different settlement scenarios, the
Company's debt levels and interest expense would significantly increase.
Depending upon the ultimate level of actual wholesale price increases, or if
the terms of state and provincial excise taxes were adversely changed, or if
the volume of cigarettes sold by the Company significantly declined as a
result of higher prices, or taxes, or both, the Company may be required to
seek additional financing in order to meet such higher working capital
requirements.
8
<PAGE>
The Company's business strategy has included and continues to include
increasing sales of higher margin, non-tobacco products, a strategy which is
intended to lessen the impact of potential future declines in unit sales and
profitability of its tobacco distribution business.
RESULTS OF OPERATIONS
The following table sets forth certain operating results as a percentage of
net sales for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------- ---------------------
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales..................................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold............................ 92.4 92.7 92.4 92.7
----- ----- ----- -----
Gross profit.................................. 7.6 7.3 7.6 7.3
Operating and administrative expenses......... 6.1 6.1 6.4 6.2
----- ----- ----- -----
Operating income............................ 1.4% 1.2% 1.2% 1.0%
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997
NET SALES. Net sales for the three months ended June 30, 1998 were
$609.1 million, a decrease of $5.9 million or 1.0% from the comparable period
in 1997.
Net sales of cigarettes for the three months ended June 30, 1998 were
$408.1 million, a decrease of $0.3 million or 0.1% from the comparable period
in 1997. The Company's total cigarette unit sales for the three months ended
June 30, 1998 were 21.9 million cartons, a decrease of 1.8 million cartons or
7.6% from the comparable period in 1997. The decrease in volume sales was due
primarily to increased price competition in California. The decrease in net
sales due to volume declines was significantly offset by increases in
manufacturers' list prices during the quarter that were passed along to the
Company's customers.
Net sales of food and non-food products for the three months ended June
30, 1998 were $200.9 million, a decrease of $5.6 million or 2.7% from the
comparable period in 1997. The decrease was due primarily to increased
competition in California. The decrease occurred primarily in candy sales,
which decreased $6.1 million or 9.5%, cigar and tobacco sales, which
decreased $2.2 million or 5.7%, and retail beverage sales, which decreased
$1.1 million or 5.2%. The decreases were partially offset by increases in
sales of fast food of $1.2 million or 5.1% and increases in snack sales of
$0.9 million or 6.0%.
GROSS PROFIT. Gross profit for the three months ended June 30, 1998 was
$44.4 million, a decrease of $2.1 million or 4.6% from the comparable period
in 1997. The decrease was primarily due to declines in sales volume in the
cigarette category, and from sales declines in the food and non-food product
categories. The gross profit margin for the three months ended June 30, 1998
decreased to 7.3% of net sales as compared to 7.6% of net sales for the
comparable period in 1997. This was primarily due to the fact that while
cigarette gross profit per unit remained unchanged, overall cigarette prices
per unit have increased due to increases in manufacturers' list prices. For the
three months ended June 30, 1998, the Company recognized LIFO expense of $3.3
million compared to $0.4 million for the comparable period in 1997. The
increase in LIFO expense was due to manufacturers' price increases, and was
significantly offset by gains resulting from increases in manufacturers' list
prices during the quarter.
OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative
expenses for the three months ended June 30, 1998 were $37.0 million, a
decrease of $0.7 million or 1.8% from the comparable period in 1997.
Operating expenses were 6.1% of net sales for the three months ended June 30,
1998 and June 30, 1997.
9
<PAGE>
OPERATING INCOME. As a result of the foregoing factors, operating
income for the three months ended June 30, 1998 was $7.4 million, a decrease
of $1.5 million or 16.6% compared to the comparable period in 1997. As a
percentage of net sales, operating income for the three months ended June 30,
1998 was 1.2%, as compared to 1.4% for the comparable period in 1997.
NET INTEREST EXPENSE. Net interest expense for the three months ended
June 30, 1998 was $3.7 million, a decrease of $1.0 million or 20.7% compared
to the 1997 period. The net decrease resulted from a decrease in the
Company's borrowing rates as a result of the asset securitization and a
decrease in average debt levels.
DEBT REFINANCING COSTS. Debt refinancing costs for the three months
ended June 30, 1998 were $1.2 million, an increase of $0.8 million or 206.6%
over the comparable period in 1997. This increase resulted primarily from a
one-time write off of unamortized costs relating to the modification of the
Revolving Credit Facility (see Note 6 - Asset Securitization).
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997
NET SALES. Net sales for the six months ended June 30, 1998 were
$1,172.3 million, an increase of $29.4 million or 2.6% over the comparable
period in 1997. The increase in net sales was due to an increase in net sales
of cigarettes and food and non-food products in 1998 compared to 1997.
Net sales of cigarettes for the six months ended June 30, 1998 were
$783.3 million, an increase of $19.1 million or 2.5% over the prior year. The
increase in net sales of cigarettes was principally due to increases in
manufacturers' list prices that were passed along to the Company's customers.
The Company's total cigarette unit sales for the six months ended June 30,
1998 were 42.9 million cartons, a decrease of 1.8 million or 4.1% from the
same period in 1997. Substantially all of this decline occurred in the second
quarter.
Net sales of food and non-food products for the six months ended June
30, 1998 were $389.0 million, an increase of $10.3 million or 2.7% over the
comparable period in 1997. The increase resulted from the Company's continued
focus on increasing food and non-food product sales and occurred primarily in
fast food sales, which increased $5.8 million or 13.8%, snack sales, which
increased $3.6 million or 13.9%, and general merchandise sales, which
increased $2.3 million or 7.9%. The increases were partially offset by a
decrease in candy sales of $3.5 million or 2.8% which resulted primarily from
increased competition in California.
GROSS PROFIT. Gross profit for the six months ended June 30, 1998 was
$85.1 million, a decrease of $1.6 million or 1.8% from the comparable period
in 1997. The decrease was primarily due to declines in sales volume in the
cigarette category. The gross profit margin for the six months ended June 30,
1998 decreased to 7.3% of net sales as compared to 7.6% of net sales for the
first six months of 1997. This decrease was primarily due to the fact that
while cigarette gross profit per unit remained unchanged, overall cigarette
prices per unit have increased due to increases in manufacturers' list
prices, and lower margins earned on net sales from the food and non-food
categories. For the six months ended June 30, 1998, the Company recognized
LIFO expense of $4.1 million compared to $1.0 million for the comparable
period in 1997. The increase in LIFO expense was due to inflation in the
cigarette category, and was significantly offset by gains resulting from
increases in manufacturers' list prices.
OPERATING AND ADMINISTRATIVE EXPENSES. Operating and administrative
expenses for the six months ended June 30, 1998 were $73.1 million, an
increase of $0.1 million or 0.2% over the comparable period in 1997. However,
such expenses for the six months ended June 30, 1998 decreased to 6.2% of net
sales as compared to 6.4% for the comparable period in 1997. The higher
expenses as a percent of sales in the 1997 period reflect approximately $2.2
million (0.2% of 1997 net sales) of one-time duplicative facility costs as a
result of the Sosnick acquisition.
OPERATING INCOME. As a result of the foregoing factors, operating
income for the six months ended June 30, 1998 was $12.0 million, a decrease
of $1.7 million or 12.4% compared to the comparable period in 1997. As a
percentage of net sales, operating income for the six months ended June 30,
1998 was 1.0%, as compared to 1.2% for the comparable period in 1997.
NET INTEREST EXPENSE. Net interest expense for the six months ended
June 30, 1998 was $8.0 million, a decrease of $1.0 million or 11.7% compared
to 1997. The net decrease resulted primarily from a decrease in the Company's
borrowing rates as a result of the asset securitization and a decrease in
average debt levels.
DEBT REFINANCING COSTS. Debt refinancing costs for the six months ended
June 30, 1998 were $1.6 million, an increase of $0.8 million or 100.9% over
the comparable period in 1997. This increase resulted primarily from a
one-time write off of unamortized costs relating to the modification of the
Revolving Credit Facility (see Note 6 - Asset Securitization).
10
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LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity requirements arise primarily from the funding of
its working capital needs, capital expenditure programs and debt service
requirements with respect to its credit facilities. The Company has no
mandatory reductions of principal on its Revolving Credit Facility, its
Accounts Receivable Facility, or its $75 million Senior Subordinated Notes
scheduled prior to their final maturities in 2003. The Company has
historically financed its operations through internally generated funds and
borrowings under its credit facilities.
Significant increases in the cost of cigarettes would occur if
legislation were approved to enact the Proposed Settlement, or if future
legislation similar to the McCain Bill were enacted. Based upon various
industry estimates of wholesale price increases which would result from
different settlement scenarios, the Company's required working capital would
increase significantly. Depending upon the ultimate level of actual wholesale
price increases, or if the terms of state and provincial excise taxes were
adversely changed, or if the volume of cigarettes sold by the Company
significantly declined as a result of higher prices, or taxes, or both, the
Company could be required to seek additional financing in order to meet such
higher working capital requirements. Any significant increase in debt would
also increase the company's interest expense.
The Company's debt obligations totaled $162.6 million at June 30, 1998, a
decrease of $34.4 million from $197.0 million at December 31, 1997. The net
decrease in outstanding debt is primarily due to decreased borrowings needed to
finance working capital funding requirements. Debt requirements are generally
the highest at December 31, when the Company historically carries higher
inventory.
The Company's principal sources of liquidity are net cash provided by
operating activities and its credit facilities. At year end, the Company
typically carries higher inventories which are then liquidated in future
periods. Therefore, net cash provided by operating activities is typically
lower at the end of any fiscal year compared to interim periods.
The Company made capital expenditures of $2.7 million for the six months
ended June 30, 1998. For the remainder of 1998, the Company estimates it will
spend approximately $5 million for capital requirements, principally
consisting of warehouse facilities and other equipment. These expenditures
are expected to be funded out of net cash provided by operating activities
and its credit facilities.
On April 1, 1998, the Company entered into a transaction to securitize
its U.S. trade accounts receivable portfolio ("Accounts Receivable
Facility"). In connection with this transaction, the Company formed a
wholly-owned special purpose, bankruptcy-remote subsidiary (the "Special
Purpose Company" or "SPC"), to which the U.S. trade accounts receivable
originated by the Company are sold or contributed, without recourse, pursuant
to a receivables sale agreement. The receivables have been assigned, with a
call option by the SPC, to a trust formed pursuant to a pooling agreement;
the SPC issued two classes of term certificates with an aggregate principal
value of $55 million, and variable certificates of up to $30 million
representing fractional undivided interests in the receivables and the
proceeds thereof. The revolving period of the securitization expires in
January 2003, or earlier if an early amortization event, as defined in the
pooling agreement, occurs. The interest rate on the fixed term certificates
is 0.28% (Class A) and 0.65% (Class B) above the Eurodollar Rate, which was
5.66% as of June 30, 1998. The interest rate on the variable certificates is
0.50% above the commercial paper rate (as defined in the securitization
agreement), which was 5.60% as of June 30, 1998.
In connection with the securitization of accounts receivable, the
Company amended its Revolving Credit Facility. The amendment reduced the
available credit facility from $175 million to $120 million, reduced its
interest rates from 1.5% to 1.0% above the Prime Rate, and from 2.5% to 2.0%
above the Eurodollar Rate, as defined in the amendment, and extended the
maturity through April, 2003. As a result of this modification, the Company
wrote off $0.9 million of unamortized refinancing costs relating to the
Revolving Credit Facility in the second quarter of 1998.
The net result of the (i) securitization of the Company's U.S. trade
accounts receivable portfolio and (ii) the modification of the Revolving Credit
Facility was to lower the Company's cost of borrowings, and to increase its
variable-rate borrowing capacity from $175 million to $205 million.
YEAR 2000
The Company is currently in the process of modifying or replacing its
computer systems in order to be year 2000 compliant. This activity is
expected to continue through 1999, and is not expected to have a material
impact on the financial position or results of operations of the Company in
any given year. However, due to the interrelated nature of computer systems,
the Company may be impacted in the year 2000 depending on whether entities
not affiliated with the Company have addressed this issue successfully.
Expenses related to this process are being expensed as incurred.
11
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IMPACT OF TOBACCO TAXES
State and Canadian provincial tobacco taxes represent a significant portion
of the Company's net sales and cost of goods sold attributable to cigarettes and
other tobacco products. In general, such taxes have been increasing, and several
states and Canadian provinces are currently weighing proposals for higher excise
taxes on cigarettes and other tobacco products.
Under current law, almost all state and Canadian provincial taxes are
payable by the Company under credit terms which, on the average, exceed the
credit terms the Company has approved for its customers to pay for products
which include such taxes. This practice has benefited the Company's cash flow.
If the Company were required to pay such taxes at the time such obligation was
incurred without the benefit of credit terms, the Company would incur a
substantial permanent increase in its working capital requirements and might be
required to seek additional financing in order to meet such higher working
capital requirements. Consistent with industry practices, the Company has
secured a bond to guarantee its tax obligations to those states requiring such a
surety (a majority of states in the Company's operating areas).
The U.S. federal excise tax on cigarettes is currently $2.40 per carton of
cigarettes. In August 1997, legislation was enacted that will raise the federal
excise tax by $1.00 per carton of cigarettes starting in the year 2000 and by an
additional $.50 per carton of cigarettes in 2002. Unlike the state and
provincial taxes described above, U.S. federal excise taxes on cigarettes are
paid by the cigarette manufacturers and passed through to the Company as a
component of the cost of cigarettes. Such increases in U.S. federal taxes
increase the Company's working capital requirements by increasing the balances
of its inventories and accounts receivable. The President as well as various
members of Congress have suggested additional excise taxes on cigarette and
tobacco products, either as part of the Proposed Settlement discussed above or
to finance unrelated federal spending. Depending upon the ultimate level of any
increase in federal excise taxes, the Company may be required to seek additional
financing in order to meet its higher working capital requirements.
NEW ACCOUNTING STANDARDS
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits." This Statement revises employers'
disclosures about pension and other postretirement benefit plans. It does not
change the measurement or recognition of those plans. This Statement
standardizes the disclosure requirements for pensions and other postretirement
benefits to the extent practicable, requires additional information on changes
in the benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures. Restatement of
disclosures for earlier periods is required. This Statement is effective for the
Company's financial statements for the year ended December 31, 1998.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Opinion ("SOP") 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This SOP provides guidance on
accounting for the costs of computer software developed or obtained for internal
use. This SOP requires that entities capitalize certain internal-use software
costs once certain criteria are met. Currently, the Company generally expenses
the costs of developing or obtaining internal-use software as incurred. The
Company is currently evaluating SOP 98-1, but does not expect it to have a
material impact on its consolidated financial statements. This SOP is effective
for the Company's financial statements for the year ended December 31, 1999.
Earlier application is encouraged in fiscal years for which annual financial
statements have not been issued.
12
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
REGULATORY MATTERS
The tobacco industry is currently subject to significant regulatory
restrictions, such as the requirement that product packages display warning
labels, a prohibition on television and radio advertising and the establishment
of a federal minimum age of 18 for the sale of tobacco products with proof of
age for anyone under the age of 27. The status of U.S. Food and Drug
Administration (the "FDA") regulation is described in more detail in the
Company's 1997 Annual Report on Form 10-K. While neither the FDA regulations nor
the pending legislation would impose restrictions on the sale of cigarettes and
smokeless tobacco products to adults, there can be no assurance such
restrictions will not be proposed in the future or that any such proposed
legislation or regulations would not result in a material reduction of the
consumption of tobacco products in the United States or would not have a
material adverse effect on the Company's business and financial position.
Over the past decade, various state and local governments have imposed or
are considering future significant regulatory restrictions on tobacco products
which are more fully described in the Company's 1997 Annual Report on Form 10-K.
The Company is unable to assess the future effects that these various proposals
may have on the sale of the Company's products.
The Company is subject to various federal, state and local environmental,
health and safety laws and regulations. Generally, these laws impose limitations
on the discharge of pollutants and the presence of hazardous substances in the
workplace and establish standards for vehicle and employee safety and for the
handling of solid and hazardous wastes. These laws include the Resource
Conservation and Recovery Act, the Comprehensive Environmental Response,
Compensation and Liability Act, the Clean Air Act, the Hazardous Materials
Transportation Act and the Occupational Safety and Health Act. Future
developments, such as stricter environmental or employee health and safety laws
and regulations thereunder, could affect the Company's operations. The Company
does not currently anticipate that the cost of its compliance with or of any
foreseeable liabilities under environmental and employee health and safety laws
and regulations will have a material adverse affect on its business and
financial condition.
LEGAL MATTERS
In May 1996, the Court of Appeals for the Fifth Circuit decertified a
federal class action purportedly brought on behalf of all cigarette smokers in
the United States. Following the decertification, lawyers for the class brought
state class action lawsuits in a number of states, with the objective of filing
such lawsuits in all fifty states, the District of Columbia and Puerto Rico.
Several of these state lawsuits name cigarette distributors as defendants.
In October 1996, a subsidiary of the Company was named as a defendant in a
class action lawsuit filed in state court in New Mexico. The other defendants
include the principal U.S. tobacco manufacturers as well as other distributors.
The case is brought on behalf of a putative class of smokers who reside in New
Mexico, each of whom is allegedly nicotine dependent. The suit seeks, on behalf
of the class, compensatory damages, punitive damages and equitable relief,
including medical monitoring of the class members.
In January 1998, the Company was served with a summons and First Amended
Complaint in an action brought by Operating Engineers Local 12 Health and
Welfare Trust (on behalf of itself and all others similarly situated), in the
United States District Court for the Central District of California, against
major tobacco manufacturers, the Company, and other distributors and retailers
of tobacco products. The complaint seeks, inter alia, compensatory and punitive
damages, restitution for monies expended by the Trust for health care of its
members who have used tobacco products, and forms of injunctive relief.
In March 1998, the Company was named as a defendant in a class action
complaint filed in a state court in Salt Lake City, Utah. The other defendants
include the principal U.S. tobacco manufacturers as well as several other
distributors. The case is brought on behalf of a class of smokers who reside in
Utah and who have purchased cigarette products distributed by the Company and
alleges, among other things, the members of the class have suffered personal
injuries and economic losses from the use of such cigarettes. The suit seeks, on
behalf of the class, compensatory damages, punitive damages, equitable relief
including the establishment of a medical monitoring fund and return of monies
spent to purchase cigarette products. In June 1998 the Court granted a motion to
dismiss the distributors from the litigation.
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In April, May and June 1998, the Company was named as a defendant in 17
similar actions brought by various union health and welfare trusts, filed in
state courts of several counties in Northern California against major tobacco
manufacturers as well as other distributors. The complaints seek, inter alia,
compensatory and punitive damages, restitution for monies expended by the trusts
for health care of its members who have used tobacco products, and forms of
injunctive relief.
On May 19, 1998, a division of the Company was named a defendant and
served in an individual tobacco litigation complaint filed in a state court
in Broward County, Florida. The other defendants include the principal U.S.
tobacco manufacturers as well as other distributors/retailers. The case is
brought on behalf of two individuals, residents of Florida, who have
purchased cigarette products distributed by the Company, and alleges, among
other things, the plaintiffs have suffered personal injuries and economic
losses from the use of such cigarettes. The suit seeks, on behalf of the
plaintiffs, compensatory damages and punitive damages.
The Company does not believe that these actions will have a material
adverse effect on the Company's financial condition. The Company has been
indemnified with respect to certain claims alleged in each of the above actions.
In addition, the Company is a party to other lawsuits incurred in the
ordinary course of its business. The Company believes it is adequately insured
with respect to such lawsuits or that such lawsuits will not result in losses
material to its consolidated financial position or results of operations.
Item 2: Changes in Securities
Not applicable
Item 3: Defaults Upon Senior Securities
Not applicable
Item 4: Submission of Matters to a Vote of Security Holders
Not applicable
Item 5: Other Information
Not applicable
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
10.14 $120,000,000 Amended and Restated Credit Agreement dated as
of April 1, 1998, among Core-Mark International, Inc., the
Several Lenders from Time to Time Parties Thereto and The
Chase Manhattan Bank, as Administrative Agent.
10.16 Amended and Restated Security Agreement dated as of April 1,
1998, among Core-Mark International, Inc., C/M Products,
Inc., Core-Mark Interrelated Companies, Inc., and Core-Mark
Midcontinent, Inc., in favor of The Chase Manhattan Bank, as
Administrative Agent.
10.17 Amendment to Borrower Stock Pledge Agreement dated as of
April 1, 1998, between Core-Mark International, Inc., and The
Chase Manhattan Bank, as Administrative Agent.
14
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10.18 Pooling Agreement, dated as of April 1, 1998, among Core-Mark
Capital Corporation, Core-Mark International, Inc., as Servicer,
and The Chase Manhattan Bank, as Trustee.
10.19 Series 1998-1 Supplement to the Pooling Agreement, dated as of
April 1, 1998, among the Core-Mark Capital Corporation,
Core-Mark International, Inc., as Servicer, and The Chase
Manhattan Bank.
10.20 Series 1998-2 Supplement to the Pooling Agreement, dated as of
April 1, 1998, among Core-Mark Capital Corporation,
Core-Mark International, Inc., as Servicer, and The Chase
Manhattan Bank.
10.21 Servicing Agreement, dated as of April 1, 1998, among Core-Mark
Capital Corporation, Core-Mark International, Inc., as Servicer,
Subsidiaries of Core-Mark International, Inc., as Subservicers,
and The Chase Manhattan Bank.
10.22 Receivables Sale and Contribution Agreement, dated as of
April 1, 1998, among Core-Mark Capital Corporation, Core-Mark
International, Inc., Core-Mark Midcontinent, Inc., and Core-Mark
Interrelated Companies, Inc., as Sellers.
21 List of Subsidiaries of the Company
27 Financial Data Schedule
(b) Reports on Form 8-K
During the second quarter of 1998, the Company filed no reports on
Form 8-K.
15
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of South San Francisco,
California, on August 14, 1998.
CORE-MARK INTERNATIONAL, INC.
By: /s/ LEO F. KORMAN
-----------------------------------------
Leo F. Korman, Senior Vice President and
Chief Financial Officer
16
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EXECUTION COPY
Exhibit 10.14
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$120,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
among
CORE-MARK INTERNATIONAL, INC.,
The Several Lenders
from Time to Time Parties Hereto
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of April 1, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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TABLE OF CONTENTS
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SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS. . . . . . . . . . . . . . . . . . . . 24
2.1 Revolving Credit Commitments . . . . . . . . . . . . . . . . . . . . . . 24
2.2 Procedure for Revolving Credit Borrowing . . . . . . . . . . . . . . . . 24
2.3 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2.4 Termination or Reduction of Commitments. . . . . . . . . . . . . . . . . 25
2.5 Repayment of Loans; Evidence of Debt . . . . . . . . . . . . . . . . . . 25
2.6 Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.7 Mandatory Prepayments and Other Reductions of Revolving Credit
Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
2.8 Conversion and Continuation Options. . . . . . . . . . . . . . . . . . . 27
2.9 Maximum Number of Tranches . . . . . . . . . . . . . . . . . . . . . . . 27
2.10 Interest Rates and Payment Dates. . . . . . . . . . . . . . . . . . . . 27
2.11 Computation of Interest and Fees. . . . . . . . . . . . . . . . . . . . 28
2.12 Inability to Determine Interest Rate. . . . . . . . . . . . . . . . . . 29
2.13 Pro Rata Treatment and Payments . . . . . . . . . . . . . . . . . . . . 29
2.14 Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.15 Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . 30
2.16 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
2.17 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2.18 Change of Lending Office. . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3. LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.1 L/C Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
3.2 Procedure for Issuance of Letters of Credit. . . . . . . . . . . . . . . 34
3.3 Fees, Commissions and Other Charges. . . . . . . . . . . . . . . . . . . 35
3.4 L/C Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
3.5 Reimbursement Obligation of the Borrower . . . . . . . . . . . . . . . . 36
3.6 Obligations Absolute . . . . . . . . . . . . . . . . . . . . . . . . . . 37
3.7 Letter of Credit Payments. . . . . . . . . . . . . . . . . . . . . . . . 37
3.8 Application. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 38
4.1 Financial Condition. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.2 No Change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.3 Corporate Existence; Compliance with Law . . . . . . . . . . . . . . . . 38
4.4 Corporate Power; Authorization; Enforceable Obligations. . . . . . . . . 39
4.5 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.6 No Material Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 39
4.7 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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4.8 Ownership of Property; Liens . . . . . . . . . . . . . . . . . . . . . . 39
4.9 Intellectual Property. . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.10 No Burdensome Restrictions. . . . . . . . . . . . . . . . . . . . . . . 40
4.11 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.12 Federal Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
4.14 Investment Company Act; Other Regulations . . . . . . . . . . . . . . . 41
4.15 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.16 Purpose of Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.17 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.18 Accuracy of Information . . . . . . . . . . . . . . . . . . . . . . . . 42
4.19 Security Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
4.20 Solvency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5. CONDITIONS TO EFFECTIVENESS. . . . . . . . . . . . . . . . . . . . . . 43
5.1 Conditions to Restatement Effective Date . . . . . . . . . . . . . . . . 43
5.2 Conditions to Each Extension of Credit . . . . . . . . . . . . . . . . . 46
SECTION 6. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 46
6.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.2 Certificates; Other Information. . . . . . . . . . . . . . . . . . . . . 47
6.3 Payment of Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.4 Conduct of Business and Maintenance of Existence . . . . . . . . . . . . 49
6.5 Maintenance of Property; Insurance . . . . . . . . . . . . . . . . . . . 49
6.6 Inspection of Property; Books and Records; Discussions . . . . . . . . . 49
6.7 Annual Reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
6.8 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
6.9 Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.10 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . 51
6.11 Cash Management System. . . . . . . . . . . . . . . . . . . . . . . . . 51
6.12 Additional Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.13 Tax Stamp Bonding.. . . . . . . . . . . . . . . . . . . . . . . . . . . 52
6.14 Compliance with Terms of Leaseholds.. . . . . . . . . . . . . . . . . . 52
SECTION 7. NEGATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 53
7.1 Financial Condition Covenants. . . . . . . . . . . . . . . . . . . . . . 53
7.2 Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . 54
7.3 Limitation on Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . 55
7.4 Limitation on Guarantee Obligations. . . . . . . . . . . . . . . . . . . 56
7.5 Limitation on Fundamental Changes. . . . . . . . . . . . . . . . . . . . 57
7.6 Limitation on Sale of Assets . . . . . . . . . . . . . . . . . . . . . . 57
7.7 Limitation on Speculative Transactions . . . . . . . . . . . . . . . . . 58
7.8 Limitation on Dividends. . . . . . . . . . . . . . . . . . . . . . . . . 58
7.9 Limitation on Capital Expenditures . . . . . . . . . . . . . . . . . . . 58
7.10 Limitation on Investments, Loans and Advances . . . . . . . . . . . . . 59
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
7.11 Limitation on Optional Payments and Modifications of Debt
Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
7.12 Limitation on Transactions with Affiliates. . . . . . . . . . . . . . . 59
7.13 Limitation on Sales and Leasebacks. . . . . . . . . . . . . . . . . . . 60
7.14 Limitation on Changes in Fiscal Year. . . . . . . . . . . . . . . . . . 60
7.15 Limitation on Negative Pledge Clauses . . . . . . . . . . . . . . . . . 60
7.16 Limitation on Lines of Business . . . . . . . . . . . . . . . . . . . . 60
SECTION 8. EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 9. THE ADMINISTRATIVE AGENT . . . . . . . . . . . . . . . . . . . . . . . 63
9.1 Appointment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.2 Delegation of Duties . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.3 Exculpatory Provisions . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.4 Reliance by Administrative Agent . . . . . . . . . . . . . . . . . . . . 64
9.5 Notice of Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.6 Non-Reliance on Administrative Agent and Other Lenders . . . . . . . . . 65
9.7 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.8 Administrative Agent in Its Individual Capacity. . . . . . . . . . . . . 66
9.9 Successor Administrative Agent . . . . . . . . . . . . . . . . . . . . . 66
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.1 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . 66
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
10.3 No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . . . . . 68
10.4 Survival of Representations and Warranties. . . . . . . . . . . . . . . 68
10.5 Payment of Expenses and Taxes . . . . . . . . . . . . . . . . . . . . . 68
10.6 Successors and Assigns; Participations and Assignments. . . . . . . . . 69
10.7 Adjustments; Set-off. . . . . . . . . . . . . . . . . . . . . . . . . . 71
10.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.9 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.10 Integration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.11 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
10.12 Submission To Jurisdiction; Waivers. . . . . . . . . . . . . . . . . . 72
10.13 Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.14 WAIVERS OF JURY TRIAL. . . . . . . . . . . . . . . . . . . . . . . . . 73
10.15 Judgment Currency. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
10.16 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
10.17 Special Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 74
</TABLE>
-iii-
<PAGE>
ANNEXES
Annex A Fee and Applicable Margin Table
SCHEDULES
1.1(a) Commitments
4.2 Changes
4.4 Consents
4.6 Litigation
4.8 Ownership of Property; Liens
4.9 Intellectual Property
4.11 Taxes
4.13 ERISA
4.15 Subsidiaries
4.17 Environmental Matters
4.19(b) Security Documents; Offices
7.2 Indebtedness
7.3 Liens
7.4 Guarantee Obligations
EXHIBITS
Exhibit A Form of Revolving Credit Note
Exhibit B Form of Borrowing Base Certificate
Exhibit C Form of Borrowing Certificate
Exhibit D Form of Responsible Officer's Certificate
Exhibit E Form of Supplemental Reporting
Exhibit F-1 Form of Opinion of Paul, Weiss, Rifkind,
Wharton & Garrison
Exhibit F-2 Form of Opinion of Sheppard, Mullin,
Richter & Hampton, LLP
Exhibit F-3 Form of Opinion of Stoel Rives LLP
Exhibit F-4 Form of Opinions of Stikeman, Elliott; and Thompson Dorfman
Sweatman
Exhibit G Form of Assignment and Acceptance
-iv-
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of April 1, 1998,
among CORE-MARK INTERNATIONAL, INC., a Delaware corporation (the "BORROWER"),
the several banks and other financial institutions from time to time parties to
this Agreement (the "LENDERS") and The Chase Manhattan Bank, a New York banking
corporation, as administrative agent for the Lenders hereunder.
W I T N E S S E T H :
WHEREAS, the Borrower, certain of the Lenders and the Administrative
Agent are parties to that certain Credit Agreement, dated as of August 7, 1996
(as heretofore amended, the "EXISTING CREDIT AGREEMENT");
WHEREAS, subject to the terms and conditions of this Agreement, the
Borrower, the Lenders and the Administrative Agent wish to amend and restate the
Existing Credit Agreement in its entirety as provided herein;
NOW, THEREFORE, subject to the satisfaction of the conditions set
forth in subsection 5.1, the Borrower, the Lenders and the Administrative Agent
hereby agree to amend and restate the Existing Credit Agreement in its entirety
to read as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings:
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate in
effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%.
For purposes hereof: "PRIME RATE" shall mean the rate of interest per
annum publicly announced from time to time by the Administrative Agent as
its prime rate in effect at its principal office in New York City (the
Prime Rate not being intended to be the lowest rate of interest charged by
Chase Manhattan Bank in connection with extensions of credit to debtors);
"BASE CD RATE" shall mean the sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) a fraction, the numerator of which is one and
the denominator of which is one minus the C/D Reserve Percentage and (b)
the C/D Assessment Rate; "THREE-MONTH SECONDARY CD RATE" shall mean, for
any day, the secondary market rate for three-month certificates of deposit
reported as being in effect on such day (or, if such day shall not be a
Business Day, the next preceding Business Day) by the Board of Governors of
the Federal Reserve System (the "BOARD") through the public information
telephone line of the Federal Reserve Bank of New York (which rate will,
under the current practices of the Board, be published in Federal Reserve
Statistical Release H.15(519) during the week following such day), or, if
such rate shall not be so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money
<PAGE>
2
center banks in New York City received at approximately 10:00 A.M., New
York City time, on such day (or, if such day shall not be a Business Day,
on the next preceding Business Day) by the Administrative Agent from three
New York City negotiable certificate of deposit dealers of recognized
standing selected by it; and "FEDERAL FUNDS EFFECTIVE RATE" shall mean,
for any day, the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for the
day of such transactions received by the Administrative Agent from three
federal funds brokers of recognized standing selected by it. Any change in
the ABR due to a change in the Prime Rate, the Three-Month Secondary CD
Rate or the Federal Funds Effective Rate shall be effective as of the
opening of business on the effective day of such change in the Prime Rate,
the Three-Month Secondary CD Rate or the Federal Funds Effective Rate,
respectively.
"ABR LOANS": Loans the rate of interest applicable to which is based
upon the ABR.
"ACCOUNT": as defined in Section 9-106 of the UCC.
"ADJUSTMENT DATE": the second Business Day following receipt by the
Administrative Agent of both (a) the financial statements required to be
delivered pursuant to subsection 6.1(a) or 6.1(b), as the case may be, for
the most recently completed fiscal period and (b) the certificate required
to be delivered pursuant to subsection 6.2(b) with respect to such fiscal
period.
"ADMINISTRATIVE AGENT": Chase, together with its affiliates, as the
arranger of the Commitments and as the administrative agent for the Lenders
under this Agreement and the other Loan Documents.
"AFFILIATE": as to any Person, any other Person (other than a
Subsidiary) which, directly or indirectly, is in control of, is controlled
by, or is under common control with, such Person. For purposes of this
definition, "control" of a Person means the power, directly or indirectly,
either to (a) vote 10% or more of the securities having ordinary voting
power for the election of directors of such Person or (b) direct or cause
the direction of the management and policies of such Person, whether by
contract or otherwise.
"AGGREGATE COVERED OUTSTANDING REVOLVING EXTENSIONS OF CREDIT": at
any date of determination, the excess of (a) the Aggregate Outstanding
Revolving Extensions of Credit over (b) the lesser of the L/C Obligations
then outstanding and the Uncovered L/C Amount.
"AGGREGATE OUTSTANDING REVOLVING EXTENSIONS OF CREDIT": at any time,
an amount equal to the sum of (a) the aggregate principal amount of all
Revolving Credit Loans then outstanding and (b) the L/C Obligations then
outstanding.
<PAGE>
3
"AGREEMENT": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"APPLICABLE COMMITMENT FEE RATE": 0.375%, PROVIDED that, the
Applicable Commitment Fee Rate will be adjusted, on each Adjustment Date
occurring after the Restatement Effective Date, to the Commitment Fee Rate
set forth on ANNEX A opposite the Category of the Borrower in effect on
such Adjustment Date, PROVIDED, HOWEVER that the Applicable Commitment Fee
Rate shall not be adjusted below Category 2 for a period of six months
following the Restatement Effective Date, at which time the Applicable
Commitment Fee Rate will be adjusted if necessary based on the Borrower's
most recent financial statements. In the event that the financial
statements required to be delivered pursuant to subsection 6.1(a) or
6.1(b), as applicable, and the related certificate required pursuant to
subsection 6.2(b), are not delivered when due, the Administrative Agent or
the Majority Lenders may, at their option, during the period from the date
upon which such financial statements were required to be delivered until
two Business Days following the date upon which they actually are
delivered, increase the Applicable Commitment Fee Rate to 0.50%.
"APPLICABLE MARGIN": for each Type of Revolving Loan, the rate per
annum set forth under the relevant column heading below:
<TABLE>
<CAPTION>
ABR LOANS EURODOLLAR LOANS
--------- ----------------
<S> <C>
1.00% 2.00%
</TABLE>
PROVIDED that, the Applicable Margin for each Type of Revolving Loan will
be adjusted, on each Adjustment Date occurring after the Restatement
Effective Date, to the Applicable Margin set forth on ANNEX A opposite the
Category of the Borrower in effect on such Adjustment Date, PROVIDED,
HOWEVER, that the Applicable Margin shall not be adjusted below Category 2
for a period of six months following the Restatement Effective Date, at
which time the Applicable Margin will be adjusted if necessary based on the
Borrower's most recent financial statements. In the event that the
financial statements required to be delivered pursuant to subsection 6.1(a)
or 6.1(b), as applicable, and the related certificate required pursuant to
subsection 6.2(b), are not delivered when due, the Administrative Agent or
the Majority Lenders may, at their option, during the period from the date
upon which such financial statements were required to be delivered until
two Business Days following the date upon which they actually are
delivered, increase the Applicable Margin for ABR Loans to 1.50% and the
Applicable Margin for Eurodollar Loans to 2.50%.
"APPLICATION": an application, in such form as the Issuing Bank may
specify from time to time, requesting the Issuing Bank to open a Letter of
Credit.
"ASSIGNEE": as defined in subsection 10.6(c).
"AVAILABLE REVOLVING CREDIT COMMITMENTS": at any time, an amount
equal to the excess, if any, of (a) the Revolving Credit Commitments over
(b) the Aggregate Outstanding Revolving Extensions of Credit.
<PAGE>
4
"BORROWER SECURITY DOCUMENTS": the collective reference to the
Security Agreement and the Borrower Stock Pledge Agreement.
"BORROWER STOCK PLEDGE AGREEMENT": the Borrower Stock Pledge
Agreement, dated as of August 7, 1996, executed and delivered by the
Borrower in connection with the Existing Credit Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.
"BORROWING BASE": on any date of determination thereof, the sum
(without duplication) of:
a. 85% of the aggregate Eligible Canadian Accounts Receivable;
b. 85% of the excess of the aggregate Eligible Canadian Cash Equivalents
over the Canadian Cash Adjustment;
c. 75% of the aggregate Eligible Vendor Receivables;
d. 85% of the aggregate Eligible Cigarette Inventory purchased by the
Borrower on zero day EFT terms;
e. 65% of the aggregate Eligible Cigarette Inventory purchased by the
Borrower on terms other than zero day EFT terms;
f. 80% of the aggregate Eligible Tobacco and Cigar Inventory;
g. 65% of the aggregate Eligible Other Inventory; and
h. 100% of the aggregate cash held by the Administrative Agent in the US
Cash Collateral Account.
All determinations in connection with the Borrowing Base shall be (i) made
by the Borrower in conjunction with the Borrowing Base Certificates and
Supplemental Reportings to be provided by the Borrower to the
Administrative Agent pursuant to subsection 6.2(f), (ii) made by the
Borrower in Dollars, and any amounts determined in Canadian dollars shall,
for purposes of calculating the Borrowing Base, be converted into Dollars
at the Spot Rate and (iii) certified to the Administrative Agent by a
Responsible Officer of the Borrower, provided, however, that the
Administrative Agent shall have the final right to review and adjust, in
its reasonable judgment, any such determination to the extent such
determination is not in accordance with this Agreement. The Administrative
Agent may also decrease any of the foregoing percentages upon ten Business
Days' written notice to the Borrower if, in the judgment of the
Administrative Agent in its reasonable discretion based on the findings of
the on-site periodic field exams conducted pursuant to subsection 6.7, a
material adverse change shall have occurred in any of the items included in
the Borrowing Base.
"BORROWING BASE CERTIFICATE": a certificate delivered by the Borrower
to the Administrative Agent pursuant to subsection 6.2(f) and certified by
a Responsible Officer of the Borrower, substantially in the form of Exhibit
B.
"BORROWING DATE": any Business Day specified in a notice pursuant to
subsection 2.2 as a date on which the Borrower requests the Lenders to make
Loans hereunder.
<PAGE>
5
"BUSINESS": as defined in subsection 4.17.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law
to close.
"CANADIAN CASH ADJUSTMENT": as of any date of determination, the
aggregate total of all checks written and outstanding, payable to Canadian
government cigarette tax jurisdictions, for amounts owing to them related
to cigarette sales or purchases.
"CANADIAN CASH COLLATERAL ACCOUNT": has the meaning specified in the
Security Agreement.
"CANADIAN CASH EQUIVALENTS": means (i) any term deposit receipts of
the Bank of Montreal having a maturity of not greater than 90 days from the
date of acquisition thereof, (ii) cash owned by the Borrower or any of its
Subsidiaries and denominated in Canadian dollars and (iii) subject to the
receipt by the Administrative Agent of a written legal opinion in form and
substance and from a firm satisfactory to the Administrative Agent and its
counsel to the effect that the Administrative Agent and the Lenders would
have a perfected security interest in such items, the following items
having a maturity of not greater than 90 days from the date of acquisition
thereof:
(a) readily marketable direct obligations of the Government of
Canada or any province thereof or obligations unconditionally
guaranteed by the full faith and credit of the Government of Canada;
(b) insured certificates of deposit, deposit notes or term
deposit receipts of any commercial bank listed on Schedule 1 of the
Bank Act (Canada); or
(c) commercial paper in an aggregate amount of no more than
$1,000,000 per issuer outstanding at any time, issued by any
corporation organized under the laws of Canada or any province thereof
and rated at least A-1 or better (or the then equivalent grade) by
Canada Bond Rating Service or R-2 (middle) or better (or the then
equivalent grade) by Dominion Bond Rating Service.
"CANADIAN RECEIVABLE OFFSETS": the aggregate Canadian credit balances
of the Borrower (determined on an account debtor by account debtor basis)
more than 45 days past due.
"CAPITAL STOCK": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"CASH INTEREST EXPENSE": of any Person for any period, Interest
Expense of such Person for such period (a) minus, in each case to the
extent included in determining such Interest Expense for such period, the
sum of the following: (i) non-cash expenses for interest payable in kind
and (ii) amortization of debt discount and
<PAGE>
6
fees and (iii) the fees described in subsections 2.3 and 3.3 and (b) plus
the sum of the following in each case to the extent previously subtracted
pursuant to clause (a) of this definition: cash payments made by such
Person or any Subsidiary of such Person during such period in respect of
the items referred to in such clause (a)(i).
"C/D ASSESSMENT RATE": for any day as applied to any ABR Loan, the
annual assessment rate in effect on such day which is payable by a member
of the Bank Insurance Fund maintained by the Federal Deposit Insurance
Corporation (the "FDIC") classified as well-capitalized and within
supervisory subgroup "B" (or a comparable successor assessment risk
classification) within the meaning of 12 C.F.R. Section 327.4 (or any
successor provision) to the FDIC (or any successor) for the FDIC's (or
such successor's) insuring time deposits at offices of such institution
in the United States.
"C/D RESERVE PERCENTAGE": for any day as applied to any ABR Loan,
that percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) (the "BOARD"), for determining the maximum reserve requirement
for a Depositary Institution (as defined in Regulation D of the Board) in
respect of new non-personal time deposits in Dollars having a maturity of
30 days or more.
"CHASE": The Chase Manhattan Bank.
"CIGARETTE INVENTORY": the cigarette Inventory of the Borrower and
its Subsidiaries, including all tax stamps (whether affixed or unaffixed)
in respect thereof.
"CMIC": Core-Mark Interrelated Companies, Inc., a California
corporation and a wholly-owned Subsidiary of the Borrower.
"CM MIDCONTINENT": Core-Mark Midcontinent, Inc., an Arkansas
corporation and a wholly-owned Subsidiary of the Borrower.
"C/M PRODUCTS": C/M Products, Inc., a California corporation and a
wholly-owned Subsidiary of the Borrower.
"CODE": the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL": all assets of the Loan Parties, now owned or
hereinafter acquired, upon which a Lien is purported to be created by any
Security Document.
"COMMERCIAL LETTER OF CREDIT": as defined in subsection 3.1(b)(1)(B).
"COMMITMENT PERIOD": the period from and including the date hereof to
but not including the Termination Date or such earlier date on which the
Commitments shall terminate as provided herein.
"COMMITMENTS": the collective reference to the Revolving Credit
Commitments.
<PAGE>
7
"COMMONLY CONTROLLED ENTITY": an entity, whether or not incorporated,
which is under common control with the Borrower within the meaning of
Section 4001 of ERISA or is part of a group which includes the Borrower and
which is treated as a single employer under Section 414 of the Code.
"CONSOLIDATED": when used in connection with any defined term, and not
otherwise defined, means such term as it applies to the Borrower and its
Subsidiaries on a consolidated basis, after eliminating all intercompany
items.
"CONSOLIDATED WORKING CAPITAL": as of the date of determination,
Current Assets of the Borrower and its Subsidiaries at such date,
determined on a consolidated basis in conformity with GAAP, minus Current
Liabilities of the Borrower and its Subsidiaries at such date, determined
on a consolidated basis in conformity with GAAP.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or any provision applicable to such Person
of any agreement, instrument or other undertaking to which such Person is a
party or by which it or any of its property is bound.
"CONTROL PERCENTAGE": means 51%, provided that such percentage may be
reduced but not below 35%, if prior to or concurrently with such reduction,
the following conditions have been satisfied: (1) there has been an initial
public offering of the common stock of the Borrower, (2) the Uncovered L/C
Amount shall have been permanently reduced to zero and (3) the lesser of
(x) the available Borrowing Base and (y) the Available Revolving Credit
Commitments shall be at least $15,000,000 determined on a pro forma basis
giving effect to the transaction that causes such reduction on the basis of
the average amount of the Borrowing Base and the Aggregate Outstanding
Revolving Extensions of Credit, respectively, during the calendar month
preceding the month in which such transaction occurs.
"CURRENT ASSETS": of any Person, at the date of determination, all
assets of such Person which would, in accordance with GAAP (using the
first-in, first-out inventory valuation method), be classified on a balance
sheet of such Person as current assets, other than deferred taxes.
"CURRENT LIABILITIES": of any Person, at the date of determination,
all liabilities of such Person which would, in accordance with GAAP (using
the first-in, first-out inventory valuation method), be classified on a
balance sheet of such Person as current liabilities, other than deferred
taxes and the current portion of any long-term Indebtedness of such Person.
"CUSTOMER REBATE RESERVES": $30,000 for rebates to customers subject
to change by the Administrative Agent in its reasonable discretion based on
the findings of the on-site periodic field exams conducted pursuant to
subsection 6.7.
<PAGE>
8
"DEFAULT": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"DEPOSIT ACCOUNT LETTERS": has the meaning specified in the Security
Agreement.
"DEPOSIT ACCOUNTS": has the meaning specified in the Security
Agreement.
"DEPOSITORY LETTERS": has the meaning specified in the Security
Agreement.
"DOLLARS" and "$": dollars in lawful currency of the United States of
America.
"EBITDA": means with respect to any Person, for any period, the Net
Income of such Person for such period determined on a consolidated basis,
PLUS, to the extent deducted in determining such Net Income, (i) Interest
Expense, (ii) depreciation, (iii) depletion, (iv) amortization, (v) all
Federal, state, local and foreign income taxes and (vi) any extraordinary
and unusual losses, and, MINUS, to the extent added in determining such
Net Income, any extraordinary and unusual gains, all as determined on a
consolidated basis in accordance with GAAP using the first-in, first-out
inventory valuation method.
"EFT": electronic funds transfer.
"ELIGIBLE CANADIAN ACCOUNTS RECEIVABLE": at a particular date, the
total outstanding balance of accounts receivable before bad debt reserves
historically recorded by the Borrower, determined in accordance with GAAP
and stated on a basis consistent with the historical practices of the
Borrower as of the date thereof (but excluding in any event any material
delivery charges, freight charges, finance charges, late fees and other
fees and less the value of any accrual which has been recorded by the
Borrower with respect to downward price adjustments) of the Borrower or any
of its Subsidiaries (excluding Vendor Receivables): (a) which are accounts
within the meaning of Section 9-106 of the New York Uniform Commercial Code
(or any successor provisions thereto), (b) which are bona fide, valid and
legally enforceable obligations of the parties thereto or the account
debtor in respect thereof and arise from the actual sale of goods in the
ordinary course of business to such account debtor or parties, (c) with
respect to which all consents, licenses, approvals or authorizations of, or
registrations or declarations with, any Governmental Authority required to
be obtained, effected or given in connection with the execution, delivery
and performance of such accounts receivable have been duly obtained,
effected or given, are in full force and effect and do not subject the
scope of such Accounts to any materially adverse limitation, either
specific or general in nature, (d) which conform in all other respects to
the representations and warranties contained herein and in the Security
Agreement, (e) which have been invoiced by the Borrower or any of its
Subsidiaries and which are not more than 45 days past due, (f) which are
not owed by an obligor which is (i) a Governmental Authority, or (ii) an
Affiliate or Subsidiary of the Borrower, (g) which are not owed by an
obligor which has taken any of the actions or suffered any of the events of
the kind described in subsection 8(f), (h) which are not
<PAGE>
9
owed by an obligor 25% or more of the outstanding balance of accounts
receivable (that otherwise meet the requirements of clauses (n) and (o) of
this definition) of which do not constitute Eligible Canadian Accounts
Receivable hereunder, (i) which are assignable and subject to a perfected,
first-priority Lien in favor of the Administrative Agent pursuant to the
Security Agreement and which are not subject to any other Liens except
Liens permitted under subsection 7.3(a), (b) or (h), (j) which are not
owed by an obligor with terms greater than 45 days, (k) which the
Borrower is not required to perform any additional services or perform or
incur any additional obligations to the account debtor in order to collect
such accounts receivable, (l) which are not subject to any defense,
setoff, recoupment or counterclaim, (m) to which the Borrower or any of its
Subsidiaries has good, valid and marketable title as sole owner and as to
which no other Person has asserted in writing any claim to right of
possession or dominion, (n) the obligor in respect of which is located in
Canada, (o) which is denominated in Dollars or in Canadian dollars, and
(p) which the Administrative Agent in its reasonable discretion based on
the findings of the on-site periodic field exams conducted pursuant to
subsection 6.7 has not otherwise determined to be unacceptable, EXCLUDING
the aggregate amount of Canadian Receivable Offsets and Customer Rebate
Reserves and the aggregate amount owing to any obligor who is a supplier
or creditor of the Borrower or any of its Subsidiaries to the extent that
there is a receivable balance due from such obligor that would otherwise
constitute an Eligible Canadian Accounts Receivable.
"ELIGIBLE CANADIAN CASH EQUIVALENTS": at a particular date, the total
value of Canadian Cash Equivalents credited to the Canadian Cash Collateral
Account and the Deposit Accounts in accordance with subsection 6.11.
"ELIGIBLE CIGARETTE INVENTORY": at a particular date, the total value
of the Cigarette Inventory of the Borrower and its Subsidiaries (calculated
as the lower of (x) cost, determined on a first in first out basis in
accordance with GAAP and stated on a basis consistent with the historical
practices of the Borrower on the date hereof before inventory reserves
historically recorded by the Borrower and (y) fair market value) (a) which
conforms in all respects to the representations and warranties contained
herein and in the Security Agreement, (b) which is located in the United
States of America, (c) which is subject to a perfected, first-priority Lien
in favor of the Administrative Agent pursuant to the Security Agreement and
which is not subject to any other Liens except Liens permitted under
subsection 7.3 (a), (b) or (h), (d) which is stored in the Borrower's or
any of its Subsidiaries' warehouses, which has been placed in the
Borrower's or any of its Subsidiaries' storage area or allocated to the
Borrower or any of its Subsidiaries in a third-party warehouse and
identified separately from the inventory of others, or which is in transit
between such third-party warehouses and Borrower's or any of its
Subsidiaries' warehouses, (e) to which the Borrower or any of its
Subsidiaries has good, valid and marketable title as sole owner and as to
which no other Person has asserted in writing any claim to right of
possession or dominion, (f) which is not raw materials, supplies, work-
in-process or packaging, packing or shipping materials, and (g) which the
Administrative Agent in its reasonable discretion based on the findings of
the on-site periodic field exams conducted pursuant to subsection 6.7 has
not otherwise determined to be unacceptable, EXCLUDING the
<PAGE>
10
aggregate amount of the Inventory Reserves, Tax Reserves and Landlord Lien
Reserves allocable to such Inventory.
"ELIGIBLE OTHER INVENTORY": at a particular date, the total value of
Inventory of the Borrower and its Subsidiaries (calculated as the lower of
(x) cost, determined on a first in a first out basis in accordance with
GAAP and stated on a basis consistent with the historical practices of the
Borrower on the date hereof before inventory reserves historically recorded
by the Borrower, and (y) fair market value: (a) which does not consist of
Tobacco Products Inventory, (b) which does not consist of fresh produce,
fresh meat or dairy products in an aggregate amount in excess of $250,000,
(c) which conforms in all respects to the representations and warranties
contained herein and in the Security Agreement, (d) which is located in the
United States of America, (e) which is subject to a perfected, first-
priority Lien in favor of the Administrative Agent pursuant to the Security
Agreement and which is not subject to any other Liens except Liens
permitted under subsection 7.3 (a), (b) or (h), (f) which is stored in the
Borrower's or any of its Subsidiaries' warehouses, which has been placed in
the Borrower's or any of its Subsidiaries' storage area or allocated to the
Borrower or any of its Subsidiaries in a third-party warehouse and
identified separately from the inventory of others, or which is in transit
between such third-party warehouses and Borrower's or any of its
Subsidiaries' warehouses, (g) to which the Borrower or any of its
Subsidiaries has good, valid and marketable title as sole owner and as to
which no other Person has asserted in writing any claim to right of
possession or dominion, (h) which is not raw materials, supplies, work-
in-process or packaging, packing or shipping materials, and (i) which the
Administrative Agent in its reasonable discretion based on the findings of
the on-site periodic field exams conducted pursuant to subsection 6.7 has
not otherwise determined to be unacceptable, EXCLUDING the aggregate amount
of the Inventory Reserves, Tax Reserves and Landlord Lien Reserves
allocable to such Inventory.
"ELIGIBLE TOBACCO AND CIGAR INVENTORY": at a particular date, the
total value of the Tobacco and Cigar Inventory of the Borrower and its
Subsidiaries (calculated as the lower of (x) cost, determined on a first in
first out basis in accordance with GAAP and stated on a basis consistent
with the historical practices of the Borrower on the date hereof before
inventory reserves historically recorded by the Borrower, and (y) fair
market value): (a) which is not Eligible Cigarette Inventory, (b) which
conforms in all respects to the representations and warranties contained
herein and in the Security Agreement, (c) which is located in the United
States of America, (d) which is subject to a perfected, first-priority Lien
in favor of the Administrative Agent pursuant to the Security Agreement and
which is not subject to any other Liens except Liens permitted under
subsection 7.3 (a), (b) or (h), (e) which is stored in the Borrower's or
any of its Subsidiaries' warehouses, which has been placed in the
Borrower's or any of its Subsidiaries' storage area or allocated to the
Borrower or any of its Subsidiaries in a third-party warehouse and
identified separately from the inventory of others, or which is in transit
between such third-party warehouses and Borrower's or any of its
Subsidiaries' warehouses, (f) to which the Borrower or any of its
Subsidiaries has good, valid and marketable title as sole owner and as to
which no other Person has asserted in writing any claim to right of
possession or dominion, (g) which is not raw materials, supplies, work-in-
process or packaging, packing or shipping materials, and
<PAGE>
11
(h) which the Administrative Agent in its reasonable discretion based on
the findings of the on-site periodic field exams conducted pursuant to
subsection 6.7 has not otherwise determined to be unacceptable, EXCLUDING
the aggregate amount of the Inventory Reserves, Tax Reserves and Landlord
Lien Reserves allocable to such Inventory.
"ELIGIBLE VENDOR RECEIVABLES": at a particular date, the total
outstanding balance of Vendor Receivables of the Borrower and its
Subsidiaries, determined in accordance with GAAP and stated on a basis
consistent with the historical practices of the Borrower as of the date
thereof (a) which are accounts within the meaning of Section 9-106 of the
New York Uniform Commercial Code (or any successor provisions thereto), (b)
which are bona fide, valid and legally enforceable obligations of the
parties thereto or the account debtor in respect thereof and arise in the
ordinary course of business to such account debtor or parties, (c) with
respect to which all consents, licenses, approvals or authorizations of, or
registrations or declarations with, any Governmental Authority required to
be obtained, effected or given in connection with the execution, delivery
and performance of such accounts receivable have been duly obtained,
effected or given, are in full force and effect and do not subject the
scope of such Accounts to any materially adverse limitation, either
specific or general in nature, (d) which conform in all other respects to
the representations and warranties contained herein and in the Security
Agreement, (e) which are not owed by an obligor which is (i) a Governmental
Authority, or (ii) an Affiliate or Subsidiary of the Borrower, (f) which
are not owed by an obligor which has taken any of the actions or suffered
any of the events of the kind described in subsection 8(f), (g) which are
assignable and subject to a perfected, first-priority Lien in favor of the
Administrative Agent pursuant to the Security Agreement and which are
not subject to any other Liens except Liens permitted under subsection
7.3(a), (b) or (h), (h) which are not subject to any defense, setoff,
recoupment or counterclaim, (i) to which the Borrower or any of its
Subsidiaries has good, valid and marketable title as sole owner and as to
which no other Person has asserted in writing any claim to right of
possession or dominion, (j) the obligor in respect of which is located in
the United States of America or in Canada, (k) which is denominated in
Dollars or in Canadian dollars, and (l) which the Administrative Agent in
its reasonable discretion based on the findings of the on-site periodic
field exams conducted pursuant to subsection 6.7 has not otherwise
determined to be unacceptable, EXCLUDING (1) the aggregate amount owing to
any obligor who is a supplier or creditor of the Borrower or any of its
Subsidiaries to the extent that there is a receivable balance due from
such obligor that would otherwise constitute an Eligible Vendor Receivable
and (2) 50% of any Vendor Receivable due 180 days or more from the
applicable date of determination.
"ENVIRONMENTAL LAWS": any and all foreign, Federal, state,
provincial, local or municipal laws, rules, guidelines, orders,
regulations, statutes, ordinances, codes, decrees, requirements of any
Governmental Authority or other Requirements of Law (including common law)
regulating, relating to or imposing liability or standards of conduct
concerning protection of employee health and safety or the environment, as
now or may at any time hereafter be in effect.
<PAGE>
12
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EUROCURRENCY RESERVE REQUIREMENTS": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities"
in Regulation D of such Board) maintained by a member bank of such System.
"EURODOLLAR BASE RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum equal to the
rate at which Chase is offered Dollar deposits at or about 10:00 A.M., New
York City time, two Business Days prior to the beginning of such Interest
Period in the interbank eurodollar market where the eurodollar and foreign
currency and exchange operations in respect of its Eurodollar Loans are
then being conducted for delivery on the first day of such Interest Period
for the number of days comprised therein and in an amount comparable to the
amount of its Eurodollar Loan to be outstanding during such Interest
Period.
"EURODOLLAR LOANS": Loans the rate of interest applicable to which is
based upon the Eurodollar Rate.
"EURODOLLAR RATE": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"EVENT OF DEFAULT": any of the events specified in Section 8,
PROVIDED that any requirement for the giving of notice, the lapse of time,
or both, or any other condition, has been satisfied.
"EXISTING CREDIT AGREEMENT": as defined in the recitals hereto.
"EXISTING CREDIT FACILITY": the Existing Credit Agreement.
"EXISTING HIGH YIELD SUBORDINATED DEBT": Indebtedness of the Borrower
evidenced by the High Yield Notes.
"EXITING LENDER": a lender under the Existing Credit Facility who is
not a Lender under this Agreement.
"FINANCING LEASE": any lease of property, real or personal, the
obligations of the lessee in respect of which are required in accordance
with GAAP to be capitalized on a balance sheet of the lessee.
<PAGE>
13
"GAAP": generally accepted accounting principles in the United States
of America in effect from time to time.
"GOVERNMENTAL AUTHORITY": any nation or government, any state,
province or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"GUARANTEE OBLIGATION": as to any Person (the "GUARANTEEING PERSON"),
any obligation of (a) the guaranteeing person or (b) another Person
(including, without limitation, any bank under any letter of credit) to
induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends
or other obligations (the "PRIMARY OBLIGATIONS") of any other third Person
(the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly,
including, without limitation, any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or
any property constituting direct or indirect security therefor, (ii) to
advance or supply funds (1) for the purchase or payment of any such primary
obligation or (2) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (iii) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; PROVIDED,
HOWEVER, that the term Guarantee Obligation shall not include endorsements
of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the stated
or determinable amount of the primary obligation in respect of which such
Guarantee Obligation is made and (b) the maximum amount for which such
guaranteeing person may be liable pursuant to the terms of the instrument
embodying such Guarantee Obligation, unless such primary obligation and
the maximum amount for which such guaranteeing person may be liable are
not stated or determinable, in which case the amount of such Guarantee
Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the Borrower in
good faith.
"GUARANTOR": any Person who delivered the Subsidiaries Guarantee.
"HEDGE AGREEMENTS": means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements.
"HIGH YIELD NOTES": $75,000,000 11-3/8% senior subordinated notes due
2003 of the Borrower issued pursuant to the indenture dated as of September
27, 1996.
"INDEBTEDNESS": of any Person at any date, (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities incurred in the
ordinary course of business and payable in accordance with customary
practices), (b) any other indebtedness of such Person which
<PAGE>
14
is evidenced by a note, bond, debenture or similar instrument, (c) all
obligations of such Person under Financing Leases, (d) all obligations of
such Person in respect of outstanding letters of credit, acceptances and
similar obligations created for the account of such Person, (e) all
obligations of such Person under Hedge Agreements and (f) all liabilities
secured by any Lien on any property owned by such Person even though such
Person has not assumed or otherwise become liable for the payment thereof.
Indebtedness of the Borrower and its Subsidiaries shall include, without
limitation, the liabilities of the Receivables Sub under the Receivables
Transaction whether or not such liabilities would be classified as
indebtedness on a Consolidated balance sheet of the Borrower under GAAP.
The principal amount of such liabilities at any time shall be deemed to be
the Invested Amount at such time.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INSOLVENT": pertaining to a condition of Insolvency.
"INTELLECTUAL PROPERTY": the collective reference to Copyrights,
Copyright Licenses, Patents, Patent Licenses, Trademarks and Trademark
Licenses, in each case, as defined in the Security Agreement.
"INTEREST EXPENSE": of any Person for any period the amount of
interest expense, both expensed and capitalized, of such Person, determined
on a consolidated basis in accordance with GAAP, for such period on the
aggregate principal amount of its Indebtedness.
"INTEREST PAYMENT DATE": (a) as to any ABR Loan, the last day of each
March, June, September and December, (b) as to any Eurodollar Loan having
an Interest Period of three months or less, the last day of such Interest
Period, and (c) as to any Eurodollar Loan having an Interest Period longer
than three months, each day which is three months or a whole multiple
thereof, after the first day of such Interest Period and the last day of
such Interest Period.
"INTEREST PERIOD": with respect to any Eurodollar Loan:
(i) initially, the period commencing on the borrowing or
conversion date, as the case may be, with respect to such Eurodollar
Loan and ending one, two, three or six months thereafter, as selected
by the Borrower in its notice of borrowing or notice of conversion, as
the case may be, given with respect thereto; and
(ii) thereafter, each period commencing on the last day of
the next preceding Interest Period applicable to such Eurodollar Loan
and ending one, two, three or six months thereafter, as selected by
the Borrower by irrevocable notice to the Administrative Agent not
less than three Business Days prior to the last day of the then
current Interest Period with respect thereto;
<PAGE>
15
PROVIDED that, all of the foregoing provisions relating to Interest Periods
are subject to the following:
(1) if any Interest Period would otherwise end on a day that is
not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be
to carry such Interest Period into another calendar month in which
event such Interest Period shall end on the immediately preceding
Business Day;
(2) any Interest Period that would otherwise extend beyond the
Termination Date shall end on the Termination Date;
(3) any Interest Period that begins on the last Business Day of
a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month; and
(4) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an
Interest Period for such Loan.
"INVENTORY": as defined in Section 9-109(4) of the UCC.
"INVENTORY RESERVE": with respect to any Inventory of the Borrower
and its Subsidiaries, determined on a first in first out basis in
accordance with GAAP and stated on a basis consistent with the historical
practices of the Borrower on the date hereof, which intent is to record a
deterioration in Inventory value for damaged, unsalable in the ordinary
course or otherwise unmerchantable items or which have been held for more
than six months in the case of Tobacco Products Inventory or more than
twelve months in the case of other Inventory or is stale.
"INVESTED AMOUNT": shall mean, with respect to any date of
determination, an amount equal to the outstanding principal amount of the
investment under the Receivables Transaction on such date.
"ISSUING BANK": Chase or an Affiliate of Chase designated by it, in
its capacity as issuer of any Letter of Credit; initially, Chase Manhattan
Bank Delaware.
"LANDLORD LIEN RESERVES": at any time, the aggregate amount of any
and all past due and current amounts then owing by the Borrower and its
Subsidiaries to landlords in respect of their warehouse facilities.
"L/C COMMITMENT": at any date of determination the lesser of
$40,000,000 and Revolving Credit Commitments at such date.
"L/C FEE PAYMENT DATE": the last day of each March, June, September,
and December, and the Termination Date.
<PAGE>
16
"L/C OBLIGATIONS": at any time, an amount equal to the sum of (a) the
aggregate then undrawn and unexpired amount of the then outstanding Letters
of Credit and (b) the aggregate amount of drawings under Letters of Credit
which have not then been reimbursed pursuant to subsection 3.5(a).
"L/C PARTICIPANTS": the collective reference to all the Lenders with
Revolving Credit Commitments other than the Issuing Bank.
"LEASE EXPENSE": for any Person for any period, the aggregate amount
of fixed and contingent rentals payable by such Person for such period with
respect to leases of real and personal property.
"LETTERS OF CREDIT": as defined in subsection 3.1(a).
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other
security interest or any preference, priority or other security agreement
or preferential arrangement of any kind or nature whatsoever (including,
without limitation, any conditional sale or other title retention agreement
and any Financing Lease having substantially the same economic effect as
any of the foregoing).
"LOAN": any loan made by any Lender pursuant to this Agreement.
"LOAN DOCUMENTS": this Agreement, any Notes, the Applications, any
Letters of Credit, the Subsidiaries Guarantee and the Security Documents.
"LOAN PARTIES": the Borrower and each Subsidiary of the Borrower
which is a party to a Loan Document.
"MAJORITY LENDERS": at any time, Lenders the Voting Percentages of
which aggregate more than 50%.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, assets, property, condition (financial or otherwise) or prospects
of the Borrower and its Subsidiaries taken as a whole or (b) the validity
or enforceability of this or any of the other Loan Documents or the rights
or remedies of the Administrative Agent or the Lenders hereunder or
thereunder.
"MATERIALS OF ENVIRONMENTAL CONCERN": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as
such in or under any Environmental Law, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"MULTIEMPLOYER PLAN": a Plan which is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
<PAGE>
17
"NET INCOME": of any Person for any period, net income of such Person,
determined on a consolidated basis in accordance with GAAP.
"NET WORTH": means, with respect to any Person as of any date of
determination, the stockholder's equity of such Person as of such date,
without giving effect to any cumulative gains or losses from foreign
currency translations PLUS minority interests of such Person as of such
date, in each case determined on a Consolidated basis and in accordance
with GAAP using the first-in, first-out inventory valuation method
(excluding any additional minimum pension liability); plus any reduction in
Net Worth attributable to the write-off on the Restatement Effective Date
of up to $700,000 of fees paid by the Borrower in connection with the
Existing Credit Facility.
"NON-EXCLUDED TAXES": as defined in subsection 2.16.
"NOTES": the Revolving Credit Notes.
"PARTICIPANT": as defined in subsection 10.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant
to Subtitle A of Title IV of ERISA.
"PERMITTED ACQUISITION": any acquisition of all or substantially all
the assets of, or shares or other equity interests in, a Person or division
or line of business of a Person or other significant assets of a Person
(other than inventory, leases, materials and equipment in the ordinary
course of business) if immediately after giving effect thereto: (a) no
Default or Event of Default shall have occurred and be continuing or would
result therefrom, (b) all transactions related thereto shall be consummated
in all material respects in accordance with applicable laws, (c) 100% of
the Capital Stock of any acquired or newly formed corporation, partnership,
association or other business entity are owned directly by the Borrower or
a Subsidiary and all actions required to be taken, if any, with respect to
such acquired or newly formed subsidiary under subsections 6.10 and 6.12
shall have been taken, (d)(i) the Borrower shall be in compliance, on a PRO
FORMA basis after giving effect to such acquisition or formation, with the
covenants contained in subsection 7.1 recomputed as at the last day of the
most recently ended fiscal quarter of the Borrower as if such acquisition
had occurred on the first day of each relevant period for testing such
compliance, and the Borrower shall have delivered to the Administrative
Agent a certificate of a Responsible Officer to such effect, together with
all relevant financial information for such subsidiary or assets (to the
extent reasonably available), and (ii) after giving effect to such
transaction, any acquired or newly formed subsidiary shall not be liable
for any Indebtedness (except for Indebtedness permitted by subsection 7.2)
and (e) the Borrower shall have delivered to the Administrative Agent
monthly projections on a PRO FORMA basis after giving effect to such
acquisition or formation, for each of the twelve months following the
proposed date of such acquisition or formation, which projections shall
indicate that (i) the Borrower would be in compliance with the covenants
contained in subsection 7.1 recomputed as of the last day of the most
recently ended month as if such acquisition had occurred on the first
day of each
<PAGE>
18
month for testing such compliance and (ii) the average amount of the
lesser of (1) the available Borrowing Base and (2) the Available Revolving
Credit Commitments shall be at least $15,000,000 during such 12 month
period and the Borrower shall have delivered to the Administrative Agent a
certificate of a Responsible Officer to such effect, PROVIDED, that
clauses (d)(i) and (e) above shall not apply to any acquisition the
aggregate amount of which is less than $5 million unless and until all
such acquisitions which are less than $5 million exceed $10 million in the
aggregate during the term of this Agreement.
"PERSON": an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
Governmental Authority or other entity of whatever nature.
"PLAN": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Borrower or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"PROPERTIES": as defined in subsection 4.17.
"RECEIVABLES SALES DOCUMENTS": shall mean the following documents,
each dated as of the Restatement Effective Date: the Receivables Sale and
Contribution Agreement, among the Borrower, CMIC, CM Midcontinent and the
Receivables Sub; the Pooling Agreement (the "POOLING AGREEMENT"), among the
Receivables Sub, the Borrower and Chase; the Servicing Agreement, among the
Receivables Sub, the Borrower and the other subsidiaries named therein; the
1998-1 Supplement, among the Receivables Sub, the Borrower and Chase; the
1998-2 Supplement, among the Receivables Sub, the Borrower, Chase and Park
Avenue Receivables Corporation and any other supplements to the Pooling
Agreement which may be entered into from time to time.
"RECEIVABLES SUB": the wholly-owned Subsidiary, formed for the
purpose of selling participations pursuant to the Receivables Transaction.
"RECEIVABLES TRANSACTION": the transaction contemplated by the
Receivables Sales Documents.
"REGISTER": as defined in subsection 10.6(d).
"REGULATION U": Regulation U of the Board of Governors of the Federal
Reserve System as in effect from time to time.
"REIMBURSEMENT OBLIGATION": the obligation of the Borrower to
reimburse the Issuing Bank pursuant to subsection 3.5(a) for amounts drawn
under Letters of Credit.
"REORGANIZATION": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section
4241 of ERISA.
<PAGE>
19
"REPORTABLE EVENT": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
Section 2615 or other PBGC regulations or guidance.
"REQUIREMENT OF LAW": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.
"RESPONSIBLE OFFICER": the chief executive officer, the president, or
the executive vice president of the Borrower or, with respect to financial
matters, the chief financial officer, the treasurer or the Controller of
the Borrower.
"RESPONSIBLE OFFICER'S CERTIFICATE": as defined in subsection 6.2(b).
"RESTATEMENT EFFECTIVE DATE": the date on which the conditions to
effectiveness set forth in subsection 5.1 shall be satisfied.
"REVOLVING CREDIT COMMITMENT": as to any Lender, the obligation of
such Lender to make Revolving Credit Loans to and/or issue or participate
in Letters of Credit issued on behalf of the Borrower hereunder in an
aggregate principal and/or face amount at any one time outstanding not to
exceed the amount set forth opposite such Lender's name on Schedule 1.1(a)
under the heading "Revolving Credit Commitment", as such amount may be
reduced from time to time pursuant to this Agreement or as such amount may
be adjusted from time to time pursuant to subsection 10.6; collectively, as
to all such Lenders, the "REVOLVING CREDIT COMMITMENTS".
"REVOLVING CREDIT COMMITMENT PERCENTAGE": as to any Lender (a) at any
time prior to the termination of the Revolving Credit Commitments, the
percentage of the Revolving Credit Commitments then constituted by such
Lender's Revolving Credit Commitment and (b) at any time after the
termination of the Revolving Credit Commitments, the percentage which (i)
the sum of (x) such Lender's Revolving Credit Loans then outstanding PLUS
(y) the product of such Lender's Revolving Credit Commitment Percentage
immediately prior to the termination of the Revolving Credit Commitments
(after giving effect to any permitted assignment pursuant to subsection
10.6) times the L/C Obligations then outstanding then constitutes of (ii)
the sum of (x) the aggregate principal amount of Revolving Credit Loans of
all the Lenders then outstanding PLUS (y) the aggregate L/C Obligations
then outstanding.
"REVOLVING CREDIT LOANS": as defined in subsection 2.1.
"REVOLVING CREDIT NOTE": as defined in subsection 2.5(e).
"SECURITY AGREEMENT": the Amended and Restated Security Agreement,
dated as of the date hereof, executed and delivered by the Borrower and
each of the
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20
Subsidiaries (other than the Receivables Sub), as the same may be further
amended, supplemented or otherwise modified from time to time.
"SECURITY DOCUMENTS": the collective reference to the Security
Agreement, the Borrower Stock Pledge Agreement and all other security
documents hereafter delivered to the Administrative Agent granting a Lien
on any asset or assets of any Person to secure the obligations and
liabilities of the Borrower hereunder and under any of the other Loan
Documents or to secure any guarantee of any such obligations and
liabilities.
"SENIOR DEBT": at any date of determination, Total Debt of the
Borrower and its Subsidiaries outstanding at such date of determination
MINUS all Subordinated Debt of the Borrower and its Subsidiaries
outstanding at such date of determination, as determined on a consolidated
basis in accordance with GAAP.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"SOSNICK ACQUISITION": the acquisition, consummated on January 28,
1997, of substantially all of the assets of the Melvin Sosnick Company and
Capital Cigar Company and the payment of related costs and expenses.
"SOLVENT": when used with respect to any Person, means that,
as of any date of determination, (a) the amount of the "present fair
saleable value" of the assets of such Person will, as of such date,
exceed the amount of all "liabilities of such Person, contingent or
otherwise", as of such date, as such quoted terms are determined in
accordance with applicable federal and state laws governing
determinations of the insolvency of debtors, (b) the present fair
saleable value of the assets of such Person will, as of such date, be
greater than the amount that will be required to pay the liability of
such Person on its debts as such debts become absolute and matured, (c)
such Person will not have, as of such date, an unreasonably small amount
of capital with which to conduct its business, and (d) such Person will
be able to pay its debts as they mature. For purposes of this
definition, (i) "debt" means liability on a "claim", and (ii) "claim"
means any (x) right to payment, whether or not such a right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured
or (y) right to an equitable remedy for breach of performance if such
breach gives rise to a right to payment, whether or not such right to an
equitable remedy is reduced to judgment, fixed, contingent, matured or
unmatured, disputed, undisputed, secured or unsecured.
"SPOT RATE": the rate of exchange quoted by the Administrative
Agent on such date of determination (at the hour on such date of
determination at which it customarily makes such determination) to prime
banks in the interbank market where its foreign currency exchange
operations in respect of Canadian Dollars are then being conducted for
the spot purchase of Canadian Dollars with Dollars.
"STANDBY LETTER OF CREDIT": as defined in subsection 3.1(b)(1)(A).
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21
"SUBORDINATED DEBT": the Existing High Yield Subordinated Debt and
any unsecured Indebtedness of the Borrower no part of the principal of
which is required to be paid (whether by way of mandatory sinking fund,
mandatory redemption, mandatory prepayment or otherwise) on or before the
Termination Date; the payment of the principal of and interest on which and
other obligations of the Borrower in respect thereof are subordinated to
the prior payment in full of the principal of and interest (including
post-petition interest) on the Loans and all other obligations and
liabilities of the Borrower to the Administrative Agent and the Lenders
hereunder on terms and conditions approved in writing by the Administrative
Agent; and all other terms and conditions of which are satisfactory in form
and substance to the Administrative Agent.
"SUBSIDIARIES GUARANTEE": the Guarantee, dated as of August 7, 1996,
executed and delivered by each Subsidiary (other than the Receivables Sub)
in connection with the Existing Credit Agreement, as the same may be
amended, supplemented or otherwise modified from time to time.
"SUBSIDIARY": as to any Person, a corporation, partnership or other
entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through
one or more intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to C/M Products, CMIC, CM Midcontinent and/or the
Receivables Sub, the only active Subsidiaries of the Borrower.
"SUPPLEMENTAL REPORTING": the reports, accounting records and
analyses delivered by the Borrower to the Administrative Agent pursuant to
subsection 6.2(f) and certified by a Responsible Officer, as described in
Exhibit E.
"TAX RESERVES": at any time, all unpaid and unbonded state and local
municipality tax stamp liabilities.
"TERMINATION DATE": the fifth anniversary of the Restatement
Effective Date.
"TOBACCO AND CIGAR INVENTORY": the cigar, chewing tobacco and other
tobacco products Inventory of the Borrower and its Subsidiaries in respect
thereof (excluding items classified as Cigarette Inventory).
"TOBACCO PRODUCTS INVENTORY": collectively, Cigarette Inventory and
Tobacco and Cigar Inventory.
"TOTAL DEBT": at any date of determination, all Indebtedness of
the Borrower and its Subsidiaries outstanding at such date of
determination (other than Indebtedness of the type set forth in clauses
(d) (with respect to letters of credit only), (e) and (f) in
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22
the definition thereof in subsection 1.1) as determined on a consolidated
basis in accordance with GAAP.
"TOTAL DEBT LEVERAGE RATIO": as of the last day of each fiscal
quarter of the Borrower, the ratio of (i) Consolidated Total Debt of the
Borrower at the last day of such fiscal quarter to (ii) Consolidated EBITDA
of the Borrower for the period of four consecutive fiscal quarters of the
Borrower ending on such last day. For purposes of computing Consolidated
Total Debt of the Borrower, the amount of Revolving Credit Loans and
Invested Amount included therein as of the last day of a fiscal quarter
shall be the average daily outstanding principal amount thereof for the
period of two consecutive fiscal quarters ending on such date.
"TRANCHE": the collective reference to Eurodollar Loans the then
current Interest Periods with respect to all of which begin on the same
date and end on the same later date (whether or not such Loans shall
originally have been made on the same day).
"TRANSFEREE": as defined in subsection 10.6(f).
"TYPE": as to any Loan, its nature as an ABR Loan or a Eurodollar
Loan.
"UCC": the Uniform Commercial Code as in effect in the State of New
York from time to time.
"UNCOVERED L/C AMOUNT": $20,000,000.
"UNIFORM CUSTOMS": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, as the same may be amended from time to time.
"US CASH COLLATERAL ACCOUNT": has the meaning specified in the
Security Agreement.
"US CASH EQUIVALENTS": (a) securities with maturities of one year or
less from the date of acquisition issued or fully guaranteed or insured by
the United States Government or any agency thereof, (b) certificates of
deposit and eurodollar time deposits with maturities of one year or less
from the date of acquisition and overnight bank deposits of any Lender or
of any commercial bank having capital and surplus in excess of
$500,000,000, (c) repurchase obligations of any Lender or of any commercial
bank satisfying the requirements of clause (b) of this definition, having a
term of not more than 30 days with respect to securities issued or fully
guaranteed or insured by the United States Government, (d) commercial paper
of a domestic issuer rated at least A-2 by Standard and Poor's Rating Group
("S&P") or P-2 by Moody's Investors Service, Inc. ("MOODY'S"), (e)
securities with maturities of one year or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the
United States, by any political subdivision or taxing authority of any such
state, commonwealth or territory or by any foreign government, the
securities of which state, commonwealth, territory, political subdivision,
taxing authority or foreign
<PAGE>
23
government (as the case may be) are rated at least A by S&P or A by
Moody's, (f) securities with maturities of one year or less from the
date of acquisition backed by standby letters of credit issued by any
Lender or any commercial bank satisfying the requirements of clause (b)
of this definition or (g) shares of money market mutual or similar funds
which invest primarily in assets satisfying the requirements of clauses
(a) through (f) of this definition.
"VENDOR RECEIVABLES": at a particular date, amounts not subject to
offset or counter-claim, that are owing to the Borrower and its
Subsidiaries from vendors whose creditworthiness is reasonably satisfactory
to the Administrative Agent, that relate to marketing and promotional
incentive programs and manufacturing rights agreements historically offered
to the Borrower and its Subsidiaries from such vendors and are payable in
cash.
"VOTING PERCENTAGE": as to any Lender (a) at any time prior to the
termination of the Revolving Credit Commitments, the percentage which such
Lender's Revolving Credit Commitment then constitutes of the Revolving
Credit Commitments of all the Lenders then outstanding, and (b) at any time
after the termination of the Revolving Credit Commitments, the percentage
which (i) the sum of (x) the principal amount of such Lender's Loans then
outstanding PLUS (y) the product of such Lender's Revolving Credit
Commitment Percentage (as in effect immediately prior to the termination of
the Revolving Credit Commitments) times the L/C Obligations then
outstanding then constitutes of (ii) the sum of (x) the aggregate principal
amount of Loans of all the Lenders then outstanding PLUS (y) the aggregate
L/C Obligations of all the Lenders then outstanding.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in any Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in any Notes, and any certificate or other
document made or delivered pursuant hereto, accounting terms relating to the
Borrower and its Subsidiaries not defined in subsection 1.1 and accounting terms
partly defined in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references are to this Agreement unless otherwise
specified. The phrase "date hereof" when used in this Agreement shall refer to
the Restatement Effective Date.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(e) Notwithstanding anything to the contrary herein, for purposes of
making all calculations in connection with the covenants contained in Section 7,
all accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with GAAP as in effect on
the date of this Agreement consistently applied. In the
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24
event of any material difference at any time between GAAP in effect on the
date of this Agreement and GAAP from time to time in effect, the certificate
of a Responsible Officer required pursuant to subsection 6.2(b) shall include
a reconciliation of the calculations required thereby with the financial
statements being delivered with such certificate.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 REVOLVING CREDIT COMMITMENTS. (a) Subject to the terms and
conditions hereof, each Lender severally agrees to make revolving credit loans
("REVOLVING CREDIT LOANS") to the Borrower from time to time during the
Commitment Period in an aggregate principal amount at any one time outstanding
which, when added to such Lender's Revolving Credit Commitment Percentage of the
then outstanding L/C Obligations, does not exceed the amount of such Lender's
Revolving Credit Commitment, provided that no Lender shall be required to make a
Revolving Credit Loan to the extent that, after giving effect thereto, the
Aggregate Covered Outstanding Revolving Extensions of Credit at such time would
exceed the Borrowing Base. During the Commitment Period the Borrower may use
the Revolving Credit Commitments by borrowing, prepaying the Revolving Credit
Loans in whole or in part, and reborrowing, all in accordance with the terms and
conditions hereof.
(b) The Revolving Credit Loans may from time to time be (i) Eurodollar
Loans, (ii) ABR Loans, or (iii) a combination thereof, as determined by the
Borrower and notified to the Administrative Agent in accordance with subsections
2.2 and 2.8, PROVIDED that no Revolving Credit Loan shall be made as a
Eurodollar Loan after the day that is one month prior to the Termination Date.
2.2 PROCEDURE FOR REVOLVING CREDIT BORROWING. The Borrower may borrow
under the Revolving Credit Commitments during the Commitment Period on any
Business Day, PROVIDED that the Borrower shall give the Administrative Agent
irrevocable notice which notice must be received by the Administrative Agent
prior to 1:00 P.M., New York City time, (a) three Business Days prior to the
requested Borrowing Date, if all or any part of the requested Revolving Credit
Loans are to be initially Eurodollar Loans, or (b) on the requested Borrowing
Date, otherwise, specifying (i) the amount to be borrowed, (ii) the requested
Borrowing Date, (iii) whether the borrowing is to be of Eurodollar Loans, ABR
Loans or a combination thereof and (iv) if the borrowing is to be entirely or
partly of Eurodollar Loans, the amount of such Loan and the length of the
initial Interest Period therefor. Each borrowing under the Commitments shall be
in an amount equal to (x) in the case of ABR Loans, $500,000 or a whole multiple
of $100,000 in excess thereof (or, if the then Available Revolving Credit
Commitments are less than $500,000, such lesser amount) and (y) in the case of
Eurodollar Loans, $1,000,000 or a whole multiple of $100,000 in excess thereof.
Upon receipt of any such notice from the Borrower, the Administrative Agent
shall promptly notify each Lender thereof. Each Lender will make the amount of
its pro rata share of each borrowing available to the Administrative Agent for
the account of the Borrower at the office of the Administrative Agent specified
in subsection 10.2 prior to 2:30 P.M., New York City time, on the Borrowing Date
requested by the Borrower in funds immediately available to the Administrative
Agent. Such borrowing will then be made available to the Borrower by the
Administrative Agent crediting the account of the Borrower on the books of such
office with
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25
the aggregate of the amounts made available to the Administrative Agent by the
Lenders and in like funds as received by the Administrative Agent.
2.3 FEES. (a) The Borrower agrees to pay to the Administrative
Agent for the account of each Lender a commitment fee for the period from and
including the first day of the Commitment Period to but not including the
Termination Date, computed at a rate per annum equal to the Applicable
Commitment Fee Rate then in effect on the average daily amount of the
Available Revolving Credit Commitment of such Lender during the period for
which payment is made, payable quarterly in arrears on the last day of each
March, June, September and December and on the Termination Date or such
earlier date as the Revolving Credit Commitments shall terminate as provided
herein, commencing on the first of such dates to occur after the date hereof.
(b) The Borrower agrees to pay to the Administrative Agent on the
Restatement Effective Date and on each anniversary thereof, the administration
fee as specified in the Fee Letter dated January 23, 1998.
2.4 TERMINATION OR REDUCTION OF COMMITMENTS. The Borrower shall have
the right, upon not less than five Business Days' notice to the Administrative
Agent, to terminate the Commitments or, from time to time, to reduce the amount
of the Commitments provided that no such termination or reduction shall be
permitted if, after giving effect thereto and to any prepayments of the
Revolving Credit Loans made on the effective date thereof, the Aggregate
Outstanding Revolving Extensions of Credit would exceed the Revolving Credit
Commitments then in effect. Any such reduction shall be in an amount equal to
$100,000 or a whole multiple thereof and shall reduce permanently the Revolving
Credit Commitments then in effect.
2.5 REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender the then unpaid principal amount of each Revolving Credit Loan of
such Lender on the Termination Date (or such earlier date on which the Revolving
Credit Loans become due and payable pursuant to Section 8). The Borrower hereby
further agrees to pay interest on the unpaid principal amount of the Loans from
time to time outstanding from the date hereof until payment in full thereof at
the rates per annum, and on the dates, set forth in subsection 2.11.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Borrower to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant to
subsection 10.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Revolving Credit Loan made hereunder, the Type
thereof and each Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower to each Lender hereunder and (iii) both the amount of any sum received
by the Administrative Agent hereunder from the Borrower and each Lender's share
thereof.
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26
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 2.5(b), absent manifest error, shall, to the
extent permitted by applicable law, be PRIMA FACIE evidence of the existence and
amounts of the obligations of the Borrower therein recorded; PROVIDED, HOWEVER,
that the failure of any Lender or the Administrative Agent to maintain the
Register or any such account, or any error therein, shall not in any manner
affect the obligation of the Borrower to repay (with applicable interest) the
Loans made to such Borrower by such Lender in accordance with the terms of this
Agreement.
(e) The Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the Borrower will execute and deliver to such Lender a
promissory note of the Borrower evidencing the Revolving Credit Loans of such
Lender, substantially in the form of Exhibit A with appropriate insertions as to
date and principal amount (a "REVOLVING CREDIT NOTE").
2.6 OPTIONAL PREPAYMENTS. The Borrower may at any time and from time
to time, prepay the Loans, in whole or in part, without premium or penalty, (i)
with respect to Eurodollar Loans, upon at least three Business Days' irrevocable
notice to the Administrative Agent, specifying the date and amount of prepayment
and (ii) with respect to ABR Loans, upon same day irrevocable notice if such
notice is received by the Administrative Agent by 1:00 P.M., New York City time,
on such day, specifying the date and amount of prepayment; and whether the
prepayment is of Eurodollar Loans, ABR Loans or a combination thereof, and, if
of a combination thereof, the amount allocable to each. Prepayments of
Eurodollar Loans shall be subject to the provisions of subsection 2.17. Upon
receipt of any such notice the Administrative Agent shall promptly notify each
Lender thereof. If any such notice is given, the amount specified in such
notice shall be due and payable on the date specified therein, together with any
amounts payable pursuant to subsection 2.17. Partial prepayments of ABR Loans
shall be in an aggregate principal amount of a minimum of $500,000 and partial
prepayments of Eurodollar Loans shall be in an aggregate principal amount of a
minimum of $1,000,000.
2.7 MANDATORY PREPAYMENTS AND OTHER REDUCTIONS OF REVOLVING CREDIT
LOANS. If, at any time, the Aggregate Covered Outstanding Revolving Extensions
of Credit at such time exceed the Borrowing Base at such time, the Borrower
shall, without notice or demand, immediately repay the Revolving Credit Loans in
an aggregate principal amount equal to the lesser of (i) the amount of such
excess and (ii) the aggregate principal amount of Revolving Credit Loans then
outstanding, together with interest accrued to the date of such payment or
prepayment on the principal so prepaid and any amounts payable under subsection
2.17 in connection therewith. To the extent that after giving effect to any
prepayment of the Revolving Credit Loans required by the preceding sentence, the
Aggregate Covered Outstanding Revolving Extensions of Credit at such time exceed
the Borrowing Base at such time, the Borrower shall, without notice or demand,
immediately deposit in a Cash Collateral Account upon terms reasonably
satisfactory to the Administrative Agent an amount equal to the lesser of (i)
the aggregate then outstanding L/C Obligations and (ii) the amount of such
remaining excess. The Administrative Agent shall apply any cash deposited in
the Cash Collateral Account (to the extent thereof) to pay any Reimbursement
Obligations which become due thereafter, PROVIDED that the Administrative Agent
shall release to the Borrower from time to time such portion of the amount on
deposit in the Cash Collateral Account
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27
which is equal to the amount by which the Borrowing Base at such time plus
the amount on deposit in the Cash Collateral Account exceeds the Aggregate
Outstanding Revolving Extensions of Credit at such time. "CASH COLLATERAL
ACCOUNT" means an account established by the Borrower with the Administrative
Agent and over which the Administrative Agent shall have exclusive dominion
and control, including the right of withdrawal for application in accordance
with this subsection 2.7.
2.8 CONVERSION AND CONTINUATION OPTIONS. (a) The Borrower may
elect from time to time to convert Eurodollar Loans to ABR Loans by giving
the Administrative Agent at least two Business Days' prior irrevocable notice
of such election, PROVIDED that any such conversion of Eurodollar Loans may
only be made on the last day of an Interest Period with respect thereto. The
Borrower may elect from time to time to convert ABR Loans to Eurodollar Loans
by giving the Administrative Agent at least three Business Days' prior
irrevocable notice of such election. Any such notice of conversion to
Eurodollar Loans shall specify the length of the initial Interest Period or
Interest Periods therefor. Upon receipt of any such notice the Administrative
Agent shall promptly notify each Lender thereof. All or any part of
outstanding Eurodollar Loans and ABR Loans may be converted as provided
herein, PROVIDED that (i) no Loan may be converted into a Eurodollar Loan
when any Event of Default has occurred and is continuing and the
Administrative Agent has or the Majority Lenders have determined that such a
conversion is not appropriate and (ii) no Loan may be converted into a
Eurodollar Loan after the date that is one month prior to the Termination
Date.
(b) Any Eurodollar Loans may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
notice to the Administrative Agent, in accordance with the applicable provisions
of the term "Interest Period" set forth in subsection 1.1, of the length of the
next Interest Period to be applicable to such Loans, PROVIDED that no Eurodollar
Loan may be continued as such (i) when any Event of Default has occurred and is
continuing and the Administrative Agent has or the Majority Lenders have
determined that such a continuation is not appropriate or (ii) after the date
that is one month prior to the Termination Date and PROVIDED, FURTHER, that if
the Borrower shall fail to give such notice or if such continuation is not
permitted such Loans shall be automatically converted to ABR Loans on the last
day of such then expiring Interest Period.
2.9 MAXIMUM NUMBER OF TRANCHES. In no event shall there be more than
ten (10) Eurodollar Tranches outstanding at any time.
2.10 INTEREST RATES AND PAYMENT DATES. (a) Each Eurodollar Loan shall
bear interest for each day during each Interest Period with respect thereto at a
rate per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to the
ABR plus the Applicable Margin.
(c) If all or a portion of (i) any principal of any Loan, (ii) any
interest payable thereon, (iii) any commitment fee or (iv) any other amount
payable hereunder shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), the principal of the Loans and any such overdue
interest, commitment fee or other amount shall bear interest
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28
at a rate per annum which is (x) in the case of principal, the rate that
would otherwise be applicable thereto pursuant to the foregoing provisions of
this subsection plus 2% or (y) in the case of any such overdue interest,
commitment fee or other amount, the rate described in paragraph (b) of this
subsection plus 2%, in each case from the date of such non-payment until such
overdue principal, interest, commitment fee or other amount is paid in full
(as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, PROVIDED that interest accruing pursuant to paragraph (c) of this
subsection shall be payable from time to time on demand.
(e) Prior to the Restatement Effective Date, all principal amounts
outstanding under the Existing Credit Facilities shall continue to be subject to
the interest rates provided in
the Existing Credit Agreement. From and after the Restatement Effective
Date, the interest rates provided in subsections 2.10(a) and (b) hereof shall
apply to all principal amounts then outstanding hereunder.
2.11 COMPUTATION OF INTEREST AND FEES. (a) Amounts payable under
this Agreement including interest, shall be calculated on the basis of a
360-day year for the actual days elapsed, except that with respect to (i)
interest calculated on the basis of the Prime Rate and (ii) commitment fees,
such amounts shall be calculated on the basis of a 365- (or 366-, as the case
may be) day year for the actual days elapsed. The Administrative Agent shall
as soon as practicable, notify the Borrower and the affected Lenders of each
determination of a Eurodollar Rate. Any change in the interest rate on a
Loan resulting from a change in the ABR or the Eurocurrency Reserve
Requirement shall become effective as of the opening of business on the day
on which such change becomes effective. The Administrative Agent shall, as
soon as practicable, notify the Borrower and the affected Lenders of the
effective date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Borrower, deliver to the
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate pursuant to subsection 2.10(a), (b) or (c).
(c) For purposes of the INTEREST ACT (Canada), whenever any interest
under the Loan Documents is calculated using a rate based on a year of 360 days,
such rate determined pursuant to such calculation, when expressed as an annual
rate, is equivalent to (i) the applicable rate based on a year of 360 days, (ii)
multiplied by the actual number of days in the calendar year in which the period
for which such interest is payable (or compounded) ends, and (iii) divided by
360.
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2.12 INABILITY TO DETERMINE INTEREST RATE. If prior to the first day
of any Interest Period:
(a) the Administrative Agent shall have determined (which
determination shall be conclusive and binding upon the Borrower) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the Eurodollar Rate for such
Interest Period, or
(b) the Administrative Agent shall have received notice from the
Majority Lenders that the Eurodollar Rate determined or to be determined
for such Interest Period will not adequately and fairly reflect the cost to
such Lenders (as conclusively certified by such Lenders) of making or
maintaining their affected Loans during such Interest Period;
the Administrative Agent shall give telecopy or telephonic notice thereof to
the Borrower and the Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans requested to be made on the first
day of such Interest Period shall be made as ABR Loans, (y) any Loans that
were to have been converted on the first day of such Interest Period to
Eurodollar Loans shall be converted to or continued as ABR Loans and (z) any
outstanding Eurodollar Loans shall be converted, on the first day of such
Interest Period, to ABR Loans. Until such notice has been withdrawn by the
Administrative Agent, no further Eurodollar Loans shall be made or continued
as such, nor shall the Borrower have the right to convert ABR Loans to
Eurodollar Loans.
2.13 PRO RATA TREATMENT AND PAYMENTS. (a) All payments (including
prepayments) to be made by the Borrower hereunder, whether on account of
principal, interest, fees or otherwise, shall be made without set off or
counterclaim and shall be made prior to 12:00 Noon, New York City time, on the
due date thereof to the Administrative Agent, for the account of the appropriate
Lenders, at the Administrative Agent's office specified in subsection 10.2
(except as otherwise provided herein) in Dollars and in immediately available
funds. The Administrative Agent shall distribute such payments to the Lenders
entitled to receive the same promptly upon receipt in like funds as received.
If any payment hereunder (other than payments on Eurodollar Loans) becomes due
and payable on a day other than a Business Day, such payment shall be extended
to the next succeeding Business Day, and, with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension. If any payment on a Eurodollar Loan becomes due and payable on a day
other than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day (and, with respect to payments of principal, interest
thereon shall be payable at the then applicable rate during such extension)
unless the result of such extension would be to extend such payment into another
calendar month, in which event such payment shall be made on the immediately
preceding Business Day.
(b) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount that would constitute its portion of such borrowing available to the
Administrative Agent, the Administrative Agent may assume that such Lender is
making such amount available to the Administrative Agent, and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrower a
corresponding amount. If such amount is not made available to the
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Administrative Agent by the required time on the Borrowing Date therefor, such
Lender shall pay to the Administrative Agent, on demand, such amount with
interest thereon at a rate equal to the daily average Federal Funds Effective
Rate for the period until such Lender makes such amount immediately available to
the Administrative Agent. A certificate of the Administrative Agent submitted
to any Lender with respect to any amounts owing under this subsection shall be
conclusive in the absence of manifest error. If such Lender's portion of such
borrowing is not made available to the Administrative Agent by such Lender
within three Business Days of such Borrowing Date, the Administrative Agent
shall also be entitled to recover such amount with interest thereon at the rate
per annum applicable to ABR Loans hereunder, on demand, from the Borrower.
(c) Each borrowing by the Borrower of Revolving Credit Loans shall be
made ratably from the Lenders in accordance with their respective Revolving
Credit Commitment Percentages. Any reduction of the Revolving Credit
Commitments shall be made ratably among the Lenders in accordance with their
respective Revolving Credit Commitment Percentages. Each payment (including
each prepayment) by the Borrower on account of principal of and interest on the
Revolving Credit Loans shall be made PRO RATA according to the respective
outstanding principal amounts of the Revolving Credit Loans then held by the
Lenders.
2.14 ILLEGALITY. Notwithstanding any other provision herein, if
the adoption of or any change in any Requirement of Law or in the
interpretation or application thereof shall make it unlawful for any Lender
to make or maintain Eurodollar Loans as contemplated by this Agreement, (a)
the commitment of such Lender hereunder to make Eurodollar Loans, continue
Eurodollar Loans as such and convert ABR Loans to Eurodollar Loans shall
forthwith be cancelled and (b) such Lender's Loans then outstanding as
Eurodollar Loans, if any, shall be converted automatically to ABR Loans on
the respective last days of the then current Interest Periods with respect to
such Loans or within such earlier period as required by law. If any such
conversion of a Eurodollar Loan occurs on a day which is not the last day of
the then current Interest Period with respect thereto, the Borrower shall pay
to such Lender such amounts, if any, as may be required pursuant to
subsection 2.17.
2.15 REQUIREMENTS OF LAW. (a) If the adoption of or any change in any
Requirement of Law or in the interpretation or application thereof or compliance
by any Lender with any request or directive (whether or not having the force of
law) from any central bank or other Governmental Authority made subsequent to
the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Note or any Eurodollar Loan made by
it, or change the basis of taxation of payments to such Lender in
respect thereof (except for Non-Excluded Taxes covered by subsection
2.16 and changes in the rate of tax on the overall net income of such
Lender);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds by, any
office of such Lender which is not otherwise included in the determination
of the Eurodollar Rate hereunder; or
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(iii) shall impose on such Lender any other condition; and the
result of any of the foregoing is to increase the cost to such Lender, by
an amount which such Lender deems to be material, of making, converting
into, continuing or maintaining Eurodollar Loans or to reduce any amount
receivable hereunder in respect thereof,
then, in any such case, the Borrower shall promptly pay such Lender such
additional amount or amounts as will compensate such Lender for such increased
cost or reduced amount receivable.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under any Letter of Credit to a
level below that which such Lender or such corporation could have achieved but
for such adoption, change or compliance (taking into consideration such Lender's
or such corporation's policies with respect to capital adequacy) by an amount
deemed by such Lender to be material, then from time to time, the Borrower shall
promptly pay to such Lender such additional amount or amounts as will compensate
such Lender for such reduction.
(c) If any Lender becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify the Borrower (with a
copy to the Administrative Agent) of the event by reason of which it has
become so entitled. A certificate as to any additional amounts payable
pursuant to this subsection submitted by such Lender to the Borrower (with a
copy to the Administrative Agent) shall be conclusive in the absence of
manifest error. The agreements in this subsection shall survive the
termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder.
2.16 TAXES. (a) All payments made by the Borrower under this
Agreement and any Notes shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority, excluding net income taxes and
franchise taxes (imposed in lieu of net income taxes) imposed on the
Administrative Agent or any Lender as a result of a present or former
connection between the Administrative Agent or such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from the Administrative Agent or such Lender having
executed, delivered or performed its obligations or received a payment under,
or enforced, this Agreement or any Note). If any such non-excluded taxes,
levies, imposts, duties, charges, fees deductions or withholdings
("NON-EXCLUDED TAXES") are required to be withheld from any amounts payable
to the Administrative Agent or any Lender hereunder or under any Note, the
amounts so payable to the Administrative Agent or such Lender shall be
increased to the extent necessary to yield to the Administrative Agent or
such Lender (after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified in
this Agreement, PROVIDED, HOWEVER, that the Borrower shall not be required to
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32
increase any such amounts payable to any Lender that is not incorporated or
organized under the laws of the United States of America or a state thereof
if such Lender fails to comply with the requirements of paragraph (b) of this
subsection. Whenever any Non-Excluded Taxes are payable by the Borrower, as
promptly as possible thereafter the Borrower shall send to the Administrative
Agent for its own account or for the account of such Lender, as the case may
be, a certified copy of an original official receipt received by the Borrower
showing payment thereof. If the Borrower fails to pay any Non-Excluded Taxes
when due to the appropriate taxing authority or fails to remit to the
Administrative Agent the required receipts or other required documentary
evidence, the Borrower shall indemnify the Administrative Agent and the
Lenders for any incremental taxes, interest or penalties that may become
payable by the Administrative Agent or any Lender as a result of any such
failure. The agreements in this subsection shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder.
(b) Each Lender that is not incorporated or organized under the laws
of the United States of America or a state thereof shall:
(i) deliver to the Borrower and the Administrative Agent, prior to
the Restatement Effective Date in the case of any Lenders not a party to
the Existing Credit Facility, (A) two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, or successor applicable
form, as the case may be, and (B) an Internal Revenue Service Form W-8 or
W-9, or successor applicable form, as the case may be;
(ii) deliver to the Borrower and the Administrative Agent two
further copies of any such form or certification on or before the date that
any such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Borrower; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Borrower or
the Administrative Agent;
unless in any such case an event (including, without limitation, any change in
treaty, law or regulation) has occurred after the date of this Agreement and
prior to the date on which any such delivery would otherwise be required which
renders all such forms inapplicable or which would prevent such Lender from duly
completing and delivering any such form with respect to it and such Lender so
advises the Borrower and the Administrative Agent. Such Lender shall certify
(i) in the case of a Form 1001 or 4224, that it is entitled to receive payments
under this Agreement or the Notes without deduction or withholding of any United
States federal income taxes and (ii) in the case of a Form W-8 or W-9, that it
is entitled to an exemption from United States backup withholding tax. Each
Person that shall become a Lender or a Participant pursuant to subsection 10.6
shall, upon the effectiveness of the related transfer, be required to provide
all of the forms and statements required pursuant to this subsection, provided
that in the case of a Participant such Participant shall furnish all such
required forms and statements to the Lender from which the related participation
shall have been purchased.
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(c) Neither the Administrative Agent nor any Lender shall be entitled
to claim any indemnity payment or additional amount payable pursuant to this
subsection 2.16 with respect to any tax unless the Administrative Agent or such
Lender, as the case may be, shall have notified the Borrower that it will demand
compensation for such payment or amount not more than 120 days after the date on
which the Administrative Agent or such Lender, as the case may be, becomes aware
of the costs or reductions giving rise to such claim. Failure on the part of
the Administrative Agent or such Lender, as the case may be, to demand any
indemnity payment of any such additional amount with respect to any period shall
not constitute a waiver of the Administrative Agent's or such Lender's, right,
as the case may be, to demand compensation with respect to any other period.
2.17 INDEMNITY. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense which such Lender may sustain
or incur as a consequence of (a) default by the Borrower in making a borrowing
of, conversion into or continuation of Eurodollar Loans after the Borrower has
given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (c) the making of a prepayment of Eurodollar Loans on a day which
is not the last day of an Interest Period with respect thereto. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
such Interest Period (or, in the case of a failure to borrow, convert or
continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin referred to in subsection
2.10, included therein, if any) over (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank eurodollar market. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.18 CHANGE OF LENDING OFFICE. Each Lender agrees that if it makes
any demand for payment under subsection 2.15 or 2.16(a), or if any adoption or
change of the type described in subsection 2.14 shall occur with respect to it,
it will use reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions and so long as such efforts would not be
disadvantageous to it, as determined in its sole discretion) to designate a
different lending office if the making of such a designation would reduce or
obviate the need for the Borrower to make payments under subsection 2.15 or
2.16(a), or would eliminate or reduce the effect of any adoption or change
described in subsection 2.14.
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SECTION 3. LETTERS OF CREDIT
3.1 L/C COMMITMENT.
(a) Subject to the terms and conditions hereof, the Issuing Bank, in
reliance on the agreements of the other Lenders set forth in subsection 3.4(a)
agrees to issue letters of credit ("LETTERS OF CREDIT") for the account of the
Borrower on any Business Day during the Commitment Period in such form as may be
approved from time to time by the Issuing Bank; PROVIDED that the Issuing Bank
shall have no obligation to issue any Letter of Credit if, after giving effect
to such issuance, (1) the L/C Obligations would exceed the L/C Commitment, (2)
the Available Revolving Credit Commitments would be less than zero or (3) the
Aggregate Covered Outstanding Revolving Extensions of Credit at such time would
exceed the Borrowing Base at such time.
(b) Each Letter of Credit shall:
(1) be denominated in Dollars and shall be either (A) a standby
letter of credit issued to support obligations of the Borrower (a "STANDBY
LETTER OF CREDIT"), or (B) a commercial letter of credit issued in respect
of the purchase of goods or services by the Borrower and its Subsidiaries
in the ordinary course of business (a "COMMERCIAL LETTER OF CREDIT") and
(2) expire no later than the earlier of (i) one year after the
date of issuance and (ii) five Business Days prior to the Termination Date;
provided that any Letter of Credit with a one-year tenor may provide for
the renewal thereof for additional one-year periods (which shall in no
event extend beyond the date referred to in clause (ii) above).
(c) Each Letter of Credit shall be subject to the Uniform Customs and,
to the extent not inconsistent therewith, the laws of the State of New
York.
(d) The Issuing Bank shall not at any time be obligated to issue any
Letter of Credit hereunder if such issuance would conflict with, or cause
the Issuing Bank or any L/C Participant to exceed any limits imposed by,
any applicable Requirement of Law.
3.2 PROCEDURE FOR ISSUANCE OF LETTERS OF CREDIT.
The Borrower may from time to time request that the Issuing Bank
issue a Letter of Credit by delivering to the Issuing Bank at its address for
notices specified herein an Application therefor, completed to the
satisfaction of the Issuing Bank, and such other certificates, documents and
other papers and information as the Issuing Bank may request. Upon receipt of
any Application, the Issuing Bank will process such Application and the
certificates, documents and other papers and information delivered to it in
connection therewith in accordance with its customary procedures and shall
promptly issue the Letter of Credit requested thereby (but in no event shall
the Issuing Bank be required to issue any Letter of Credit earlier than three
Business Days after its receipt of the Application therefor and all such
other certificates, documents and other papers and information relating
thereto)
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by issuing the original of such Letter of Credit to the beneficiary thereof
or as otherwise may be agreed by the Issuing Bank and the Borrower. The
Issuing Bank shall furnish a copy of such Letter of Credit to the Borrower
promptly following the issuance thereof.
3.3 FEES, COMMISSIONS AND OTHER CHARGES.
(a) The Borrower shall pay to the Administrative Agent, for the
account of the Issuing Bank, a fronting fee with respect to each Letter of
Credit in an amount equal to 1/4 of 1% per annum of the face amount of such
Letter of Credit. Such fronting fee shall be payable in arrears on each L/C Fee
Payment Date and shall be nonrefundable.
(b) Subject to subsection 3.3(e), the Borrower shall pay to the
Administrative Agent, for the account of the Issuing Bank and the L/C
Participants, a letter of credit commission with respect to each Letter of
Credit, computed for the period from the date of issuance thereof at a per annum
rate equal to the Applicable Margin (less any fronting fee paid pursuant to
subsection 3.3(a)) then in effect for Eurodollar Loans, calculated on the basis
of a 360 day year, of the aggregate average daily amount available to be drawn
under such Letter of Credit during the period for which payment is being made.
Such fee shall be payable to the Issuing Bank and the L/C Participants to be
shared ratably among them in accordance with their respective Revolving Credit
Commitment Percentages. Such commissions shall be payable in arrears on each
L/C Fee Payment Date.
(c) In addition to the foregoing fees and commissions, the Borrower
shall pay or reimburse the Issuing Bank for such normal and customary fees as
are incurred or charged by the Issuing Bank in issuing, effecting payment under,
amending or otherwise administering any Letter of Credit.
(d) The Administrative Agent shall, promptly following its receipt
thereof, distribute to the Issuing Bank and the L/C Participants all fees and
commissions received by the Administrative Agent for their respective accounts
pursuant to this subsection.
(e) Prior to the Restatement Effective Date, the Borrower shall pay a
letter of credit commission with respect to each Letter of Credit issued under
the Existing Credit Facility at a per annum rate as provided under the Existing
Credit Agreement. From and after the Restatement Effective Date, the letter of
credit commission provided in subsection 3.3(b) hereof shall apply to all
outstanding Letters of Credit issued prior to the Restatement Effective Date.
3.4 L/C PARTICIPATIONS.
(a) The Issuing Bank irrevocably agrees to grant and hereby grants to
each L/C Participant, and, to induce the Issuing Bank to issue Letters of Credit
hereunder, each L/C Participant irrevocably agrees to accept and purchase and
hereby accepts and purchases from the Issuing Bank, on the terms and conditions
hereinafter stated, for such L/C Participant's own account and risk an undivided
interest equal to such L/C Participant's Revolving Credit Commitment Percentage
in the Issuing Bank's obligations and rights under each Letter of Credit issued
hereunder and the amount of each draft paid by the Issuing Bank thereunder. Each
L/C Participant unconditionally and irrevocably agrees with the Issuing Bank
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36
that, if a draft is paid under any Letter of Credit for which the Issuing Bank
is not reimbursed in full by the Borrower in accordance with the terms of this
Agreement, such L/C Participant shall pay to the Issuing Bank upon demand at the
Issuing Bank's address for notices specified herein an amount equal to such L/C
Participant's Revolving Credit Commitment Percentage of the amount of such
draft, or any part thereof, which is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to the
Issuing Bank pursuant to subsection 3.4(a) in respect of any unreimbursed
portion of any payment made by the Issuing Bank under any Letter of Credit is
paid to the Issuing Bank within three Business Days after the date such payment
is due, such L/C Participant shall pay to the Issuing Bank on demand an amount
equal to the product of (i) such amount, times (ii) the daily average Federal
funds rate, as quoted by the Issuing Bank, during the period from and including
the date such payment is required to the date on which such payment is
immediately available to the Issuing Bank, times (iii) a fraction the numerator
of which is the number of days that elapse during such period and the
denominator of which is 360. If any such amount required to be paid by any L/C
Participant pursuant to subsection 3.4(a) is not in fact made available to the
Issuing Bank by such L/C Participant within three Business Days after the date
such payment is due, the Issuing Bank shall be entitled to recover from such L/C
Participant, on demand, such amount with interest thereon calculated from such
due date at the rate per annum applicable to ABR Loans hereunder. A certificate
of the Issuing Bank submitted to any L/C Participant with respect to any amounts
owing under this subsection shall be conclusive in the absence of manifest
error.
(c) Whenever, at any time after the Issuing Bank has made payment
under any Letter of Credit and has received from any L/C Participant its pro
rata share of such payment in accordance with subsection 3.4(a), the Issuing
Bank receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, including proceeds of collateral applied thereto
by the Issuing Bank), or any payment of interest on account thereof, the Issuing
Bank will distribute to such L/C Participant its pro rata share thereof;
PROVIDED, HOWEVER, that in the event that any such payment received by the
Issuing Bank pursuant to subsection 3.5 shall be required to be returned by the
Issuing Bank, such L/C Participant shall return to the Issuing Bank the portion
thereof previously distributed by the Issuing Bank to it.
3.5 REIMBURSEMENT OBLIGATION OF THE BORROWER.
(a) The Borrower agrees to reimburse the Issuing Bank on each date on
which the Issuing Bank notifies the Borrower of the date and amount of a draft
presented under any Letter of Credit and paid by the Issuing Bank for the amount
of (i) such draft so paid and (ii) any taxes, fees, charges or other costs or
expenses incurred by the Issuing Bank in connection with such payment. Each
such payment shall be made to the Issuing Bank at its address for notices
specified herein in lawful money of the United States of America and in
immediately available funds.
(b) Interest shall be payable on any and all amounts remaining unpaid
by the Borrower under this subsection from the date such amounts become payable
(whether at stated maturity, by acceleration or otherwise) until payment in full
at the rate which would be payable on any outstanding ABR Loans which were then
overdue.
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3.6 OBLIGATIONS ABSOLUTE.
(a) The Borrower's obligations under this Section 3 shall be
absolute and unconditional under any and all circumstances and irrespective
of any set-off, counterclaim or defense to payment which the Borrower may
have or have had against the Issuing Bank or any beneficiary of a Letter of
Credit.
(b) The Borrower also agrees with the Issuing Bank that the Issuing
Bank shall not be responsible for, and the Borrower's Reimbursement Obligations
under subsection 3.5(a) shall not be affected by, among other things, (i) the
validity or genuineness of documents or of any endorsements thereon, even though
such documents shall in fact prove to be invalid, fraudulent or forged, provided
that the Issuing Bank shall have exercised the standard of care specified in the
Uniform Customs, or (ii) any dispute between or among the Borrower and any
beneficiary of any Letter of Credit or any other party to which such Letter of
Credit may be transferred or (iii) any claims whatsoever of the Borrower against
any beneficiary of such Letter of Credit or any such transferee.
(c) The Issuing Bank shall not be liable for any error, omission,
interruption or delay in transmission, dispatch or delivery of any message or
advice, however transmitted, in connection with any Letter of Credit, except for
errors or omissions caused by the Issuing Bank's gross negligence or willful
misconduct.
(d) The Borrower agrees that any action taken or omitted by the
Issuing Bank under or in connection with any Letter of Credit or the related
drafts or documents, if done in the absence of gross negligence of willful
misconduct and in accordance with the standards of care specified in the Uniform
Commercial Code of the State of New York, shall be binding on the Borrower and
shall not result in any liability of the Issuing Bank to the Borrower.
3.7 LETTER OF CREDIT PAYMENTS.
If any draft shall be presented for payment under any Letter of
Credit, the Issuing Bank shall promptly notify the Borrower of the date and
amount thereof. The responsibility of the Issuing Bank to the Borrower in
connection with any draft presented for payment under any Letter of Credit
shall, in addition to any payment obligation expressly provided for in such
Letter of Credit, be limited to determining that the documents (including each
draft) delivered under such Letter of Credit in connection with such presentment
are in conformity with such Letter of Credit.
3.8 APPLICATION.
To the extent that any provision of any Application related to any
Letter of Credit is inconsistent with the provisions of this Section 3, the
provisions of this Section 3 shall apply.
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SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Administrative Agent and the Lenders to enter into this
Agreement and to make the Loans and issue or participate in the Letters of
Credit, the Borrower hereby represents and warrants to the Administrative Agent
and each Lender that:
4.1 FINANCIAL CONDITION. The consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at December 31, 1996 and the
related consolidated statements of income and of cash flows for the fiscal
year ended on such date, reported on by KPMG Peat Marwick LLP copies of which
have heretofore been furnished to the Administrative Agent with copies for
each Lender, present fairly in all material respects the consolidated
financial condition of the Borrower and its consolidated Subsidiaries as at
such date, and the consolidated results of their operations and their
consolidated cash flows for the fiscal year then ended. The unaudited
consolidated balance sheet of the Borrower and its consolidated Subsidiaries
as at September 30, 1997 and the related unaudited consolidated statements of
income and of cash flows for the three and nine-month period ended on such
date, certified by a Responsible Officer, copies of which have heretofore
been furnished to the Administrative Agent with copies for each Lender,
present fairly in all material respects the consolidated financial condition
of the Borrower and its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated cash flows
for the three and nine-month period then ended (subject to normal year-end
audit adjustments), except that they have been prepared on a
first-in-first-out inventory valuation method and except for the absence of
notes and related schedules. All such financial statements, including the
related schedules and notes thereto, have been prepared in accordance with
GAAP applied consistently throughout the periods involved (except as approved
by such accountants or Responsible Officer, as the case may be, and as
disclosed therein). Neither the Borrower nor any of its consolidated
Subsidiaries had, at the date of the most recent balance sheet referred to
above, any material Guarantee Obligation, contingent liability or liability
for taxes, or any long-term lease or unusual forward or long-term commitment,
including, without limitation, any interest rate or foreign currency swap or
exchange transaction, which is not reflected in the foregoing statements or
in the notes thereto. During the period from December 31, 1996 to and
including the date hereof there has been no sale, transfer or other
disposition by the Borrower or any of its consolidated Subsidiaries of any
material part of its business or property and no purchase or other
acquisition of any business or property (including any capital stock of any
other Person) material in relation to the consolidated financial condition of
the Borrower and its consolidated Subsidiaries at December 31, 1996, except
for the Sosnick Acquisition.
4.2 NO CHANGE. (a) Except as set forth on Schedule 4.2, since December
31, 1996, there has been no development or event which has had or could
reasonably be expected to have a Material Adverse Effect, and (b) during the
period from December 31, 1996, to and including the date hereof no dividends or
other distributions have been declared, paid or made upon the Capital Stock of
the Borrower nor has any of the Capital Stock of the Borrower been redeemed,
retired, purchased or otherwise acquired for value by the Borrower or any of its
Subsidiaries.
4.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of the Borrower
and its Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of
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the jurisdiction of its organization, (b) has the corporate power and
authority, and the legal right, to own and operate its property, to lease the
property it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification except where the failure to obtain such qualification would not
have a Material Adverse Effect and (d) is in compliance with all Requirements
of Law except to the extent that the failure to comply therewith could not,
in the aggregate, reasonably be expected to have a Material Adverse Effect.
4.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
Borrower has the corporate power and authority, and the legal right, to make,
deliver and perform this Agreement and to borrow hereunder and has taken all
necessary corporate action to authorize the borrowings on the terms and
conditions of the Loan Documents to which it is a party and to authorize the
execution, delivery and performance of this Agreement. Except as set forth on
Schedule 4.4, no consent or authorization of, filing with, notice to or other
act by or in respect of, any Governmental Authority or any other Person is
required in connection with the borrowings hereunder or with the execution,
delivery, performance, validity or enforceability of this Agreement. This
Agreement and each other Loan Document to which it is a party has been duly
executed and delivered on behalf of the Borrower. This Agreement and each other
Loan Document to which it is a party constitutes a legal, valid and binding
obligation of the Borrower enforceable against the Borrower in accordance with
its terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
4.5 NO LEGAL BAR. The execution, delivery and performance of the Loan
Documents to which the Borrower is a party, the borrowings hereunder and the use
of the proceeds thereof will not violate any Requirement of Law or Contractual
Obligation of the Borrower or of any of its Subsidiaries and will not result in,
or require, the creation or imposition of any Lien on any of its or their
respective properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation.
4.6 NO MATERIAL LITIGATION. Except as set forth on Schedule 4.6,
no litigation, investigation or proceeding of or before any arbitrator or
Governmental Authority is pending or, to the knowledge of the Borrower,
threatened by or against the Borrower or any of its Subsidiaries or against
any of its or their respective properties or revenues (a) with respect to any
of the Loan Documents or any of the transactions contemplated hereby or
thereby, or (b) which could reasonably be expected to have a Material Adverse
Effect.
4.7 NO DEFAULT. Neither the Borrower nor any of its Subsidiaries is
in default under or with respect to any of its Contractual Obligations in any
respect which could reasonably be expected to have a Material Adverse Effect.
No Default or Event of Default has occurred and is continuing.
4.8 OWNERSHIP OF PROPERTY; LIENS. Except as set forth on Schedule
4.8, each of the Borrower and its Subsidiaries has a valid leasehold interest
in, all its real property, or a
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40
valid leasehold interest in, all its other property, and none of such owned
property and no such leasehold interest is subject to any Lien except as
permitted by subsection 7.3.
4.9 INTELLECTUAL PROPERTY. Except as set forth on Schedule 4.9, the
Borrower and each of its Subsidiaries owns, is licensed to use, or otherwise has
the right to use all trademarks, tradenames, copyrights, technology, know-how
and processes necessary for the conduct of its business as currently conducted
except for those the failure to own or license which could not reasonably be
expected to have a Material Adverse Effect (the "INTELLECTUAL PROPERTY"). No
claim has been asserted and is pending by any Person challenging or questioning
the use of any such Intellectual Property or the validity or effectiveness of
any such Intellectual Property, nor does the Borrower know of any valid basis
for any such claim, which could reasonably be expected to have a Material
Adverse Effect. To the knowledge of the Borrower and its Subsidiaries the use
of such Intellectual Property by the Borrower and its Subsidiaries does not
infringe on the rights of any Person, except for such claims and infringements
that, in the aggregate, do not have and could not reasonably be expected to have
a Material Adverse Effect. To the knowledge of the Borrower, all registrations
and filings which, in the reasonable judgment of the Borrower, are necessary to
preserve the rights of the Borrower and each of the Subsidiaries in their
material Intellectual Property have been made and are in good standing.
4.10 NO BURDENSOME RESTRICTIONS. No Requirement of Law or Contractual
Obligation of the Borrower or any of its Subsidiaries has or could reasonably be
expected to have a Material Adverse Effect.
4.11 TAXES. Except as set forth on Schedule 4.11, each of the
Borrower and its Subsidiaries has filed or caused to be filed all tax returns
which, to the knowledge of the Borrower, are required to be filed and has paid
all taxes shown to be due and payable on said returns or on any assessments made
against it or any of its property and all other taxes, fees or other charges
imposed on it or any of its property by any Governmental Authority that are now
due and payable (other than any the amount or validity of which are currently
being contested in good faith by appropriate proceedings and with respect to
which reserves in conformity with GAAP have been provided on the books of the
Borrower or its Subsidiaries, as the case may be); no tax Lien has been filed,
and, to the knowledge of the Borrower, no claim is being asserted, with respect
to any such tax, fee or other charge.
4.12 FEDERAL REGULATIONS. No part of the proceeds of any Loans
will be used for "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation G or
Regulation U of the Board of Governors of the Federal Reserve System as now
and from time to time hereafter in effect. If requested by the
Administrative Agent, the Borrower will furnish to the Administrative Agent
with copies for each Lender a statement to the foregoing effect in conformity
with the requirements of FR Form G-1 or FR Form U-1 referred to in said
Regulation G or Regulation U, as the case may be.
4.13 ERISA. Neither a Reportable Event which could result in a
material liability to the Borrower or any of its Subsidiaries nor an
"accumulated funding deficiency" (within the meaning of Section 412 of the Code
or Section 302 of ERISA) has occurred during the five-year period prior to the
date on which this representation is made or deemed
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41
made with respect to any Plan, and each Plan has complied in all material
respects with the applicable provisions of ERISA and the Code. No
termination of a Single Employer Plan has occurred that is reasonably likely
to cause the Borrower to incur liability, and no Lien in favor of the PBGC or
a Plan has arisen, during such five-year period. Except as set forth on
Schedule 4.13, the present value of all accrued benefits under each Single
Employer Plan (based on those assumptions used to fund such Plans) did not,
as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits. Except as set forth on Schedule
4.13, neither the Borrower nor any Commonly Controlled Entity has had a
complete or partial withdrawal from any Multiemployer Plan in the past five
years, and neither the Borrower nor any Commonly Controlled Entity would
become subject to any material liability under ERISA if the Borrower or any
such Commonly Controlled Entity were to withdraw completely from all
Multiemployer Plans as of the valuation date most closely preceding the date
on which this representation is made or deemed made. No such Multiemployer
Plan is in Reorganization or Insolvent.
4.14 INVESTMENT COMPANY ACT; OTHER REGULATIONS. The Borrower is not
an "investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. The
Borrower is not subject to regulation under any Federal or State statute or
regulation (other than Regulation X of the Board of Governors of the Federal
Reserve System) which limits its ability to incur Indebtedness.
4.15 SUBSIDIARIES. Schedule 4.15 sets forth a list of all
Subsidiaries of the Borrower at the date hereof. Each subsidiary of the
Borrower that is not a Subsidiary, is a corporation that conducts no business,
owns no assets (other than certain intercompany receivables), has no liabilities
having an aggregate value in excess of $75,000 other than certain intercompany
payables, and other than corporate franchise taxes.
4.16 PURPOSE OF LOANS. The proceeds of the Revolving Credit Loans
shall be used by the Borrower for general corporate purposes, to fund ongoing
working capital and to finance future acquisitions of the Borrower and its
Subsidiaries in the ordinary course of business.
4.17 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 4.17:
(a) The facilities and properties owned, leased or operated by the
Borrower or any of its Subsidiaries (the "PROPERTIES") do not contain, and
have not previously contained, any Materials of Environmental Concern in
amounts or concentrations which (i) constitute or constituted a violation
of, or (ii) could reasonably be expected to give rise to liability under,
any Environmental Law, which, in either case, could reasonably be expected
to have a Material Adverse Effect.
(b) The Properties and all operations at the Properties are in
compliance, and to the knowledge of the Borrower have in the last five (5)
years been in compliance, in all material respects with all applicable
Environmental Laws, and to the knowledge of the Borrower there is no
contamination at, under or about the Properties or violation of any
Environmental Law with respect to the Properties or the business operated
by
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42
the Borrower or any of its Subsidiaries (the "BUSINESS") which could
materially interfere with the continued operation of the Properties or
materially impair the fair saleable value thereof.
(c) Neither the Borrower nor any of its Subsidiaries has received any
notice of violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Properties or the Business,
nor does the Borrower have knowledge or reason to believe that any such
notice is being threatened, except, in either case, for such notice as
could not reasonably be expected to have a Material Adverse Effect.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a
location which could reasonably be expected to give rise to liability
under, any Environmental Law, except for such transportation or disposal as
could not reasonably be expected to have a Material Adverse Effect, nor
have any Materials of Environmental Concern been generated, treated, stored
or disposed of at, on or under any of the Properties in violation of, or in
a manner that could reasonably be expected to give rise to liability under,
any applicable Environmental Law, except for such transportation or
disposal as could not reasonably be expected to have a Material Adverse
Effect.
(e) No judicial proceeding or governmental or administrative action is
pending or, to the knowledge of the Borrower, threatened, under any
Environmental Law to which the Borrower or any Subsidiary is or will be
named as a party with respect to the Properties or the Business, nor are
there any consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial requirements
outstanding under any Environmental Law with respect to the Properties or
the Business.
(f) There has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or related
to the operations of the Borrower or any Subsidiary in connection with the
Properties or otherwise in connection with the Business, in violation of or
in amounts or in a manner that could reasonably give rise to liability
under Environmental Laws except such releases or threats of releases which
could not reasonably be expected to have a Material Adverse Effect.
4.18 ACCURACY OF INFORMATION. No factual statement or information
contained in this Agreement, any other Loan Document, or any other document,
certificate or written statement furnished to the Administrative Agent or the
Lenders or any of them by or on behalf of any Loan Party for use in
connection with the transactions contemplated by this Agreement or the other
Loan Documents (including, without limitation, any financial information
furnished pursuant to Section 4.1), taken as a whole contained as of the date
such statement, information, document or certificate was so furnished any
untrue statement of a material fact or omitted to state a material fact
necessary in order to make the statements contained herein or therein in
light of the circumstances in which it was made not misleading. The
projections contained in the materials referenced above are based upon good
faith estimates and assumptions believed by management of the Borrower to be
reasonable at the
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43
time made, it being recognized by the Lenders that such financial information
as it relates to future events is not to be viewed as fact and that actual
results during the period or periods covered by such financial information
may differ from the projected results set forth therein. There is no fact
known to any Loan Party that could reasonably be expected to have a Material
Adverse Effect that has not been expressly disclosed herein, in the other
Loan Documents, or in such other documents, certificates and statements
furnished to the Administrative Agent for the benefit of the Lenders for use
in connection with the transactions contemplated hereby and by the other Loan
Documents.
4.19 SECURITY DOCUMENTS. (a) The Borrower Stock Pledge Agreement is
effective to create in favor of the Administrative Agent, for the benefit of the
Lenders, a legal, valid and enforceable security interest in the Pledged Stock
(as defined therein) and proceeds thereof and constitutes a fully perfected
first priority Lien on, and security interest in, all right, title and interest
of the Borrower in such Pledged Stock and the proceeds thereof, in each case
(except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally) prior and superior in right to any other Person.
(b) The Security Agreement is effective to create in favor of the
Administrative Agent, for the benefit of the Lenders, a legal, valid and
enforceable security interest in the Collateral described therein and proceeds
thereof; financing statements in appropriate form have been filed in the offices
specified on Schedule 4.19(b) and, except as set forth in the Security
Agreement, the Security Agreement constitutes a fully perfected Lien on, and
security interest in, all right, title and interest of the Loan Parties in such
Collateral and, to the extent provided therein, the proceeds thereof, in each
case (except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally) prior and superior in right to any other Person,
other than with respect to Liens expressly permitted by subsection 7.3.
4.20 SOLVENCY. Each Loan Party is, and after giving effect to the
incurrence or assumption of all Indebtedness and obligations being incurred or
assumed in connection herewith and the Receivables Transaction, will continue to
be, Solvent.
SECTION 5. CONDITIONS TO EFFECTIVENESS
5.1 CONDITIONS TO RESTATEMENT EFFECTIVE DATE. This amendment and
restatement of the Existing Credit Agreement shall become effective upon, and
the agreement of each Lender to make the initial extension of credit requested
to be made by it under the Existing Credit Agreement as so amended and restated
is subject to the satisfaction of, immediately prior to or concurrently with the
making of such extension of credit on the Restatement Effective Date, the
following conditions:
(a) LOAN DOCUMENTS. The Administrative Agent shall have received (i)
this Agreement, executed and delivered by a duly authorized officer of the
Borrower, with a counterpart for each Lender and (ii) the Security
Agreement, executed by a duly authorized officer of the Borrower and each
Grantor named therein.
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44
(b) RECEIVABLES TRANSACTION. The Receivables Transaction shall have
been consummated and the Borrower shall have the ability to sell
participations thereunder and/or to issue term and variable funding
certificates thereunder in an aggregate face amount of not less than $70
million.
(c) BORROWING CERTIFICATE. The Administrative Agent shall have
received, with a counterpart for each Lender, a certificate of the
Borrower, dated the Restatement Effective Date, substantially in the form
of Exhibit C, with appropriate insertions and attachments, satisfactory in
form and substance to the Administrative Agent, executed by a Responsible
Officer.
(d) CORPORATE PROCEEDINGS OF THE BORROWER. The Administrative Agent
shall have received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Administrative
Agent, of the Board of Directors of the Borrower authorizing the execution,
delivery and performance of this Agreement and the borrowings contemplated
hereunder and shall state that such resolutions have not been amended,
modified, revoked or rescinded.
(e) BORROWER INCUMBENCY CERTIFICATE. The Administrative Agent shall
have received, with a counterpart for each Lender, a Certificate of the
Borrower, dated the Restatement Effective Date, as to the incumbency and
signature of the officer of the Borrower executing this Agreement
satisfactory in form and substance to the Administrative Agent, executed by
the President or any Vice President and the Secretary or any Assistant
Secretary of the Borrower.
(f) CORPORATE PROCEEDINGS OF SUBSIDIARIES. The Administrative Agent
shall have received, with a counterpart for each Lender, a copy of the
resolutions, in form and substance satisfactory to the Administrative
Agent, of the Board of Directors of each Subsidiary of the Borrower which
is a party to any Loan Document authorizing the execution, delivery and
performance of such Loan Document(s), certified by the Secretary or an
Assistant Secretary of each such Subsidiary as of the Restatement Effective
Date, which certificate shall be in form and substance satisfactory to the
Administrative Agent and shall state that the resolutions thereby certified
have not been amended, modified, revoked or rescinded.
(g) SUBSIDIARY INCUMBENCY CERTIFICATES. The Administrative Agent
shall have received, with a counterpart for each Lender, a certificate of
each Subsidiary of the Borrower which is a Loan Party, dated the
Restatement Effective Date, as to the incumbency and signature of the
officers of such Subsidiaries executing any Loan Document, satisfactory in
form and substance to the Administrative Agent, executed by the President
or any Vice President and the Secretary or any Assistant Secretary of each
such Subsidiary.
(h) CONSENTS, LICENSES AND APPROVALS. The Administrative Agent shall
have received, with a counterpart for each Lender, a certificate of a
Responsible Officer of the Borrower (i) attaching copies of all consents,
authorizations and filings referred to in subsection 4.4, and (ii) stating
that such consents, licenses and filings are in full
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45
force and effect, and each such consent, authorization and filing shall be
in form and substance satisfactory to the Administrative Agent.
(i) FEES AND EXPENSES. The Lenders, the Administrative Agent and its
Affiliates shall have received all fees required to be paid, and all
expenses required to be paid for which invoices have been presented, on or
before the Restatement Effective Date.
(j) LEGAL OPINIONS. The Administrative Agent shall have received,
with a counterpart for each Lender, the following executed legal opinions:
(1) the executed legal opinion of Paul, Weiss, Rifkind,
Wharton & Garrison, special counsel to the Borrower and the other Loan
Parties, substantially in the form of Exhibit F-1;
(2) the executed legal opinion of Sheppard, Mullin, Richter &
Hampton, LLP, special counsel to the Administrative Agent and the
Lenders in the State of California, substantially in the form of
Exhibit F-2;
(3) the executed legal opinion of Stoel Rives LLP, special
counsel to the Administrative Agent and the Lenders in the State of
Oregon, substantially in the form of Exhibit F-3;
(4) the executed legal opinions of (i) Stikeman, Elliott; and
(ii) Thompson Dorfman, Sweatman, counsel to the Administrative Agent
and the Lenders in Canada, substantially in the form of Exhibit F-4.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agent may
reasonably require;
(k) REPAYMENT OF EXITING LENDERS; REPAYMENTS AND REBORROWINGS. The
Administrative Agent shall have received evidence satisfactory to it that
the commitments of Exiting Lenders under the Existing Credit Facility have
been cancelled and such Exiting Lenders have received payment in full of
their outstanding loans under the Existing Credit Facility and accrued
interest and fees thereunder and have been released from their obligations
in respect of outstanding letters of credit thereunder. In addition, the
Borrower shall have effected such repayments and reborrowings hereunder
from the Lenders such that, after giving effect thereto, the outstanding
principal amount of the Revolving Credit Loans of each Lender shall be in
proportion to the Revolving Commitment Percentages of the Lenders (after
giving effect to the amendment and restatement hereof).
(l) BORROWING BASE CERTIFICATE. The Administrative Agent shall have
received a Borrowing Base Certificate, certifying in reasonable detail the
Borrowing Base as of the close of business on the last calendar day of the
immediately preceding calendar week or calendar month, as the case may be,
pursuant to subsection 6.2(f), which gives pro forma effect to the
Receivables Transaction.
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46
5.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The agreement of each
Lender to make any extension of credit requested to be made by it on any date
(including, without limitation, its initial extension of credit) is subject
to the satisfaction of the following conditions precedent:
(a) REPRESENTATIONS AND WARRANTIES. Each of the representations and
warranties made by the Borrower in or pursuant to the Loan Documents shall
be true and correct in all material respects on and as of such date as if
made on and as of such date.
(b) NO DEFAULT. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
(c) ADDITIONAL MATTERS. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement and the other Loan Documents
shall be reasonably satisfactory in form and substance to the
Administrative Agent in all material respects, and the Administrative Agent
shall have received such other documents and legal opinions in respect of
any aspect or consequence of the transactions contemplated hereby or
thereby as it shall reasonably request.
Each borrowing by and Letter of Credit issued on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date thereof that the conditions contained in this subsection have been
satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any amount is owing to any Lender or the Administrative Agent
hereunder or under any other Loan Document, the Borrower shall and (except in
the case of delivery of financial information, reports and notices) shall cause
each of its Subsidiaries to:
6.1 FINANCIAL STATEMENTS. Furnish to each Lender:
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the consolidated balance
sheet of the Borrower and its consolidated Subsidiaries as at the end of
such year and the related consolidated statements of income and retained
earnings and of cash flows for such year, in each case, using the last-in,
first-out inventory valuation method, and setting forth in comparative form
the figures for the previous year, reported on without a "going concern" or
like qualification or exception, or qualification arising out of the scope
of the audit, by KPMG Peat Marwick LLP or other independent certified
public accountants of nationally recognized standing; and
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, the
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47
unaudited consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such quarter and the related unaudited
consolidated statements of income and retained earnings and of cash flows
of the Borrower and its consolidated Subsidiaries for such quarter and the
portion of the fiscal year through the end of such quarter, in each case,
using the first-in, first-out inventory valuation method, and setting
forth in comparative form the figures for the previous year, certified by
a Responsible Officer as being fairly stated in all material respects
(subject to normal year-end audit adjustments); and
(c) as soon as available, but in any event not later than 30 days
after the end of each month (other than March, June, September and
December) of each fiscal year of the Borrower, the unaudited consolidated
balance sheet of the Borrower and its consolidated Subsidiaries as at the
end of such month and the related unaudited consolidated statements of
income and retained earnings and of cash flows of the Borrower and its
consolidated Subsidiaries for such month and the portion of the fiscal year
through the end of such month, in each case, using the first-in, first-out
inventory valuation method, and setting forth in comparative form the
figures for the previous year, certified by a Responsible Officer as being
fairly stated in all material respects (subject to normal year-end audit
adjustments);
all such financial statements shall be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods reflected
therein and with prior periods (except as approved by such accountants or
officer, as the case may be, and disclosed therein).
6.2 CERTIFICATES; OTHER INFORMATION. Furnish to the Administrative
Agent with copies for each Lender except as otherwise provided in clause (g)
below:
(a) concurrently with the delivery of the financial statements
referred to in subsection 6.1(a), a certificate of the independent
certified public accountants reporting on such financial statements stating
that in making the examination necessary therefor no knowledge was obtained
of any Default or Event of Default, except as specified in such
certificate;
(b) subject to the proviso below, concurrently with the delivery of
the financial statements referred to in subsections 6.1(a), (b) and (c), a
certificate of a Responsible Officer (1) stating that, to the best of such
Officer's knowledge, during such period (i) no Subsidiary has been formed
or acquired (or, if any such Subsidiary has been formed or acquired, the
Borrower has complied with the requirements of subsection 6.12 with respect
thereto), (ii) neither the Borrower nor any of its Subsidiaries has changed
its name, its principal place of business, its chief executive office or
the location of any material item of tangible Collateral without complying
with the requirements of this Agreement and the Security Documents with
respect thereto and (iii) the Borrower has observed or performed in all
material respects all of its covenants and other agreements, and satisfied
every condition, contained in this Agreement and the other Loan Documents
to be observed, performed or satisfied by it, and that such Officer has
obtained no knowledge of any Default or Event of Default except as
specified in such certificate; provided that with respect to the financial
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48
statements delivered pursuant to subsection 6.1(c), such certificate need
only cover the items set forth in clause (i) above, and (2) in the case of
the financial statements delivered pursuant to subsections 6.1(a) and (b)
setting forth, in reasonable detail, a calculation of the financial
covenants set forth in subsection 7.1 for the period corresponding to such
financial statements; and, with respect to the annual financial statements
required to be furnished pursuant to subsection 6.1(a), a reconciliation of
such financial statements from the last-in first-out inventory valuation
method to the first-in, first-out inventory valuation method in order to
calculate the financial covenants set forth in subsection 7.1, all in
substantially the form set forth on Exhibit D (the "Responsible Officer's
Certificate").
(c) not later than 10 days prior to the end of each fiscal year of the
Borrower, a copy of the projections by the Borrower of the operating budget
and cash flow budget of the Borrower and its Subsidiaries for the
succeeding fiscal year using the first-in, first-out inventory valuation
method, such projections to be accompanied by a certificate of a
Responsible Officer to the effect that such projections have been prepared
on the basis of sound financial planning practice and that such Responsible
Officer has no reason to believe they are incorrect or misleading in any
material respect;
(d) promptly upon receipt thereof, copies of all reports submitted to
the Borrower or any of its Subsidiaries by KPMG Peat Marwick or any other
independent accountants of the Borrower or any such Subsidiary in
connection with each annual, interim or special audit of its financial
statements made by such accountants (including, without limitation, any
comment letter submitted by such accountants to management of the Borrower
or any such Subsidiary in connection with their annual audit and any
reports addressing internal accounting controls of the Borrower or such
Subsidiary submitted by such accountants), and, promptly upon completion
thereof, copies of any response report from the Borrower or such Subsidiary
to such accountants;
(e) within five days after the same are filed, copies of all financial
statements and reports which the Borrower may make to, or file with, the
Securities and Exchange Commission or any successor or analogous
Governmental Authority, and at such time, if any, that the Borrower becomes
subject to the reporting requirements of the Securities Exchange Act of
1934, as amended, within five days after the same are sent, copies of all
financial statements and reports which the Borrower sends to its
stockholders;
(f) promptly, but in no event later than 1:00 P.M., New York City
time, on the third Business Day following the end of each calendar week,
UNLESS such third Business Day falls in the last week of a calendar month,
in which case, in no event later than 1:00 P.M., New York City time, on the
third Business Day of the next calendar month, a Borrowing Base
Certificate, certifying in reasonable detail the Borrowing Base as of the
close of business on the last calendar day of the immediately preceding
calendar week or calendar month, as the case may be, and in each case, a
copy to the Administrative Agent of a Supplemental Reporting presenting the
Borrower's computation thereof. Each Borrowing Base Certificate shall
remain in
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49
effect from and including the date on which such Borrowing Base
Certificate is delivered, to, but excluding, the date on which the next
Borrowing Base Certificate is delivered; and
(g) promptly, furnish to the Administrative Agent or any Lender such
additional financial and other information with respect to the business or
operations of the Borrower and its Subsidiaries as the Administrative Agent
or such Lender may from time to time reasonably request.
6.3 PAYMENT OF OBLIGATIONS. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all
its obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided
on the books of the Borrower or its Subsidiaries, as the case may be.
6.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. Continue to
engage in business of the same general type as now conducted by it or businesses
reasonably related thereto; preserve, renew and keep in full force and effect
its corporate existence and take all reasonable action to maintain all rights,
privileges and franchises necessary or desirable in the normal conduct of its
business except as otherwise permitted pursuant to subsection 7.5 and except to
the extent that failure to comply with the foregoing would not, in the
aggregate, be reasonably expected to have a Material Adverse Effect; comply with
all Contractual Obligations and Requirements of Law except to the extent that
failure to comply therewith could not, in the aggregate, be reasonably expected
to have a Material Adverse Effect.
6.5 MAINTENANCE OF PROPERTY; INSURANCE. Keep all tangible property
useful and necessary in its business in good working order and condition;
maintain with financially sound and reputable insurance companies insurance on
all its tangible property in at least such amounts and against at least such
risks (but including in any event public liability, product liability and
business interruption) as are usually insured against in the same general area
by companies engaged in the same or a similar business; and furnish to the
Administrative Agent with copies for each Lender, upon written request, full
information as to the insurance carried.
6.6 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities; and permit
representatives of any Lender to visit and inspect any of its properties and
examine and make abstracts from any of its books and records at any reasonable
time during normal business hours and as often as may reasonably be desired and
to discuss the business, operations, properties and financial and other
condition of the Borrower and its Subsidiaries with officers and employees of
the Borrower and its Subsidiaries and with its independent certified public
accountants; provided that such inspection shall be conducted in a manner that
does not unreasonably interfere with the business or operations of the Borrower
or its Subsidiaries.
6.7 ANNUAL REVIEWS. At any time upon the request of the
Administrative Agent, permit the Administrative Agent or professionals
(including investment bankers, consultants, accountants, lawyers and appraisers)
retained by the Administrative Agent to
<PAGE>
50
conduct evaluations and appraisals (at a reasonable time during normal
business hours provided that the following is conducted in a manner that does
not unreasonably interfere with the business or operations of the Borrower or
its Subsidiaries) of (i) the Borrower's practices in the computation of the
Borrowing Base, (ii) the assets included in the Borrowing Base, (iii) systems
and procedures related to Borrowing Base items, (iv) other related procedures
deemed necessary by the Administrative Agent, and pay the reasonable fees and
expenses in connection therewith (including, without limitation, the
reasonable fees and expenses associated with services performed by the
Administrative Agent's Collateral Monitoring Department); provided, however,
that such persons shall not be entitled to conduct such evaluations and
appraisals of assets more frequently than once per year unless (x) a Default
or Event of Default has occurred and is continuing or (y) the Administrative
Agent or the Majority Lenders determine that any material event or material
change has occurred with respect to the Loan Parties, their inventory or
receivables practices or the performance of the Collateral and that as a
result of such event or change more frequent evaluations or appraisals are
required to effectively monitor the Borrowing Base, in which case the
Borrower will permit such Persons to conduct such evaluations and appraisals
at such reasonable times during normal business hours and as often as may be
reasonably requested; provided that such inspection shall be conducted in a
manner that does not unreasonably interfere with the business or operations
of the Borrower or its Subsidiaries.
6.8 NOTICES. Promptly give notice to the Administrative Agent with
copies for each Lender of (to the extent it has knowledge of same):
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of the Borrower or any of its Subsidiaries or (ii) litigation,
investigation or proceeding which may exist at any time between the
Borrower or any of its Subsidiaries and any Governmental Authority, which
in either case, if not cured or if adversely determined, as the case may
be, could reasonably be expected to have a Material Adverse Effect;
(c) any litigation or proceeding affecting the Borrower or any of its
Subsidiaries in which the amount involved is $2,000,000 or more and not
covered by insurance or with respect to which the Borrower or its
Subsidiaries is not fully indemnified by a third party or in which
injunctive or similar relief is sought;
(d) the following events, as soon as possible and in any event within
30 days after the Borrower knows or has reason to know thereof: (i) the
occurrence or expected occurrence of any Reportable Event with respect to
any Plan, a failure to make any required contribution to a Plan, the
creation of any Lien in favor of the PBGC or a Plan or any withdrawal from,
or the termination, Reorganization or Insolvency of, any Multiemployer Plan
or (ii) the institution of proceedings or the taking of any other action by
the PBGC or the Borrower or any Commonly Controlled Entity or any
Multiemployer Plan with respect to the withdrawal from, or the terminating,
Reorganization or Insolvency of, any Plan; and
(e) any development or event which has had or which the Borrower
believes could reasonably be expected to have a Material Adverse Effect.
<PAGE>
51
Each notice pursuant to this subsection shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action the Borrower proposes to take with respect thereto.
6.9 ENVIRONMENTAL LAWS. (a) Comply with, and use diligent efforts to
ensure compliance by all tenants and subtenants, if any, with, all applicable
Environmental Laws and obtain and comply in all material respects with and
maintain, and use diligent efforts to ensure that all tenants and subtenants
obtain and comply in all material respects with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws, except, in either case to the extent that failure
to do so could not be reasonably expected to have a Material Adverse Effect.
(b) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under
Environmental Laws and promptly comply in all material respects with all
lawful orders and directives of all Governmental Authorities regarding
Environmental Laws except to the extent that the same are being contested in
good faith by appropriate proceedings and the pendency of such proceedings
could not be reasonably expected to have a Material Adverse Effect.
6.10 FURTHER ASSURANCES. Upon the request of the Administrative
Agent, promptly perform or cause to be performed any and all acts and execute or
cause to be executed any and all documents (including, without limitation,
financing statements and continuation statements) for filing under the
provisions of the Uniform Commercial Code or any other Requirement of Law which
are necessary or advisable to maintain in favor of the Administrative Agent, for
the benefit of the Lenders, Liens on the Collateral that are duly perfected in
accordance with all applicable Requirements of Law.
6.11 CASH MANAGEMENT SYSTEM. Maintain (i) the US Cash Collateral
Account into which all proceeds of Collateral payable in the United States are
deposited (including any amounts paid to the Borrower or any of its Subsidiaries
and required pursuant to the Security Agreement, to be deposited by the Borrower
and its Subsidiaries into the Depository Accounts) with the Administrative Agent
and (ii) the Canadian Cash Collateral Account and the Deposit Accounts into
which all proceeds of Collateral payable in Canada are paid (including any
amounts paid to the Borrower or any of its Subsidiaries and required pursuant to
the Security Agreement to be deposited by the Borrower and its Subsidiaries into
the Canadian Cash Collateral Account or the Deposit Accounts) with Bank of
Montreal, or, in each case, one or more banks reasonably acceptable to the
Administrative Agent that have acknowledged the assignment of such accounts to
the Administrative Agent pursuant to the Depository Letters or the Deposit
Account Letters and the Security Agreement, as the case may be, and maintain
cash management systems reasonably acceptable to the Majority Lenders.
At the beginning of each Business Day, transfer to the US Cash
Collateral Account such amounts of Canadian dollars as shall be necessary to
cause the aggregate amount of available funds on deposit in the Canadian Cash
Collateral Account and the Deposit Accounts not to exceed $30,000,000 Canadian
dollars.
<PAGE>
52
6.12 ADDITIONAL COLLATERAL. (a) With respect to any assets acquired
on or after the Restatement Effective Date by the Borrower or any of its
Subsidiaries that are intended to be subject to the Lien created by any of the
Security Documents but which are not so subject (other than any assets described
in paragraph (b) or (c) of this subsection and assets that, in the judgment of
the Administrative Agent are immaterial or a Lien on which cannot be perfected
by filing UCC-1 financing statements or their foreign equivalents), promptly
(and in any event within 30 days after the acquisition thereof): (i) execute
and deliver to the Administrative Agent such amendments to the relevant Security
Documents or such other documents as the Administrative Agent shall reasonably
deem necessary or advisable to grant to the Administrative Agent, for the
benefit of the Lenders, a Lien on such assets, (ii) take all actions necessary
or advisable to cause such Lien to be duly perfected in accordance with all
applicable Requirements of Law, including, without limitation, the filing of
financing statements in such jurisdictions as may be reasonably requested by the
Administrative Agent, and (iii) if requested by the Administrative Agent,
deliver to the Administrative Agent legal opinions relating to the matters
described in clauses (i) and (ii) immediately preceding, which opinions shall be
in form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(b) With respect to any Person that, on or subsequent to the
Restatement Effective Date, becomes an active Subsidiary, promptly upon the
request of the Administrative Agent: (i) execute and deliver to the
Administrative Agent, for the benefit of the Lenders, a new pledge agreement
or such amendments to the Borrower Stock Pledge Agreement as the
Administrative Agent shall reasonably deem necessary or advisable to grant to
the Administrative Agent, for the benefit of the Lenders, a Lien on the
Capital Stock of such Subsidiary (unless such Subsidiary is a foreign
Subsidiary in which case, 66% of the Capital Stock of such foreign
subsidiary) which is owned by the Borrower or any of its Subsidiaries, (ii)
deliver to the Administrative Agent the certificates representing such
Capital Stock, together with undated stock powers executed and delivered in
blank by a duly authorized officer of the Borrower or such Subsidiary, as the
case may be, (iii) cause such new Subsidiary other than the Receivables Sub
(A) to become a party to the Subsidiary Guarantee and the Security Agreement,
in each case pursuant to documentation which is in form and substance
satisfactory to the Administrative Agent, and (B) to take all actions
necessary or advisable to cause the Lien created by the Security Agreement to
be duly perfected in accordance with all applicable Requirements of Law,
including, without limitation, the filing of financing statements in such
jurisdictions as may be reasonably requested by the Administrative Agent and
(iv) if requested by the Administrative Agent, deliver to the Administrative
Agent legal opinions relating to the matters described in clauses (i), (ii)
and (iii) immediately preceding, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
6.13 TAX STAMP BONDING. Maintain surety bonds if and to the extent
required by law (including, with respect to amounts) with respect to all tobacco
tax stamps not paid for on a cash basis.
6.14 COMPLIANCE WITH TERMS OF LEASEHOLDS. Make all payments and
otherwise perform all material obligations in respect of all leases of real
property to which the Borrower or any of its Subsidiaries is a party, keep such
leases in full force and effect and not allow such leases to lapse or be
terminated or any rights to renew such leases to
<PAGE>
53
be forfeited or cancelled if the failure to make such payments or perform
such obligations, to keep such lease in full force and effect, or the lapse,
termination or failure to renew would reasonably be likely to result in a
Material Adverse Effect, notify the Administrative Agent of any default by
any party of which the Borrower has actual knowledge with respect to such
leases and cooperate with the Administrative Agent in all respects to cure
any such default, and cause each of its Subsidiaries to do so.
SECTION 7. NEGATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments remain in
effect or any amount is owing to any Lender or the Administrative Agent
hereunder or under any other Loan Document, the Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly:
7.1 FINANCIAL CONDITION COVENANTS.
(a) MAINTENANCE OF CURRENT RATIO. Permit the ratio of Consolidated
Current Assets of the Borrower to Consolidated Current Liabilities of the
Borrower at any time to be less than 1.40 to 1.00.
(b) MAINTENANCE OF NET WORTH. Permit Consolidated Net Worth of the
Borrower at any time to be less than an amount equal to $6,500,000 PLUS the
aggregate of 50% of Consolidated Net Income of the Borrower, if positive,
for each quarter during the period commencing on January 1, 1997 and ending
at the close of the fiscal quarter then last ended.
(c) MAINTENANCE OF SENIOR DEBT LEVERAGE RATIO. Permit the ratio of
(i) Consolidated Senior Debt of the Borrower at the last day of any fiscal
quarter ending during any "Test Period" set forth below to (ii)
Consolidated EBITDA for the period of four consecutive fiscal quarters
ending on such date to be greater than the amount set forth opposite such
period below:
<TABLE>
<CAPTION>
TEST PERIOD RATIO
----------- -----
<S> <C>
12/31/97 - 9/30/98 4.00 to 1.00
12/31/98 - 9/30/01 and each four-quarter period thereafter 3.75 to 1.00
</TABLE>
For purposes of computing Consolidated Senior Debt of the Borrower,
the amount of Revolving Credit Loans and Invested Amount included therein
as of the last day of a fiscal quarter shall be the average daily
outstanding principal amount thereof for the period of two consecutive
fiscal quarters ending on such date (or, if shorter, the period commencing
on the Restatement Effective Date and ending on such date).
<PAGE>
54
(d) MAINTENANCE OF MINIMUM EBITDA. Permit Consolidated EBITDA of the
Borrower for the four quarters ending at the last day of any period set
forth below to be less than the amount set forth opposite such period
below:
<TABLE>
<CAPTION>
TEST PERIOD AMOUNT
----------- ------
<S> <C>
9/30/97 - 12/31/97 $32,000,000
3/31/98 - 6/30/98 $33,500,000
9/30/98 - 12/31/98 $35,000,000
3/31/99 - 6/30/99 $36,500,000
9/30/99 - 12/31/99 and
each four-quarter period thereafter $38,000,000
</TABLE>
(e) MAINTENANCE OF INTEREST COVERAGE. Permit for any period of four
consecutive fiscal quarters ending during any "Test Period" set forth below
the ratio of (i) Consolidated EBITDA of the Borrower to (ii) Consolidated
Cash Interest Expense of the Borrower for such period to be less than the
ratio set forth opposite such period below:
<TABLE>
<CAPTION>
TEST PERIOD RATIO
----------- -----
<S> <C>
12/31/97 - 9/30/98 1.65 to 1.00
12/31/98 - 9/30/99 1.75 to 1.00
12/31/99 - 9/30/00 2.00 to 1.00
12/31/00 - 9/30/01 and
each four quarter period thereafter 2.25 to 1.00
</TABLE>
7.2 LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness, except:
(a) Indebtedness of the Borrower under this Agreement;
(b) Indebtedness of the Borrower to any Subsidiary and of any
Subsidiary to the Borrower or any other Subsidiary;
(c) Indebtedness of the Borrower and any of its Subsidiaries incurred
to finance the acquisition of fixed or capital assets (whether pursuant to
a loan, a Financing Lease or otherwise) in an aggregate principal amount
not exceeding as to the Borrower and its Subsidiaries $5 million at any
time outstanding;
(d) Indebtedness outstanding on August 7, 1996 and listed on Schedule
7.2 and any refinancings, refundings, renewals or extensions thereof;
provided that the aggregate principal amount set forth on Schedule 7.2 does
not increase in connection with any such refinancing, refunding, renewal or
extension;
(e) Indebtedness in respect of Hedge Agreements designed to hedge
against fluctuations in interest rates or foreign exchange rates incurred
in the ordinary course of business and consistent with prudent business
practice in an aggregate notional
<PAGE>
55
amount not to exceed $75,000,000, in the case of the interest rate Hedge
Agreements, and $40,000,000, in the case of foreign exchange rate Hedge
Agreements, at any time outstanding;
(f) additional Indebtedness of the Borrower and its Subsidiaries (not
otherwise described in this Section 7.2) not exceeding $3 million in
aggregate principal amount at any one time outstanding;
(g) Indebtedness constituting Existing High Yield Subordinated Debt;
(h) Subordinated Debt of the Borrower (other than the High Yield
Notes) in an aggregate principal amount not to exceed $2,000,000 at any one
time outstanding;
(i) Indebtedness in respect of the conditional sale of coffee machines
and similar fast food equipment where the Borrower or its Subsidiaries
guarantee the purchase price of such equipment in the event the purchaser
of such equipment does not purchase such equipment through coffee and food
purchases;
(j) Indebtedness in respect of state cigarette stamp tax and other
bonds incurred in the ordinary course of business on a basis consistent
with past practice;
(k) Indebtedness in respect of letters of credit which are denominated
in Canadian dollars and issued for the account of the Borrower, in an
aggregate face amount not to exceed $5 million Canadian dollars; provided,
that any such letter of credit is supported by a Letter of Credit;
(l) Indebtedness of the type described in clause (f) of the definition
of "Indebtedness" which is secured by Liens permitted under subsection 7.3;
(m) Indebtedness assumed in connection with Permitted Acquisitions,
provided that such Indebtedness was not incurred in anticipation of the
Permitted Acquisition and, in any case, not to exceed $500,000 in the
aggregate; and
(n) Indebtedness under the Receivables Transaction.
7.3 LIMITATION ON LIENS. Create, incur, assume or suffer to exist any
Lien upon any of its property, assets or revenues, whether now owned or
hereafter acquired, except for:
(a) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, PROVIDED that adequate reserves with
respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
landlord's or other like Liens arising in the ordinary course of business
for amounts which are not overdue for a period of more than 60 days or
which are being contested in good faith by appropriate proceedings;
<PAGE>
56
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, trade contracts (other
than for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred in
the ordinary course of business;
(e) easements, rights-of-way, restrictions, restrictive covenants,
encroachments and other similar encumbrances incurred in the ordinary
course of business which, in the aggregate, are not substantial in amount
and which do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct
of the business of the Borrower or such Subsidiary;
(f) Liens in existence on August 7, 1996 listed on Schedule 7.3,
securing Indebtedness permitted by subsection 7.2(d) and new Liens created
thereafter in connection with refinancings, refundings, renewals, and
extensions described in subsection 7.2(d), PROVIDED that no such Lien is
spread to cover any additional property after the Restatement Effective
Date and that the principal amount of Indebtedness secured thereby is not
increased;
(g) Liens securing Indebtedness of the Borrower and its Subsidiaries
permitted by subsection 7.2(c) incurred to finance the acquisition of fixed
or capital assets, PROVIDED that (i) such Liens shall be created
substantially simultaneously with the acquisition of such fixed or capital
assets, (ii) such Liens do not at any time encumber any property other than
the property financed by such Indebtedness, (iii) the principal amount of
Indebtedness secured thereby is not increased and (iv) the principal amount
of Indebtedness secured by any such Lien shall at no time exceed the
original purchase price of such property at the time it was acquired;
(h) Liens created pursuant to the Security Documents;
(i) Liens arising under licensing agreements entered into by the
Borrower or any Subsidiaries in the ordinary course of business for the use
of Intellectual Property or other intangible assets of the Borrower or any
Subsidiary, and any consents to use, and other similar agreements
concerning Intellectual Property or other intangible assets or judgments
adjudicating rights in any intangible rights in Intellectual Property or
other intangible assets;
(j) Liens securing Indebtedness of the Borrower and its Subsidiaries
permitted by subsection 7.2(b); and
(k) Liens on the assets of the Receivables Sub pursuant to the
Receivables Transaction.
7.4 LIMITATION ON GUARANTEE OBLIGATIONS. Create, incur, assume or
suffer to exist any Guarantee Obligation except:
<PAGE>
57
(a) Guarantee Obligations in existence on the date hereof and listed
on Schedule 7.4 and refinancings, renewals or extensions thereof, provided
that the aggregate principal amount set forth on Schedule 7.4 does not
increase in connection with any such refinancing, renewal or extension;
(b) guarantees made in the ordinary course of its business by the
Borrower of obligations of any Subsidiary of Indebtedness permitted by
subsections 7.2(c), (d) and (e) or any leases for real property by any
Subsidiary; and
(c) the Subsidiaries Guarantee.
7.5 LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, assign, transfer
or otherwise dispose of, all or substantially all of its property, business or
assets, or make any material change in its present method of conducting
business, except:
(a) any Subsidiary of the Borrower may be merged or consolidated with
or into, or be liquidated, wound up or dissolved into, the Borrower
(PROVIDED that the Borrower shall be the continuing or surviving
corporation) or with or into any one or more wholly owned Subsidiaries of
the Borrower (PROVIDED that the wholly owned Subsidiary or Subsidiaries
shall be the continuing or surviving corporation);
(b) subject to subsections 7.10(c) and (d), the Borrower or any
Subsidiary may be merged or consolidated with any other Person organized
under a jurisdiction of the United States with assets held primarily in the
United States; PROVIDED, that the Borrower or such Subsidiary shall be the
continuing or surviving corporation; the Administrative Agent is provided
with written notice, and after giving effect thereto no Default or Event of
Default would exist or reasonably be expected to be caused thereby;
(c) any wholly owned Subsidiary may sell, lease, transfer or otherwise
dispose of any or all of its assets (upon voluntary liquidation or
otherwise) to the Borrower or any other wholly owned Subsidiary of the
Borrower; and
(d) as contemplated pursuant to the Receivables Transaction.
7.6 LIMITATION ON SALE OF ASSETS. Convey, sell, lease, assign,
transfer or otherwise dispose of any of its property, business or assets
(including, without limitation, receivables and leasehold interests), whether
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any shares of such Subsidiary's Capital Stock to any Person other than the
Borrower or any wholly owned Subsidiary, except:
(a) the sale or other disposition of obsolete or worn out property in
the ordinary course of business;
(b) the sale or other disposition of any property in the ordinary
course of business, PROVIDED that (other than inventory) the aggregate book
value of all assets so
<PAGE>
58
sold or disposed of in any period of twelve consecutive months shall not
exceed $500,000;
(c) the sale of inventory in the ordinary course of business;
(d) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the
compromise or collection thereof; and
(e) the sale, abandonment or other disposition in the ordinary course
of business of Intellectual Property that is no longer necessary for the
conduct of the business of the Borrower or any Subsidiary;
(f) as permitted by subsection 7.5; and
(g) as contemplated pursuant to the Receivables Transaction.
7.7 LIMITATION ON SPECULATIVE TRANSACTIONS. Engage, or permit any of
its Subsidiaries to engage, in any transaction involving commodity options or
futures contracts or any similar speculative transactions (including, without
limitation, take-or-pay contracts) except for Hedge Agreements permitted under
subsection 7.2(e).
7.8 LIMITATION ON DIVIDENDS. Declare or pay any dividend (other than
dividends payable solely in common stock of the Borrower) on, or make any
payment on account of, or set apart assets for a sinking or other analogous fund
for, the purchase, redemption, defeasance, retirement or other acquisition of,
any shares of any class of Capital Stock of the Borrower or any warrants or
options to purchase any such Stock, whether now or hereafter outstanding, or
make any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Borrower or any Subsidiary
(such declarations, payments, setting apart, purchases, redemptions,
defeasances, retirements, acquisitions and distributions being herein called
"RESTRICTED PAYMENTS"), except that if no Default or Event of Default exists or
would reasonably be expected to be caused thereby, the Borrower may repurchase
shares of its common stock from its employees and former employees so long as
the aggregate amount of all such repurchases since August 7, 1996 does not
exceed $1 million.
7.9 LIMITATION ON CAPITAL EXPENDITURES. Make or commit to make (by
way of the acquisition of securities of a Person or otherwise) any expenditure
in respect of the purchase or other acquisition of fixed or capital assets
except for expenditures in the ordinary course of business not exceeding, in the
aggregate for the Borrower and its Subsidiaries, $11,500,000, for the 1997
fiscal year and $9,500,000, for each fiscal year thereafter, PROVIDED, that up
to $1,500,000 of any such amount if not so expended in the fiscal year for which
it is permitted above, may be carried over for expenditure in the next following
fiscal year; PROVIDED, FURTHER, that any expenditures constituting a portion of
the acquisition price of a business or a line of business acquired as a going
concern and also classified as an acquisition covered by subsection 7.10 shall
not be taken into account for purposes of determining compliance with the
provisions of this subsection 7.9.
<PAGE>
59
7.10 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of or any assets constituting a
business unit of, or make any other investment in, any Person, except :
(a) extensions of trade credit in the ordinary course of business;
(b) investments in US Cash Equivalents and Canadian Cash Equivalents;
(c) investments constituting Permitted Acquisitions; provided, that
at the date of signing of definitive documentation with respect to such
proposed Permitted Acquisition, the lesser of (1) the Borrowing Base minus
the Aggregate Outstanding Revolving Extensions of Credit and (2) the
Available Revolving Credit Commitments shall be at least $15,000,000
determined on the basis of the average amount of the Borrowing Base and the
Aggregate Outstanding Revolving Extensions of Credit, respectively, during
the calendar month preceding the date such definitive documentation is
signed;
(d) loans and advances to employees of the Borrower or its
Subsidiaries for travel, entertainment and relocation expenses in the
ordinary course of business in an aggregate amount for the Borrower and its
Subsidiaries not to exceed $500,000 at any one time outstanding;
(e) investments by the Borrower and its Subsidiaries in securities and
notes to the extent received in settlement of delinquent obligations of any
supplier or customer that is in bankruptcy or reorganization proceedings or
received in settlement of accounts receivables that are more than 60 days
past due;
(f) investments by the Borrower in its Subsidiaries and investments by
such Subsidiaries in the Borrower and in other Subsidiaries; and
(g) subject to the limitations set forth in subsection 7.2(e),
investments constituting Hedge Agreements.
7.11 LIMITATION ON OPTIONAL PAYMENTS AND MODIFICATIONS OF DEBT
INSTRUMENTS. (a) Make any optional payment or prepayment on or optional
redemption or optional purchase of any Indebtedness or receivables sold
pursuant to the Receivables Transaction (other than (1) the Loans and (2) a
refinancing of Indebtedness permitted by subsection 7.2(d)), or (b) amend,
modify or change, or consent or agree to any amendment, modification or
change to any of the terms of any such Indebtedness (other than any such
amendment, modification or change which would extend the maturity or reduce
the amount of any payment of principal thereof or which would reduce the rate
or extend the date for payment of interest thereon).
7.12 LIMITATION ON TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, any purchase, sale, lease or
exchange of property or the rendering of any service, with any Affiliate unless
such transaction is (a) otherwise not prohibited under this Agreement, and
(b) upon fair and reasonable terms no less favorable to
<PAGE>
60
the Borrower or such Subsidiary, as the case may be, than it would obtain in
a comparable arm's length transaction with a Person which is not an Affiliate.
7.13 LIMITATION ON SALES AND LEASEBACKS. Enter into any arrangement
with any Person providing for the leasing by the Borrower or any Subsidiary of
real or personal property which has been or is to be sold or transferred by the
Borrower or such Subsidiary to such Person or to any other Person to whom funds
have been or are to be advanced by such Person on the security of such property
or rental obligations of the Borrower or such Subsidiary.
7.14 LIMITATION ON CHANGES IN FISCAL YEAR. Permit the fiscal year of
the Borrower to end on a day other than December 31.
7.15 LIMITATION ON NEGATIVE PLEDGE CLAUSES. Enter into with any
Person any agreement, other than (a) this Agreement, (b) any Indebtedness
permitted by subsection 7.2(c) (in which case, any prohibition or limitation
shall only be effective against the assets financed thereby), (c) any
refinancing, refunding, renewal or extension permitted by subsection 7.2(d) (in
which case any prohibition or limitation shall not be more restrictive than the
prohibition or limitation contained in the Indebtedness that was so refinanced,
refunded, renewed or extended) and (d) the Receivables Transaction, which
prohibits or limits the ability of the Borrower or any of its Subsidiaries to
create, incur, assume or suffer to exist any Lien upon any of its property,
assets or revenues, whether now owned or hereafter acquired.
7.16 LIMITATION ON LINES OF BUSINESS. Enter into any business, either
directly or through any Subsidiary, except for those businesses in which the
Borrower and its Subsidiaries are engaged on the date of this Agreement or
businesses reasonably related thereto.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Loan or any
Reimbursement Obligation when due in accordance with the terms thereof or
hereof; or the Borrower shall fail to pay any interest on any Loan, or any
other amount payable hereunder, within five days after any such interest or
other amount becomes due in accordance with the terms thereof or hereof; or
(b) Any representation or warranty made or deemed made by the Borrower
herein or in any other Loan Document or which is contained in any
certificate, document or financial or other statement furnished by it at
any time under or in connection with this Agreement or any such other Loan
Document shall prove to have been incorrect in any material respect on or
as of the date made or deemed made; or
(c) The Borrower or any other Loan Party shall default in the
observance or performance of any agreement contained in subsections 6.4,
6.8, 6.11 (other than as a result of wire transfer difficulties or system
malfunctions beyond the control of any
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Loan Party), and 6.12, Section 7, Section 5 of the Borrower Stock Pledge
Agreement or Section 4 of the Security Agreement; or
(d) The Borrower or any other Loan Party shall default in the
observance or performance of any other agreement contained in this
Agreement or any other Loan Document (other than as provided in paragraphs
(a) through (c) of this Section), and such default shall continue
unremedied for a period of 30 days; or
(e) The Borrower or any of its Subsidiaries shall (i) default in any
payment of principal of or interest of any Indebtedness (other than the
Loans) or in the payment of any Guarantee Obligation, in each case, that is
outstanding in a principal amount of at least $1 million either
individually or in the aggregate, beyond the period of grace (not to exceed
30 days), if any, provided in the instrument or agreement under which such
Indebtedness or Guarantee Obligation was created; or (ii) default in the
observance or performance of any other agreement or condition relating to
any such Indebtedness or Guarantee Obligation or contained in any
instrument or agreement evidencing, securing or relating thereto, or any
other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit the holder or holders of
such Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity or
such Guarantee Obligation to become payable; or
(f) an Early Termination (as defined in the Receivables Sales
Documents) occurs; or
(g) (i) The Borrower or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with respect to it or
its debts, or (B) seeking appointment of a receiver, trustee, custodian,
conservator or other similar official for it or for all or any substantial
part of its assets, or the Borrower or any of its Subsidiaries shall make a
general assignment for the benefit of its creditors; or (ii) there shall be
commenced against the Borrower or any of its Subsidiaries any case,
proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
the Borrower or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60
days from the entry thereof; or (iv) the Borrower or any of its
Subsidiaries shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above; or (v) the Borrower or any
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62
of its Subsidiaries shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due; or
(h) (i) Any Person shall engage in any non-exempt "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the
Code) involving any Plan, (ii) any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived, shall exist with
respect to any Plan or any Lien in favor of the PBGC or a Plan shall arise
on the assets of the Borrower or any Commonly Controlled Entity, (iii) a
Reportable Event shall occur with respect to, or proceedings shall commence
to have a trustee appointed, or a trustee shall be appointed, to administer
or to terminate, any Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee is, in the
reasonable opinion of the Majority Lenders, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, (iv) any Single
Employer Plan shall terminate for purposes of Title IV of ERISA, (v) the
Borrower or any Commonly Controlled Entity shall, or in the reasonable
opinion of the Majority Lenders is likely to, incur any liability in
connection with a withdrawal from, or the Insolvency or Reorganization of,
a Multiemployer Plan or (vi) any other event or condition shall occur or
exist with respect to a Plan; and in each case in clauses (i) through (vi)
above, such event or condition, together with all other such events or
conditions in clauses (i) through (vi), if any, could reasonably be
expected to have a Material Adverse Effect and is reasonably expected to
result in liability exceeding $1 million; or
(i) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance) of $1,000,000 or more, and all
such judgments or decrees shall not have been vacated, discharged, stayed
or bonded pending appeal within 60 days from the entry thereof or, in the
event of such a stay, such judgment shall not be discharged within 60 days
after such stay expires; or
(j) (i) Any of the Security Documents shall cease, for any reason, to
be in full force and effect, or the Borrower or any other Loan Party which
is a party to any of the Security Documents shall so assert or (ii) the
Lien created by any of the Security Documents shall cease to be enforceable
and of the same effect and priority purported to be created thereby; or
(k) The Subsidiaries Guarantee shall cease, for any reason, to be in
full force and effect or any Guarantor shall so assert; or
(l) (i) Jupiter Partners, LP ("Jupiter") shall at any time for any
reason cease to control, directly or indirectly, at least the Control
Percentage of the voting rights of the Borrower having ordinary voting
power in the election of directors of the Borrower or (ii), any other
Person or "group" (within the meaning of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended) (other than Jupiter and its
Affiliates) shall have acquired control of 35% or more of the voting rights
of the Borrower having ordinary voting power in the election of directors
of the Borrower unless the acquisition by any such Person or "group" shall
have been recommended by the board of directors of the Borrower;
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63
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (g) of this Section with respect to the
Borrower, automatically the Commitments shall immediately terminate and the
Loans hereunder (with accrued interest thereon) and all other amounts owing
under this Agreement (including, without limitation, all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) shall immediately
become due and payable, and (B) if such event is any other Event of Default,
either or both of the following actions may be taken: (i) with the consent of
the Majority Lenders, the Administrative Agent may, or upon the request of the
Majority Lenders, the Administrative Agent shall, by notice to the Borrower
declare the Commitments to be terminated forthwith, whereupon the Commitments
shall immediately terminate; and (ii) with the consent of the Majority Lenders,
the Administrative Agent may, or upon the request of the Majority Lenders, the
Administrative Agent shall, by notice to the Borrower, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement to be due and payable forthwith, whereupon the same shall immediately
become due and payable.
With respect to all Letters of Credit with respect to which
presentment for honor shall not have occurred at the time of an acceleration
pursuant to the preceding paragraph, the Borrower shall at such time deposit in
a cash collateral account opened by the Administrative Agent an amount equal to
the aggregate then undrawn and unexpired amount of such Letters of Credit. The
Borrower hereby grants to the Administrative Agent, for the benefit of the
Issuing Bank and the L/C Participants, a security interest in such cash
collateral to secure all obligations of the Borrower under this Agreement and
the other Loan Documents. Amounts held in such cash collateral account shall be
applied by the Administrative Agent to the payment of drafts drawn under such
Letters of Credit, and the unused portion thereof after all such Letters of
Credit shall have expired or been fully drawn upon, if any, shall be applied to
repay other obligations of the Borrower hereunder and under the Notes. After all
such Letters of Credit shall have expired or been fully drawn upon, all
Reimbursement Obligations shall have been satisfied and all other obligations of
the Borrower hereunder and under the Notes shall have been paid in full, the
Administrative Agent shall return the balance, if any, in such cash collateral
account to the Borrower and shall execute documents to terminate its security
interest in such cash collateral. The Borrower shall execute and deliver to the
Administrative Agent, for the account of the Issuing Bank and the L/C
Participants, such further documents and instruments as the Administrative Agent
may request to evidence the creation and perfection of the security interest in
such cash collateral account.
Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
SECTION 9. THE ADMINISTRATIVE AGENT
9.1 APPOINTMENT. Each Lender hereby irrevocably designates and
appoints the Administrative Agent as the agent of such Lender under this
Agreement and the other Loan Documents, and each such Lender irrevocably
authorizes the Administrative Agent, in such capacity, to take such action on
its behalf under the provisions of this Agreement and the other Loan Documents
and to exercise such powers and perform such duties as are expressly
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64
delegated to the Administrative Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere
in this Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the
Administrative Agent.
9.2 DELEGATION OF DUTIES. The Administrative Agent may execute any of
its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent
shall not be responsible for the negligence or misconduct of any administrative
agents or attorneys in-fact selected by it with reasonable care.
9.3 EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any
of its officers, directors, employees, administrative agents, attorneys-in-fact
or Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except for its or such Person's own gross negligence or
willful misconduct) or (ii) responsible in any manner to any of the Lenders for
any recitals, statements, representations or warranties made by the Borrower or
any officer thereof contained in this Agreement or any other Loan Document or in
any certificate, report, statement or other document referred to or provided for
in, or received by the Administrative Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document or for any failure of the Borrower to perform its obligations hereunder
or thereunder. The Administrative Agent shall not be under any obligation to
any Lender to ascertain or to inquire as to the observance or performance of any
of the agreements contained in, or conditions of, this Agreement or any other
Loan Document, or to inspect the properties, books or records of the Borrower.
9.4 RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affidavit, letter,
telecopy, telex or teletype message, statement, order or other document or
conversation believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Borrower), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent may deem and treat the payee
of any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concurrence of the
Majority Lenders as it deems appropriate or it shall first be indemnified to
its satisfaction by the Lenders against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any
such action. The Administrative Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement and the other
Loan Documents in accordance with a request of
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65
the Majority Lenders, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders and all future holders
of the Loans.
9.5 NOTICE OF DEFAULT. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Administrative Agent has received notice from a Lender or
the Borrower referring to this Agreement, describing such Default or Event of
Default and stating that such notice is a "notice of default". In the event
that the Administrative Agent receives such a notice, the Administrative Agent
shall give notice thereof to the Lenders. The Administrative Agent shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Majority Lenders; PROVIDED that unless and until the
Administrative Agent shall have received such directions, the Administrative
Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of the Lenders.
9.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, administrative agents, attorneys-in-fact or
Affiliates has made any representations or warranties to it and that no act by
the Administrative Agent hereinafter taken, including any review of the affairs
of the Borrower, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and made its own decision to make
its Loans hereunder and enter into this Agreement. Each Lender also represents
that it will, independently and without reliance upon the Administrative Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Borrower. Except for notices, reports and
other documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower which may come into
the possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
9.7 INDEMNIFICATION. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Borrower and without limiting the obligation of the Borrower to do so),
ratably according to their respective Voting Percentages in effect on the
date on which indemnification is sought, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following the payment of
the Loans) be imposed on, incurred by or asserted against the Administrative
Agent in any way relating to or arising out of, the Commitments, this
Agreement, any of the other Loan Documents or any documents
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66
contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing;
PROVIDED that no Lender shall be liable for the payment of any portion of
such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting solely from the
Administrative Agent's gross negligence or willful misconduct. The
agreements in this subsection shall survive the payment of the Loans and all
other amounts payable hereunder.
9.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with the Borrower as though the
Administrative Agent were not the Administrative Agent hereunder and under the
other Loan Documents. With respect to the Loans made by it and with respect to
any Letter of Credit issued or participated in by it, the Administrative Agent
shall have the same rights and powers under this Agreement and the other Loan
Documents as any Lender and may exercise the same as though it were not the
Administrative Agent, and the terms "Lender" and "Lenders" shall include the
Administrative Agent in its individual capacity.
9.9 SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may
resign as Administrative Agent upon 10 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under this Agreement
and the other Loan Documents, then the Majority Lenders shall appoint from among
the Lenders a successor agent for the Lenders, which successor agent (provided
that it shall have been approved by the Borrower), shall succeed to the rights,
powers and duties of the Administrative Agent hereunder. Effective upon such
appointment and approval, the term "Administrative Agent" shall mean such
successor agent, and the former Administrative Agent's rights, powers and duties
as Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement or any holders of the Loans. After any retiring Administrative
Agent's resignation as Administrative Agent, the provisions of this Section 8
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Administrative Agent under this Agreement and the other Loan
Documents.
SECTION 10. MISCELLANEOUS
10.1 AMENDMENTS AND WAIVERS. Neither this Agreement nor any other
Loan Document, nor any terms hereof or thereof may be amended, supplemented,
waived or modified except in accordance with the provisions of this subsection.
The Majority Lenders may, or, with the written consent of the Majority Lenders,
the Administrative Agent may, from time to time, (a) enter into with the
Borrower written amendments, supplements or modifications hereto and to the
other Loan Documents for the purpose of adding any provisions to this Agreement
or the other Loan Documents or changing in any manner the rights of the Lenders
or of the Borrower hereunder or thereunder or (b) waive, on such terms and
conditions as the Majority Lenders or the Administrative Agent, as the case may
be, may specify in such instrument, any of the requirements of this Agreement or
the other Loan Documents or any Default or Event of Default and its
consequences; PROVIDED, HOWEVER, that no such waiver and no such amendment,
supplement or modification shall (i) reduce the
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amount or extend the scheduled date of maturity of any Loan or of any
installment thereof, or reduce the stated rate of any interest or fee payable
hereunder or extend the scheduled date of any payment thereof or increase the
amount or extend the expiration date of any Lender's Commitment, in each case
without the consent of each Lender affected thereby, or (ii) amend, modify or
waive any provision of this subsection or subsection 2.13, or reduce the
percentage specified in the definition of Majority Lenders, or consent to the
assignment or transfer by the Borrower of any of its rights and obligations
under this Agreement and the other Loan Documents or, subject to the proviso
below, release the Subsidiaries Guarantee or all or any substantial part of
the Collateral, in each case without the written consent of all the Lenders;
provided, that with respect to a release of the Subsidiaries Guarantee or all
or any substantial part of the Collateral relating solely to the obligations
of the Borrower or any of its Subsidiaries in connection with a Hedge
Agreement entered into with any Lender, the written consent of the Lender
affected thereby, or (iii) increase any of the percentages specified in the
Borrowing Base or increase the Uncovered L/C Amount, in each case, without
the written consent of all the Lenders, or (iv) amend, modify or waive any
provision of Section 9 without the written consent of the then Administrative
Agent. Any such waiver and any such amendment, supplement or modification
shall apply equally to each of the Lenders and shall be binding upon the
Borrower, the Lenders, the Administrative Agent and all future holders of the
Loans. In the case of any waiver, the Borrower, the Lenders and the
Administrative Agent shall be restored to their former positions and rights
hereunder and under the other Loan Documents, and any Default or Event of
Default waived shall be deemed to be cured and not continuing; no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any right consequent thereon.
10.2 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by mail, three days after being
deposited in the mails, postage prepaid, or (c) in the case of delivery by
facsimile transmission, when sent and receipt has been confirmed, addressed as
follows in the case of the Borrower, the Administrative Agent and the Issuing
Banks, and as set forth on its signature page hereto in the case of the other
parties hereto, or to such other address as may be hereafter notified by the
respective parties hereto:
The Borrower: Core-Mark International, Inc.
395 Oyster Point Boulevard, Suite 415
South San Francisco, CA 94080
Attention: Leo F. Korman
Fax: 650-589-4010
The Administrative
Agent: Chase Securities Inc.
101 California Street, 27th Floor
San Francisco, CA 94111
Attention: Wendy E. Gittings
Fax: 415-954-9583
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68
with a copy to: Chase Agent Bank Services
1 Chase Manhattan Plaza, 8th Floor
New York, New York 10081
Attention: Janet Belden
Fax: 212-552-5658
The Issuing Bank: Chase Manhattan Bank Delaware
1201 Market Street
Wilmington, Delaware 19801
Attention: Michael Handago
Fax: 302-428-3390
PROVIDED that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsection 2.2, 2.4, 2.6, 2.7 or 2.12 shall not be
effective until received.
10.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder or under the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise of
any right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exclusive of any rights, remedies, powers and privileges provided by law.
10.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans hereunder.
10.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees (a) to pay
or reimburse the Administrative Agent and its Affiliates for all its
reasonable out-of-pocket costs and expenses incurred in connection with the
preparation, execution, delivery and administration of, and any amendment,
supplement or modification to, this Agreement and the other Loan Documents
and any other documents prepared in connection herewith or therewith, and the
consummation and administration of the transactions contemplated hereby
including, without limitation, the fees specified in subsection 6.7 and
monthly collateral monitoring fees, including, without limitation, the
reasonable fees and disbursements of counsel to the Administrative Agent, (b)
to pay or reimburse the Administrative Agent and the Lenders for all their
out-of-pocket costs and expenses incurred in connection with the enforcement
or preservation of any rights under this Agreement, the other Loan Documents
and any such other documents, including, without limitation, the reasonable
fees and disbursements of counsel to the Administrative Agent and the
Lenders, (c) to pay, indemnify, and hold the Administrative Agent and its
Affiliates and the Lenders (and their respective officers, directors,
employees, advisors and agents) harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp, excise and other like taxes, if any, which may be
payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or
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69
any waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and hold
the Administrative Agent and its Affiliates and the Lenders (and their
respective officers, directors, employees, advisors and agents) harmless from
and against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement or the other
Loan Documents or of the financing contemplated thereby or the use or the
proposed use of the proceeds thereof (other than matters the subject matter
of which is covered by clauses (a), (b) or (c) above), including, without
limitation, any of the foregoing relating to the violation of, noncompliance
with or liability under, any Environmental Law applicable to the operations
of the Borrower, any of its Subsidiaries or any of the Properties (all the
foregoing in this clause (d), collectively, the "indemnified liabilities"),
PROVIDED that the Borrower shall have no obligation hereunder to the
Administrative Agent or any Lender with respect to indemnified liabilities
arising from the gross negligence or willful misconduct of the Administrative
Agent or any such Lender or arising from events or actions occurring after
any Lender has taken possession of the property at issue by foreclosure or
otherwise. The agreements in this subsection shall survive repayment of the
Loans and all other amounts payable hereunder.
10.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS AND ASSIGNMENTS. (a) This
Agreement shall be binding upon and inure to the benefit of the Borrower, the
Lenders, the Administrative Agent and their respective successors and permitted
assigns. The Borrower may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of each
Lender.
(b) Any Lender may, in the ordinary course of its commercial
banking business and in accordance with applicable law, at any time sell to
one or more banks or other entities ("PARTICIPANTS") participating interests
in any Loan owing to such Lender, any Commitment of such Lender or any other
interest of such Lender hereunder and under the other Loan Documents,
provided that each such sale shall be of Loans and Commitments in an
aggregate amount of at least $5,000,000 and provided further, that no Lender
may so sell its Commitments so that less than $5,000,000 of such Commitments
are held by such Lender without participating interests therein, unless such
Lender so sells 100% of its Commitments, in each case, unless otherwise
agreed by the Borrower and the Administrative Agent. In the event of any
such sale by a Lender of a participating interest to a Participant, such
Lender's obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Lender shall remain solely responsible
for the performance thereof, such Lender shall remain the holder of any such
Loan for all purposes under this Agreement and the other Loan Documents, and
the Borrower and the Administrative Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. No Lender
shall be entitled to create in favor of any Participant, in the participation
agreement pursuant to which such Participant's participating interest shall
be created or otherwise, any right to vote on, consent to or approve any
matter relating to this Agreement or any other Loan Document except for those
specified in clauses (i) and (ii) of the proviso to subsection 10.1. The
Borrower agrees that if amounts outstanding under this Agreement are due or
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall, to the maximum
extent permitted by applicable law, be deemed to have
<PAGE>
70
the right of setoff in respect of its participating interest in amounts owing
under this Agreement to the same extent as if the amount of its participating
interest were owing directly to it as a Lender under this Agreement, PROVIDED
that, in purchasing such participating interest, such Participant shall be
deemed to have agreed to share with the Lenders the proceeds thereof as
provided in subsection 10.7(a) as fully as if it were a Lender hereunder.
The Borrower also agrees that each Participant shall be entitled to the
benefits of subsections 2.15, 2.16 and 2.17 (Requirements of Law, Taxes and
Indemnity) with respect to its participation in the Commitments and the Loans
outstanding from time to time as if it was a Lender; PROVIDED that, in the
case of subsection 2.16 (Taxes), such Participant shall have complied with
the requirements of said subsection and PROVIDED, FURTHER, that no
Participant shall be entitled to receive any greater amount pursuant to any
such subsection than the transferor Lender would have been entitled to
receive in respect of the amount of the participation transferred by such
transferor Lender to such Participant had no such transfer occurred.
(c) Upon prior written notice to the Borrower, any Lender may, in
the ordinary course of its commercial banking business and in accordance with
applicable law, at any time and from time to time assign to any Lender or any
Affiliate thereof or, with the consent of the Borrower, the Administrative
Agent and the Issuing Bank (which in each case shall not be unreasonably
withheld), to an additional bank or financial institution (an "ASSIGNEE") all
or any part of its rights and obligations under this Agreement and the other
Loan Documents pursuant to an Assignment and Acceptance, substantially in the
form of Exhibit G, executed by such Assignee, such assigning Lender (and, in
the case of an Assignee that is not then a Lender or an affiliate thereof, by
the Borrower, the Administrative Agent and the Issuing Bank) and delivered to
the Administrative Agent for its acceptance and recording in the Register,
PROVIDED that, each such sale be of Loans and Commitments of an aggregate
amount of at least $5,000,000 and provided further, that no Lender party to
this Agreement on the date hereof may so sell any of its initial Commitments
hereunder such that such Lender holds directly less than $5,000,000 of such
Commitments unless such Lender so sells 100% of its Commitments. Upon such
execution, delivery, acceptance and recording, from and after the effective
date determined pursuant to such Assignment and Acceptance, (x) the Assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder with a Commitment as set forth therein PROVIDED that, no Assignee
shall be entitled to receive any greater amount pursuant to subsection 2.16
than the assignor Lender would have been entitled to receive in respect of
the amount assigned by such assignor Lender to such Assignee had no such
assignment occurred, and (y) the assigning Lender thereunder shall, to the
extent provided in such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement, such assigning Lender shall
cease to be a party hereto). Notwithstanding any provision of this paragraph
(c) and paragraph (e) of this subsection, the consent of the Borrower shall
not be required, and, unless requested by the Assignee and/or the assigning
Lender, new Notes shall not be required to be executed and delivered by the
Borrower, for any assignment which occurs at any time when any of the events
described in Section 8(f) shall have occurred and be continuing.
<PAGE>
71
(d) The Administrative Agent, on behalf of the Borrower, shall
maintain at the address of the Administrative Agent referred to in subsection
10.2 a copy of each Assignment and Acceptance delivered to it and a register
(the "REGISTER") for the recordation of the names and addresses of the Lenders
and the Commitments of, and principal amounts of the Loans owing to, each Lender
from time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Administrative Agent and the
Lenders may (and, in the case of any Loan or other obligation hereunder not
evidenced by a Note, shall) treat each Person whose name is recorded in the
Register as the owner of a Loan or other obligation hereunder as the owner
thereof for all purposes of this Agreement and the other Loan Documents,
notwithstanding any notice to the contrary. Any assignment of any Loan or other
obligation hereunder not evidenced by a Note shall be effective only upon
appropriate entries with respect thereto being made in the Register. The
Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an affiliate thereof, by the Borrower and the Administrative
Agent) together with payment to the Administrative Agent of a registration and
processing fee of $3,500, the Administrative Agent shall (i) promptly accept
such Assignment and Acceptance and (ii) on the effective date determined
pursuant thereto record the information contained therein in the Register and
give notice of such acceptance and recordation to the Lenders and the Borrower.
(f) Subject to subsection 10.16, the Borrower authorizes each Lender
to disclose to any Participant or Assignee (each, a "TRANSFEREE") and any
prospective Transferee any and all financial information in such Lender's
possession concerning the Borrower and its Affiliates which has been delivered
to such Lender by or on behalf of the Borrower pursuant to this Agreement or
which has been delivered to such Lender by or on behalf of the Borrower in
connection with such Lender's credit evaluation of the Borrower and its
Affiliates prior to becoming a party to this Agreement.
(g) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this subsection concerning assignments of Loans and Notes
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including, without limitation, any
pledge or assignment by a Lender of any Loan or Note to any Federal Reserve Bank
in accordance with applicable law.
10.7 ADJUSTMENTS; SET-OFF. (a) If any Lender (a "BENEFITTED
LENDER") shall at any time receive any payment of all or part of its Loans or
the Reimbursement Obligations owing to it, or interest thereon, or receive
any collateral in respect thereof (whether voluntarily or involuntarily, by
set-off, pursuant to events or proceedings of the nature referred to in
Section 8(f), or otherwise), in a greater proportion than any such payment to
or collateral received by any other Lender, if any, in respect of such other
Lender's Loans or the Reimbursements Obligations owing to it, or interest
thereon, such benefitted Lender shall purchase for cash from the other
Lenders a participating interest in such portion of each such other Lender's
Loans, or the Reimbursement Obligations owing to it, or shall provide such
other Lenders with the benefits of any such collateral, or the proceeds
thereof, as shall be necessary to cause such benefitted Lender to share the
excess payment or benefits of such
<PAGE>
72
collateral or proceeds ratably with each of the Lenders; PROVIDED, HOWEVER,
that if all or any portion of such excess payment or benefits is thereafter
recovered from such benefitted Lender, such purchase shall be rescinded, and
the purchase price and benefits returned, to the extent of such recovery, but
without interest.
(b) In addition to any rights and remedies of the Lenders provided by
law, each Lender shall have the right, without prior notice to the Borrower, any
such notice being expressly waived by the Borrower to the extent permitted by
applicable law, upon any amount becoming due and payable by the Borrower
hereunder (whether at the stated maturity, by acceleration or otherwise) to
set-off and appropriate and apply against such amount any and all deposits
(general or special, time or demand, provisional or final), in any currency, and
any other credits, indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured, at any time
held or owing by such Lender or any branch or agency thereof to or for the
credit or the account of the Borrower. Each Lender agrees promptly to notify
the Borrower and the Administrative Agent after any such set-off and application
made by such Lender, PROVIDED that the failure to give such notice shall not
affect the validity of such set-off and application.
10.8 COUNTERPARTS. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts (including
by facsimile transmission), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of this
Agreement signed by all the parties shall be lodged with the Borrower and the
Administrative Agent.
10.9 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.10 INTEGRATION. This Agreement and the other Loan Documents
represent the agreement of the Borrower, the Administrative Agent and the
Lenders with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Administrative Agent or any
Lender relative to subject matter hereof not expressly set forth or referred to
herein or in the other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.12 SUBMISSION TO JURISDICTION; WAIVERS. The Borrower hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which
it is a party, or for recognition and enforcement of any judgement in
respect thereof, to the non-exclusive general jurisdiction of the Courts
of the State of New York sitting in the Borough of
<PAGE>
73
Manhattan, the courts of the United States of America for the Southern
District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such
courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not to
plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to the
Borrower at its address set forth in subsection 10.2 or at such other
address of which the Administrative Agent shall have been notified pursuant
thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right it
may have to claim or recover in any legal action or proceeding referred to
in this subsection any special, exemplary, punitive or consequential
damages.
10.13 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither the Administrative Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or in connection
with this Agreement or any of the other Loan Documents, and the
relationship between Administrative Agent and Lenders, on one hand, and the
Borrower, on the other hand, in connection herewith or therewith is solely
that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby among
the Lenders or among the Borrower and the Lenders.
10.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
10.15 JUDGMENT CURRENCY. (a) If, for the purposes of obtaining
judgment in any court, it is necessary to convert a sum due under any of the
Loan Documents to the Administrative Agent or any Lender in any currency (the
"Original Currency") into another currency (the "Other Currency"), the
parties hereto agree, to the fullest extent that they may effectively do so,
that the rate of exchange used shall be that at which in accordance with
<PAGE>
74
normal banking procedures the Administrative Agent or such Lender, as the
case may be, could purchase the Original Currency with the Other Currency on
the Business Day preceding that on which final judgment is paid or satisfied.
(b) The obligations of the Borrower in respect of any sum due in the
Original Currency from it to the Administrative Agent or any Lender under any of
the Loan Documents shall, notwithstanding any judgment in any Other Currency, be
discharged only to the extent that on the Business Day following receipt by the
Administrative Agent or such Lender of any sum adjudged to be so due in such
Other Currency, the Administrative Lender or such Lender, as the case may be,
may in accordance with normal banking procedures purchase the Original Currency
with such Other Currency. If the amount of the Original Currency so purchased
is less than the sum originally due to the Administrative Agent or the Lender,
as the case may be, in the Original Currency, the Borrower agrees, as a separate
obligation and notwithstanding any such judgment, to indemnify the
Administrative Agent or such Lender, as the case may be, against such loss, and
if the amount of the Original Currency so purchased exceeds the sum originally
due to the Administrative Agent or such Lender, as the case may be, in the
Original Currency, the Administrative Agent and such Lender, as the case may be,
agree to remit such excess to the Borrower.
10.16 CONFIDENTIALITY. The Administrative Agent and each Lender
agrees to keep confidential all non-public information provided to it by or on
behalf of the Borrower or any Subsidiary that is designated by the Borrower or
any Subsidiary as confidential; PROVIDED that nothing herein shall prevent the
Administrative Agent or any Lender from disclosing any such information (a) to
the Administrative Agent or any other Lender, (b) to any Transferee or
prospective Transferee which agrees to comply with the provisions of this
subsection 10.16, (c) to the employees, directors, agents, attorneys,
accountants and other professional advisors of such Lender for purposes related
to the transactions contemplated by the Loan Documents, (d) upon the request or
demand of any Governmental Authority having jurisdiction over the Administrative
Agent or such Lender, (e) in response to any order of any court or other
Governmental Authority or as may otherwise be required pursuant to applicable
law or regulation, (f) which has been publicly disclosed other than in breach of
this subsection 10.16, or (g) in connection with the exercise of any remedy
hereunder or under any other Loan Document.
10.17 SPECIAL PROVISIONS. (a) From and after the Restatement
Effective Date, (i) each Exiting Lender shall cease to be a party to this
Agreement, (ii) no Exiting Lender shall have any obligations or liabilities
under this Agreement with respect to the period from and after the Restatement
Effective Date and, without limiting the foregoing, no Exiting Lender shall have
any Revolving Credit Commitment under this Agreement or any participation in any
Letter of Credit outstanding hereunder and (iii) no Exiting Lender shall have
any rights under the Existing Credit Agreement, this Agreement or any other Loan
Document (other than rights under the Existing Credit Agreement expressly stated
to survive the termination of the Existing Credit Agreement and the repayment of
amounts outstanding thereunder).
(b) The Lenders hereby waive any requirements for notice of
prepayment, commitment terminations, minimum amounts of prepayments of Revolving
Credit Loans (as defined in the Existing Credit Agreement), ratable reductions
of Revolving Credit
<PAGE>
75
Commitments (as defined in the Existing Credit Agreement) and ratable
payments on account of the principal or interest of any Revolving Credit Loan
(as defined in the Existing Credit Agreement) under the Existing Credit
Agreement to the extent such prepayment, reductions or payments are required
pursuant to subsection 5.1(k).
(c) Each of the Exiting Lenders shall deliver to the Administrative
Agent prior to the Restatement Effective Date written consent waiving its rights
to pro-rata payment and pro-rata termination under the Existing Credit
Agreement.
(d) The Lenders hereby confirm that, from and after the Restatement
Effective Date, all participations of the Lenders in respect of Letters of
Credit outstanding hereunder pursuant to subsection 3.4(a) shall be based upon
the Revolving Credit Commitment Percentages of the Lenders (after giving effect
to this Agreement).
(e) The Borrower hereby releases, effective as of the Restatement
Effective Date, in full the Exiting Banks from their obligations in respect of
the Revolving Credit Commitments (as defined in the Existing Credit Agreement)
and, effective as of the Restatement Effective Date, the Lenders hereby assume
such obligations, it being understood that such assumption is reflected in the
Commitments of the Lenders hereunder.
(f) The Borrower shall pay directly to each Exiting Lender, upon
receiving an invoice from such Exiting Lender, any payments due under Section
2.20 of the Existing Credit Agreement.
[Signature Pages Follow]
<PAGE>
76
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
CORE-MARK INTERNATIONAL, INC.
By: /s/ LEO F. KORMAN
-------------------------------------
Name: Leo F. Korman
Title: Sr. VP and CFO
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By: /s/ MARIAN N. SCHULMAN
-------------------------------------
Name: Marian N. Schulman
Title: Vice President
<PAGE>
BANKBOSTON, N.A., as a Lender
By: /s/ R. BRANDON
-------------------------------------
Name: R. Brandon
Title: Director
Address for Notices:
BANKBOSTON, N.A.
100 Federal Street
Boston, MA 02110
Attention: Kali Ramachandran
Telecopy: 617-434-6241
<PAGE>
UNION BANK OF CALIFORNIA, N.A., as a
Lender
By: /s/ DAVID W. KINKELA
-------------------------------------
Name: David W. Kinkela
Title: Assistant Vice President
Address for Notices:
UNION BANK OF CALIFORNIA, N.A.
350 California Street
6th Floor
San Francisco, CA 94104
Attention: David Kinkela
Telecopy: (415) 705-5093
<PAGE>
BANK OF MONTREAL, as a Lender
By: /s/ LEON H. SINCLAIR
----------------------------
Name: Leon H. Sinclair
Title: Director
Address for Notices:
BANK OF MONTREAL
601 South Figueroa Street
Los Angeles, CA 90017
Attention: Maria Chachere
Telecopy: 213-239-0617
<PAGE>
LASALLE BUSINESS CREDIT, INC., as a Lender
By: /s/ ROBERT C. ALEXANDER
------------------------------
Name: Robert C. Alexander
Title: V.P.
Address for Notices:
LASALLE BUSINESS CREDIT, INC.
One Centerpointe Drive, Suite 100
Lake Oswego, OR 97035
Attention: John Mundstock
Telecopy: 503-684-4665
<PAGE>
SANWA BUSINESS CREDIT CORPORATION,
as a Lender
By: /s/ RAFFI SHIRINYAN
----------------------------
Name: Raffi Shirinyan
Title: Vice President
Address for Notices:
SANWA BUSINESS CREDIT CORPORATION
550 North Brand Blvd.
Glendale, CA 91203
Attention: Sandra Sha
Telecopy: 818-545-0095
<PAGE>
U.S. BANK NATIONAL ASSOCIATION, as a
Lender
By: /s/ GREG WILSON
----------------------------
Name: Greg Wilson
Title: Commercial Banking Officer
Address for Notices:
U.S. BANK NATIONAL ASSOCIATION
601 Second Avenue South, MPFP0702
Minneapolis, MN 55402-4302
Attention: Elliot Jaffee
Telecopy: (612) 973-0825<PAGE>
<PAGE>
TRANSAMERICA BUSINESS CREDIT
CORPORATION, as a Lender
By: /s/ PERRY VAVOULES
----------------------------
Name: Perry Vavoules
Title: Senior Vice President
Address for Notices:
TRANSAMERICA BUSINESS CREDIT CORPORATION
555 Theodore Fremd Avenue, Suite C-301
Rye, NY 10580
Attention: Ron Walker
Telecopy: (914) 921-0110
<PAGE>
ERSTE BANK DER OSTERREICHISCHEN
SPARKASSEN AG, as a Lender
By: /s/ RIMA TERRADISTA
----------------------------
Name: Rima Terradista
Title: Vice President
By: /s/ JOHN S. RUNNION
-----------------------------
Name: John S. Runnion
Title: First Vice President
Address for Notices:
ERSTE BANK DER OSTERREICHISCHEN
SPARKASSEN AG
280 Park Avenue West Building
New York, NY 10017
Attention: Rima Terradista
Telecopy: (212) 984-5627
<PAGE>
BANQUE NATIONALE DE PARIS, as a Lender
By: /s/ DAVID W. LOW
---------------------------------
Name: David W. Low
Title: Vice President and Manager
By: /s/ JEFFREY S. KAJISA
---------------------------------
Name: Jeffrey S. Kajisa
Title: Assistant Vice President
Address for Notices:
BANQUE NATIONALE DE PARIS
180 Montgomery Street
San Francisco, CA 94104
Attention: David Low
Telecopy: (650) 296-8954
<PAGE>
CREDITANSTALT CORPORATE FINANCE,
INC., as a Lender
By: /s/ JACK R. BERTGES
----------------------------
Name: Jack R. Bertges
Title: Senior Vice President
By: /s/ JAMES F. MCCANN
---------------------------------
Name: James F. McCann
Title: Vice President
Address for Notices:
CREDITANSTALT CORPORATE FINANCE, INC.
4 Embarcadero Center, Suite 1630
San Francisco, CA 94111
Attention: Jack R. Bertgus/James F. McCann
Telecopy: (415) 481-0622
<PAGE>
SCHEDULE 1.1 (a)
CORE-MARK INTERNATIONAL, INC.
REVOLVING CREDIT COMMITMENT ALLOCATIONS
$120,000,000
<TABLE>
<CAPTION>
BANKS TOTAL ALLOCATION
<S> <C>
THE CHASE MANHATTAN BANK $12,000,000.00
U.S. BANK NATIONAL ASSOCIATION 12,000,000.00
BANK OF MONTREAL 11,500,000.00
BANKBOSTON, N.A. 11,500,000.00
LASALLE BUSINESS CREDIT, INC. 11,500,000.00
UNION BANK OF CALIFORNIA, N.A. 11,500,000.00
SANWA BUSINESS CREDIT 10,000,000.00
CORPORATION
TRANSAMERICA BUSINESS CREDIT 10,000,000.00
CORPORATION
CREDITANSTALT CORPORATE FINANCE, INC. 10,000,000.00
BANQUE NATIONALE DE PARIS 10,000,000.00
ERSTE BANK DER OSTERREICHISCHEN 10,000,000.00
SPARKASSEN AG (FORMERLY
GIROCREDIT)
TOTALS 120,000,000.00
</TABLE>
<PAGE>
EXHIBIT A TO
CREDIT AGREEMENT
[FORM OF]
REVOLVING CREDIT NOTE
New York, New York
$ , 1998
---------- --------- --
FOR VALUE RECEIVED, the undersigned, CORE-MARK INTERNATIONAL, INC., a
Delaware corporation (the "BORROWER"), hereby unconditionally promises to pay
to the order of __________________ (the "LENDER") at the office of The Chase
Manhattan Bank, located at 270 Park Avenue, New York, New York 10017, in
lawful money of the United States of America and in immediately available
funds, on the Termination Date the principal amount of (a) ____________
($___________), or, if less, (b) the aggregate unpaid principal amount of all
Revolving Credit Loans made by the Lender to the Borrower pursuant to
subsection 2.1 of the Credit Agreement, as hereinafter defined. The Borrower
further agrees to pay interest in like money at such office on the unpaid
principal amount hereof from time to time outstanding at the rates and on the
dates specified in subsections 2.5 and 2.10 of such Credit Agreement.
The holder of this Note is authorized to endorse on the schedules
annexed hereto and made a part hereof or on a continuation thereof which
shall be attached hereto and made a part hereof the date, Type and amount of
each Revolving Credit Loan made pursuant to the Credit Agreement and the date
and amount of each payment or prepayment of principal thereof, each
continuation thereof, each conversion of all or a portion thereof to another
Type and, in the case of Eurodollar Loans, the length of each Interest Period
with respect thereto. Each such endorsement, absent manifest error, shall
constitute PRIMA FACIE evidence of the accuracy of the information endorsed.
The failure to make any such endorsement or any error in such endorsement
shall not affect the obligations of the Borrower in respect of such Revolving
Credit Loan.
This Note (a) is one of the Revolving Credit Notes referred to in the
Amended and Restated Credit Agreement dated as of ___________ __, 1998 (as
amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT"), among the Borrower, the Lender, the other banks and financial
institutions from time to time parties thereto and The Chase Manhattan Bank,
as administrative agent, (b) is subject to the provisions of the Credit
Agreement and (c) is subject to optional and mandatory prepayment in whole or
in part as provided in the Credit Agreement. This Note is secured and
guaranteed as provided in the Loan Documents. Reference is hereby made to
the Loan Documents for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
the guarantees, the terms and conditions upon which the security interests
and each guarantee were granted and the rights of the holder of this Note in
respect thereof.
<PAGE>
Upon the occurrence of any one or more of the Events of Default, all
amounts then remaining unpaid on this Note shall become, or may be declared to
be, immediately due and payable, all as provided in the Credit Agreement.
All parties now and hereafter liable with respect to this Note, whether as
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind in connection
with this Note.
Unless otherwise defined herein, terms defined in the Credit Agreement and
used herein shall have the meanings given to them in the Credit Agreement.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.
CORE-MARK INTERNATIONAL, INC.
---------------------------------
By:
Name:
Title:
2
<PAGE>
Schedule A
TO REVOLVING CREDIT NOTE
LOANS, CONVERSIONS AND REPAYMENTS OF ABR LOANS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Amount Amount of Amount of ABR Loans Unpaid Principal
Amount of Converted to Principal of Converted to Balance of Notation
Date ABR Loans ABR Loans ABR Loans Repaid Eurodollar Loans ABR Loans Made By
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule B
TO REVOLVING CREDIT NOTE
<TABLE>
<CAPTION>
LOANS, CONTINUATIONS, CONVERSIONS AND REPAYMENTS OF EURODOLLAR LOANS
Interest Period Amount of Amount of
Amount of Amount and Eurodollar Principal of Eurodollar Loans Unpaid Principal
Eurodollar Converted to Rate with Eurodollar Loans Converted to Balance of Notation
Date Loans Eurodollar Loans Respect Thereto Repaid ABR Loans Eurodollar Loans Made By
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXECUTION COPY
Exhibit 10.16
-------------------------------
AMENDED AND RESTATED SECURITY AGREEMENT
among
CORE-MARK INTERNATIONAL, INC.,
C/M PRODUCTS, INC.,
CORE-MARK INTERRELATED COMPANIES, INC.
and
CORE-MARK MIDCONTINENT, INC.
in favor of
THE CHASE MANHATTAN BANK,
as Administrative Agent
April 1, 1998
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TABLE OF CONTENTS
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1. Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions. . . . . . . . . . . . . . . . . . . . . . 5
2. Grant of Security Interest; Release of Eligible Receivables. . . . . . . . . . 5
3. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . 7
3.1 Title; No Other Liens. . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.2 Perfected First Priority Liens . . . . . . . . . . . . . . . . . . . . . 7
3.3 Inventory and Equipment. . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Chief Executive Office . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 Farm Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
4. Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Delivery of Instruments and Chattel Paper. . . . . . . . . . . . . . . . 8
4.2 Maintenance of Insurance . . . . . . . . . . . . . . . . . . . . . . . . 8
4.3 Maintenance of Perfected Security Interest; Further Documentation. . . . 8
4.5 Further Identification of Collateral . . . . . . . . . . . . . . . . . . 9
4.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5. Provisions Relating to Accounts. . . . . . . . . . . . . . . . . . . . . . . . 10
5.1 Grantors Remain Liable under Accounts. . . . . . . . . . . . . . . . . . 10
5.2 Analysis of Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.3 Collections on Accounts. . . . . . . . . . . . . . . . . . . . . . . . . 10
5.4 Maintaining the US Cash Collateral Account and the L/C Cash
Collateral Account . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.5 Maintaining the Depository Accounts, the Deposit Accounts and the
Canadian Cash Collateral Account . . . . . . . . . . . . . . . . . . . 11
5.6 Investing of Amounts in the US Cash Collateral Account and the
L/C Cash Collateral Account. . . . . . . . . . . . . . . . . . . . . . 12
5.7 Application and Release of Funds.. . . . . . . . . . . . . . . . . . . . 13
5.8 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 13
5.9 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
6. Provisions Relating to Contracts . . . . . . . . . . . . . . . . . . . . . . . 14
6.1 Borrower Remains Liable under Contracts. . . . . . . . . . . . . . . . . 14
6.2 Communication With Contracting Parties . . . . . . . . . . . . . . . . . 14
6.3 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 14
6.4 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7. Provisions Relating to Copyrights, Patents and Trademarks. . . . . . . . . . . 15
7.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 15
7.2 Covenants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.1 Notice to Obligors and Contract Parties. . . . . . . . . . . . . . . . . 17
8.2 Proceeds to be Turned Over To Administrative Agent . . . . . . . . . . . 18
8.3 Code Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
9. Administrative Agent's Appointment as Attorney-in-Fact; Administrative
Agent's Performance
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<TABLE>
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of Borrower's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.1 Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
9.2 Performance by Administrative Agent of Borrower's Obligations. . . . . . 20
9.3 Borrower's Reimbursement Obligation. . . . . . . . . . . . . . . . . . . 20
9.4 Ratification; Power Coupled With An Interest . . . . . . . . . . . . . . 21
10. Duty of Administrative Agent. . . . . . . . . . . . . . . . . . . . . . . . . 21
11. Execution of Financing Statements . . . . . . . . . . . . . . . . . . . . . . 21
12. Authority of Administrative Agent . . . . . . . . . . . . . . . . . . . . . . 21
13. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
15. Amendments in Writing; No Waiver; Cumulative Remedies . . . . . . . . . . . . 22
15.1 Amendments in Writing . . . . . . . . . . . . . . . . . . . . . . . . . 22
15.2 No Waiver by Course of Conduct. . . . . . . . . . . . . . . . . . . . . 22
15.3 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . 22
16. Section Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
17. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
18. Attachment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
19. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
20 Termination and Release of Collateral. . . . . . . . . . . . . . . . . . . . . 23
21. WAIVERS OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
ii
<PAGE>
AMENDED AND RESTATED SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT, dated as of April 1, 1998,
made by each of the signatories hereto (the "GRANTORS"), in favor of THE
CHASE MANHATTAN BANK, a New York banking corporation, as administrative agent
(in such capacity, the "ADMINISTRATIVE AGENT") for the Lenders parties to the
Credit Agreement, dated as of April 1, 1998 (as amended, supplemented or
otherwise modified from time to time, the "AMENDED AND RESTATED CREDIT
AGREEMENT"), among Core-Mark International, Inc., a Delaware corporation (the
"BORROWER"), the Administrative Agent and such Lenders.
W I T N E S S E T H:
WHEREAS, in connection with the Credit Agreement, dated as of
August 7, 1996 (as heretofore amended, the "EXISTING CREDIT AGREEMENT"), the
Grantors entered into a Security Agreement, dated as of August 7, 1996 (the
"EXISTING SECURITY AGREEMENT"); and
WHEREAS, in connection with the amendment and restatement of the
Existing Credit Agreement, the parties to the Existing Security Agreement
wish to amend and restate the Existing Security Agreement in its entirety as
provided herein.
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Amended and Restated
Credit Agreement and to induce the Lenders to make their respective Loans and
other extensions of credit to the Borrower, each Grantor hereby agrees with
the Administrative Agent, for the ratable benefit of the Lenders, that the
Existing Security Agreement is hereby amended and restated to read in its
entirety as follows:
1. DEFINED TERMS.
1.1 DEFINITIONS. (a) Unless otherwise defined herein, terms
defined in the Amended and Restated Credit Agreement and used herein shall
have the meanings given to them in the Amended and Restated Credit Agreement,
and the following terms which are defined in the Uniform Commercial Code in
effect in the State of New York on the date hereof are used herein as so
defined: Accounts, Chattel Paper, Documents, Equipment, Farm Products,
General Intangibles, Instruments, Inventory and Proceeds.
(b) The following terms shall have the following meanings:
"ACCOUNT COLLATERAL": (a) all funds held in and all certificates and
instruments, if any, from time to time representing or evidencing (1) the
Cash Collateral Accounts, (2) the L/C Cash Collateral Account, (3) the
Depository Accounts, (4) the Deposit Accounts, (5) all other deposit
accounts of each Grantor and (6) all Collateral Investments and (b)(1)
<PAGE>
2
all notes, certificates of deposit, deposit accounts, checks and other
instruments from time to time hereinafter delivered to or otherwise
possessed by the Administrative Agent for or on behalf of each Grantor
in substitution for or in addition to any or all of the then existing
Account Collateral and (2) all interest, dividends, cash, instruments
and other property from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all of the then
existing Account Collateral.
"AGREEMENT": this Security Agreement, as the same may be amended,
supplemented or otherwise modified from time to time.
"BORROWING CERTIFICATE": a certificate substantially in the form of
Exhibit C to the Amended and Restated Credit Agreement.
"CANADIAN CASH COLLATERAL ACCOUNT": a cash collateral account with
Bank of Montreal or such other bank as may be reasonably acceptable to the
Administrative Agent, in the name of the Borrower that has entered into a
letter agreement substantially in the form of Exhibit A-2-A.
"CASH COLLATERAL ACCOUNTS": the Canadian Cash Collateral Account and
the US Cash Collateral Account.
"CODE": the Uniform Commercial Code as from time to time in effect in
the State of New York.
"COLLATERAL": as defined in subsection 2(a).
"COLLATERAL INVESTMENTS": as defined in subsection 5.6.
"CONTRACTS": with respect to any Accounts, Instruments, Chattel Paper
or General Intangibles, any contract or agreement in respect thereof or
pursuant to which any of the foregoing was created, as the same may be
amended, supplemented or otherwise modified from time to time, including,
without limitation, (a) all rights of each Grantor to receive moneys due
and to become due to it thereunder or in connection therewith, (b) all
rights of each Grantor to damages arising out of or for breach or default
in respect thereof and (c) all rights of each Grantor to exercise all
remedies thereunder.
"COPYRIGHTS": all copyrights, whether registered or unregistered, and
whether or not the underlying works of authorship have been published, and
all works of authorship and other rights therein or derived therefrom, all
copyrights of works based on, incorporated in, derived from or relating to
works covered by such copyrights, all right, title and interest to make and
exploit all derivative works based upon or adopted from works covered by
such copyright and all copyright registrations and copyright applications,
and any renewals or extensions thereof, including without limitation, each
copyright registration and copyright application, if any, identified in
SCHEDULE 1 hereto, and including, without limitation, (a) the right to
print, publish and distribute any of the foregoing, (b) the right to sue or
otherwise recover for any and all past, present and future
<PAGE>
3
infringements and misappropriations thereof, (c) all income, royalties,
damages and other payments due and/or payable as of August 7, 1996 or
any time thereafter with respect thereto (including, without limitation,
payments under all licenses entered into in connection therewith, and
damages and payments for past or future infringements thereof) and (d)
all rights of each Grantor corresponding thereto throughout the United
States and all other rights of any kind whatsoever of each Grantor
accruing thereunder or pertaining thereto; PROVIDED that, for purposes
hereof, the term "Copyrights" shall not include those rights which are
not created by, or do not arise or exist under, the laws of the United
States or any State or political subdivision thereof.
"COPYRIGHT LICENSES": all license agreements with any other Person in
connection with any of the Copyrights of each Grantor, or such other
Person's copyrights, whether each Grantor is a licensor or licensee under
any such license agreement, including, without limitation, the license
agreements listed on SCHEDULE 1 hereto, subject in each case to the terms
of such license agreements, including, without limitation, terms requiring
consent to a grant of a security interest; PROVIDED that, for purposes
hereof, the term "Copyright Licenses" shall not include those rights which
are not created by, or do not arise or exist under, the laws of the United
States or any State or political subdivision thereof.
"DEPOSIT ACCOUNTS": as defined in subsection 5.5(a).
"DEPOSIT BANKS": as defined in subsection 5.5(a).
"DEPOSIT ACCOUNT LETTERS": as defined in subsection 5.5(a).
"DEPOSITORY ACCOUNTS": each non-interest bearing cash collection
account with a bank that is reasonably satisfactory to the Administrative
Agent and that has entered into a Depository Letter, initially, account
number 4311-848436, with Wells Fargo Bank at its office at 420 Montgomery
Street, San Francisco, CA 94194.
"DEPOSITORY BANKS": as defined in subsection 5.5(a).
"DEPOSITORY LETTERS": as defined in subsection 5.5(a).
"L/C CASH COLLATERAL ACCOUNT": a non-interest bearing cash collateral
account with The Chase Manhattan Bank at its office at 270 Park Avenue, New
York, New York, 10017, account number 910-2-775732, in the name of the
Administrative Agent and under its sole dominion and control and subject to
the terms of this Agreement.
"OBLIGATIONS": the collective reference to the unpaid principal of
and interest on the Loans and all other obligations and liabilities of each
Grantor to the Administrative Agent and the Lenders (including, without
limitation, interest accruing at the then applicable rate provided in the
Amended and Restated Credit Agreement after the maturity of the Loans and
interest accruing at the then applicable rate provided in the Amended and
Restated Credit Agreement after the filing of any petition in bankruptcy,
or
<PAGE>
4
the commencement of any insolvency, reorganization or like proceeding,
relating to each Grantor, whether or not a claim for post-filing or
post-petition interest is allowed in such proceeding), whether direct or
indirect, absolute or contingent, due or to become due, or existing as
of August 7, 1996 or thereafter incurred, which may arise under, out of,
or in connection with, the Amended and Restated Credit Agreement, this
Agreement, the other Loan Documents, any Hedge Agreement entered into by
any Grantor with any Lender, any Overdraft or any other document made,
delivered or given in connection therewith, in each case whether on
account of principal, interest, reimbursement obligations, fees,
indemnities, costs, expenses or otherwise (including, without
limitation, all fees and disbursements of counsel to the Administrative
Agent or to the Lenders that are required to be paid by each Grantor
pursuant to the terms of the Amended and Restated Credit Agreement, this
Agreement, any other Loan Document, any Hedge Agreement entered into by
any Grantor with any Lender or any Overdraft), PROVIDED that in no event
shall the obligations of any Grantor other than the Borrower exceed the
maximum amount specified in the Subsidiaries Guarantee.
"OVERDRAFT": means:
(a) at any time, the amount by which the aggregate amount debited
from any deposit, concentration, operating or disbursement account
maintained by any Grantor with the Administrative Agent or any Affiliate of
the Administrative Agent, as the result of processing of payment orders
issued by such Grantor or otherwise, exceeds the aggregate funds on deposit
in such account; or
(b) so long as Bank of Montreal is a Lender under the Amended and
Restated Credit Agreement and is the Borrower's primary operating bank in
Canada, the lesser of (i) the amount by which the aggregate amount debited
from any deposit, concentration, operating or disbursement account
maintained by any Grantor with Bank of Montreal or any Affiliate of Bank of
Montreal, as the result of processing of payment orders issued by such
Grantor or otherwise, exceeds the aggregate funds on deposit in such
account and (ii) Canadian $1,000,000.
"PATENTS": (a) all letters patent of the United States or any other
country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in SCHEDULE 2, and (b) all applications
for letters patent of the United States or any other country and all
divisions, continuations and continuations-in-part thereof, including,
without limitation, any thereof referred to in SCHEDULE 2.
"PATENT LICENSE": all agreements, whether written or oral, providing
for the grant by or to any Grantor of any right to manufacture, use or sell
any invention covered by a Patent, including, without limitation, any
thereof referred to in SCHEDULE 2.
"RECEIVABLES SALE AND CONTRIBUTION AGREEMENT": as defined in
subsection 2(b).
"TRADEMARKS": (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other
<PAGE>
5
source or business identifiers, and the goodwill associated therewith,
existing as of August 7, 1996 or thereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any State thereof
or any other country or any political subdivision thereof, or otherwise,
including, without limitation, any thereof referred to in SCHEDULE 3,
and (b) all renewals thereof.
"TRADEMARK LICENSE" means any written agreement, providing for the
grant by or to any Grantor of any right to use any Trademark, including,
without limitation, any thereof referred to in SCHEDULE 3.
"US CASH COLLATERAL ACCOUNT": a non-interest bearing cash deposit
account with The Chase Manhattan Bank at its office at 270 Park Avenue, New
York, New York, 10017, account number 910-2-775740, in the name of the
Administrative Agent and under its sole dominion and control and subject to
the terms of this Agreement.
"UNAFFIXED TAX STAMPS": tax stamps in respect of local and state
cigarette taxes that are not physically attached to the Cigarette Inventory
as defined in the Amended and Restated Credit Agreement;
"VEHICLES" means all cars, trucks, trailers, construction and earth
moving equipment and other vehicles covered by a certificate of title law
of any state.
1.2 OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof," "herein",
"hereto" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section, subsection and Schedule references are to this
Agreement unless otherwise specified.
(b) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
2. GRANT OF SECURITY INTEREST; RELEASE OF ELIGIBLE RECEIVABLES. (a)
As collateral security for the prompt and complete payment and performance when
due (whether at the stated maturity, by acceleration or otherwise) of the
Obligations, each Grantor hereby grants to the Administrative Agent for the
ratable benefit of the Lenders a security interest in all of the following
property owned as of August 7, 1996 or at any time thereafter acquired by such
Grantor or in which such Grantor had as of August 7, 1996 or at any time
thereafter acquired or may acquire any right, title or interest (collectively,
the "COLLATERAL"):
(1) all Account Collateral;
(2) all Accounts;
(3) all Chattel Paper;
(4) all Contracts;
<PAGE>
6
(5) all Copyrights;
(6) all Copyright Licenses;
(7) all Documents;
(8) all Equipment;
(9) all General Intangibles;
(10) all Instruments;
(11) all Inventory;
(12) all Patents;
(13) all Patent Licenses;
(14) all Trademarks;
(15) all Trademark Licenses;
(16) all Unaffixed Tax Stamps;
(17) all Vehicles;
(18) all books and records pertaining to the Collateral; and
(19) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing and all collateral
security and guarantees given by any Person with respect to
any of the foregoing.
(b) Upon the transfer or purported transfer of any assets by the
Grantors pursuant to the Receivables Sale and Contribution Agreement, dated as
of April 1, 1998 (the "RECEIVABLES SALE AND CONTRIBUTION AGREEMENT") among
Core-Mark Capital Corporation, Core-Mark International, Inc., Core-Mark
Midcontinent, Inc., Core-Mark Interrelated Companies, Inc. and the Sellers
named therein, the security interest in such assets created pursuant hereto
(but not the proceeds thereof) shall be automatically released.
<PAGE>
7
3. REPRESENTATIONS AND WARRANTIES. Each Grantor hereby represents
and warrants, as to itself that:
3.1 TITLE; NO OTHER LIENS. Except for the security interest granted
to the Administrative Agent for the ratable benefit of the Lenders pursuant to
this Agreement and the other Liens permitted to exist on the Collateral pursuant
to the Amended and Restated Credit Agreement, such Grantor owns each item of the
Collateral free and clear of any and all Liens or claims of others. No
financing statement or other public notice with respect to all or any part of
the Collateral is on file or of record in any public office, except such as have
been filed in favor of the Administrative Agent, for the ratable benefit of the
Lenders, pursuant to this Agreement or as are permitted pursuant to the Amended
and Restated Credit Agreement and except for financing statements relating to
property in which such Grantor has no interest other than an interest arising
under an operating lease.
3.2 PERFECTED FIRST PRIORITY LIENS. The filing of appropriate
financing statements, the filing with and recording by the United States Patent
and Trademark Office and the United States Copyright Office of this Security
Agreement, and all other appropriate action have been duly taken, and the
security interests granted pursuant to this Agreement (a) constitute perfected
security interests in the Collateral (other than the Vehicles, except to the
extent that the appropriate steps for perfection have been taken pursuant to
subsection 4.3(b)) in favor of the Administrative Agent, for the ratable benefit
of the Lenders, as collateral security for the Obligations and (b) are prior to
all other Liens on the Collateral in existence on August 7, 1996 except for
Liens permitted pursuant to the Amended and Restated Credit Agreement.
3.3 INVENTORY AND EQUIPMENT. The Inventory and the Equipment are kept
at the locations listed on SCHEDULE 5.
3.4 CHIEF EXECUTIVE OFFICE. The location of such Grantor's chief
executive office or sole place of business is specified on SCHEDULE 6.
3.5 FARM PRODUCTS. No material portion of the Collateral constitutes,
or is the Proceeds of, Farm Products.
4. COVENANTS. Each Grantor covenants and agrees with the
Administrative Agent and the Lenders, from and after August 7, 1996 until the
Obligations shall have been paid in full, the Commitments shall have expired or
otherwise been terminated and no Letters of Credit are outstanding, as follows:
4.1 DELIVERY OF INSTRUMENTS AND CHATTEL PAPER. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any Instrument or Chattel Paper and such amount exceeds $100,000, such
Instrument or Chattel Paper shall be added to SCHEDULE 8. If requested by the
Administrative Agent each such Instrument or Chattel Paper shall be promptly
delivered to the Administrative Agent, duly indorsed in a manner satisfactory to
the Administrative Agent, to be held as Collateral pursuant to this Agreement.
4.2 MAINTENANCE OF INSURANCE. (a) Such Grantor (or the Borrower, on
behalf of
<PAGE>
8
such Grantor) will maintain, with financially sound and reputable companies,
insurance policies (1) insuring the Inventory, Equipment and Vehicles against
loss by fire, explosion, theft and such other casualties as may be reasonably
satisfactory to the Administrative Agent and (2) insuring such Grantor, the
Administrative Agent and the Lenders against liability for personal injury
and property damage relating to such Inventory, Equipment and Vehicles, such
policies to be in such form and amounts and having such coverage as may be
reasonably satisfactory to the Administrative Agent and the Lenders, with
losses payable to such Grantor (or the Borrower, on behalf of such Grantor),
the Administrative Agent and the Lenders as their respective interests may
appear.
(b) All such insurance shall (1) provide that no cancellation,
material reduction in amount or material change in coverage thereof shall be
effective until at least 30 days after receipt by the Administrative Agent of
written notice thereof, (2)name the Administrative Agent and the Lenders as
insured parties,(3) include a breach of warranty clause and (4) be reasonably
satisfactory in all other respects to the Administrative Agent.
(c) Such Grantor shall deliver to the Administrative Agent and the
Lenders a certificate of a reputable insurance broker with respect to such
insurance during the month of August in each calendar year and such
supplemental reports with respect thereto as the Administrative Agent may
from time to time reasonably request.
4.3 MAINTENANCE OF PERFECTED SECURITY INTEREST; FURTHER
DOCUMENTATION. (a) Such Grantor shall maintain the security interest created
by this Agreement as a perfected security interest having at least the
priority described in subsection 3.2 and shall defend such security interest
against the claims and demands of all Persons whomsoever.
(b) At any time and from time to time, upon the written request of
the Administrative Agent, and at the sole expense of such Grantor, such
Grantor will promptly and duly execute and deliver such further instruments
and documents and take such further actions as the Administrative Agent may
reasonably request for the purpose of obtaining or preserving the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, (i) the filing of any financing or
continuation statements under the Uniform Commercial Code or their foreign
equivalent in effect in any jurisdiction with respect to the security
interests created hereby and (ii) after an Event of Default and at the
request of the Administrative Agent, the delivery of certificates of title
with respect to Vehicles to the Administrative Agent, properly endorsed in
accordance with applicable law, and the filing of any appropriate lien
documents with the relevant state authorities.
4.4 CHANGES IN LOCATIONS, NAME, ETC. Such Grantor will not:
(a) permit any of the Inventory or Equipment to be kept at a location
other than those listed on SCHEDULE 5 unless it gives the Administrative
Agent notice and takes all steps reasonably necessary or advisable, in the
judgment of the Administrative Agent, to maintain the perfection and
priority in such Inventory and Equipment as set forth in subsection 3.2;
<PAGE>
9
(b)change the location of its chief executive office from that
specified in subsection 3.4, unless it shall have given the Administrative
Agent and the Lenders at least 30 days' prior written notice of such change
and takes all steps reasonably necessary or advisable, in the judgment of
the Administrative Agent, to maintain the perfection and priority of the
security interests granted pursuant to this Agreement; or
(c) change its name, identity or corporate structure to such an extent
that any financing statement filed by the Administrative Agent in
connection with this Agreement would become seriously misleading, unless it
shall have given the Administrative Agent and the Lenders at least 30 days'
prior written notice of such change and takes all steps reasonably
necessary or advisable, in the judgment of the Administrative Agent, to
maintain the perfection and priority of the security interests granted
pursuant to this Agreement.
4.5 FURTHER IDENTIFICATION OF COLLATERAL. Such Grantor will furnish
to the Administrative Agent and the Lenders from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Administrative Agent may
reasonably request, all in reasonable detail.
4.6 NOTICES. Such Grantor will advise the Administrative Agent and
the Lenders promptly after becoming aware thereof, in reasonable detail, at
their respective addresses for notices provided for in the Amended and Restated
Credit Agreement of:
(a)any Lien (other than security interests created hereby or Liens
permitted under the Amended and Restated Credit Agreement) on any of the
Collateral; and
(b)the occurrence of any other event which could reasonably be
expected to have a material adverse effect on the aggregate value of the
Collateral or on the security interests created hereby.
5. PROVISIONS RELATING TO ACCOUNTS.
5.1 GRANTORS REMAIN LIABLE UNDER ACCOUNTS. Anything herein to the
contrary notwithstanding, as between any Grantor and the Administrative Agent,
each Grantor shall remain liable under each of the Accounts to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with the terms of any agreement giving rise to
each such Account. Neither the Administrative Agent nor any Lender shall have
any obligation or liability under any Account (or any agreement giving rise
thereto) by reason of or arising out of this Agreement or the receipt by the
Administrative Agent or any Lender of any payment relating to such Account
pursuant hereto, nor shall the Administrative Agent or any Lender be obligated
in any manner to perform any of the obligations of any Grantor under or pursuant
to any Account (or any agreement giving rise thereto), to make any payment, to
make any inquiry as to the nature or the sufficiency of any payment received by
it or as to the sufficiency of any performance by any party under any Account
(or any agreement giving rise thereto), to present or file any claim, to take
any action to enforce any performance or to collect the payment of any amounts
which may have been
<PAGE>
10
assigned to it or to which it may be entitled at any time or times.
5.2 ANALYSIS OF ACCOUNTS. The Administrative Agent shall have the
right to make test verifications of the Accounts in any manner and through any
medium that it reasonably considers advisable, and each Grantor shall furnish
all such assistance and information as the Administrative Agent reasonably may
require in connection with such test verifications. The Administrative Agent in
its own name or in the name of others may communicate with the obligors on the
Accounts to verify with them to the Administrative Agent's satisfaction the
existence, amount and terms of any Accounts.
5.3 COLLECTIONS ON ACCOUNTS. (a) To the extent that any obligor makes
payments in respect of Accounts, the Administrative Agent hereby authorizes each
Grantor to collect such Accounts, subject to the Administrative Agent's
direction and control as set forth in this Section, and the Administrative Agent
may curtail or terminate said authority at any time after the occurrence and
during the continuance of an Event of Default. Each Grantor shall, upon receipt
of any payments made directly to such Grantor in respect of Accounts (1)
forthwith (and, in any event, within two Business Days) deposit such amounts
duly indorsed by such Grantor if required, in a Deposit Account or Depository
Account, as the case may be, and (2) until so turned over, shall be held by such
Grantor in trust for the Administrative Agent for the benefit of the Lenders.
(b) No less frequently than once a year or at the request of the
Administrative Agent, the Borrower shall deliver to the Administrative Agent a
revised SCHEDULE 8, reflecting all collections in respect of the preceding month
in respect of Instruments or Chattel Paper listed on such schedule.
(c) At the Administrative Agent's request, each Grantor shall deliver
to the Administrative Agent all original and other documents evidencing, and
relating to, the agreements and transactions which gave rise to any Accounts
exceeding $100,000, including, without limitation, all original orders, invoices
and shipping receipts.
5.4 MAINTAINING THE US CASH COLLATERAL ACCOUNT AND THE L/C CASH
COLLATERAL ACCOUNT. Until the Obligations shall have been paid in full, the
Commitments shall have expired or otherwise been terminated and no Letters of
Credit are outstanding:
(a) The Borrower shall maintain the US Cash Collateral Account and
the L/C Cash Collateral Account with The Chase Manhattan Bank.
(b) It shall be a term and condition of each of the US Cash
Collateral Account and the L/C Cash Collateral Account, notwithstanding any
term or condition to the contrary in any other agreement relating to the US
Cash Collateral Account or the L/C Cash Collateral Account, as the case may
be, and except as otherwise provided by the provisions of Section 5.7 and
Section 8, that no amount (including interest on Collateral Investments)
shall be paid or released to or for the account of, or withdrawn by or for
the account of, any Grantor or any other Person from the US Cash Collateral
Account or the L/C Cash Collateral Account, as the case may be.
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11
The US Cash Collateral Account and the L/C Cash Collateral Account shall be
subject to such applicable laws, and such applicable regulations of the Board of
Governors of the Federal Reserve System and of any other appropriate banking or
governmental authority, as may now or hereafter be in effect.
5.5 MAINTAINING THE DEPOSITORY ACCOUNTS, THE DEPOSIT ACCOUNTS AND THE
CANADIAN CASH COLLATERAL ACCOUNT. Until the Obligations shall have been paid in
full, the Commitments shall have expired or otherwise been terminated and no
Letters of Credit are outstanding:
(a) The Grantors shall maintain (1) Depository Accounts only with
banks ("DEPOSITORY BANKS") that have entered into letter agreements in
substantially the form of Exhibit A-1 with the Grantors and the
Administrative Agent ("DEPOSITORY LETTERS") or in form and substance
reasonably acceptable to the Borrower and the Administrative Agent, (2)
deposit accounts in Canada ("DEPOSIT ACCOUNTS") only with banks ("DEPOSIT
BANKS") that (i) are listed on SCHEDULE 7 (as such schedule may be amended
or supplemented from time to time) and (ii) shall have entered into letter
agreements in substantially the form of Exhibit A-2-B with the Grantors and
the Administrative Agent ("DEPOSIT ACCOUNT LETTERS") or in form and
substance reasonably acceptable to the Borrower and the Administrative
Agent and (3) the Canadian Cash Collateral Account.
(b) The Grantors shall cause each Deposit Bank to forward an amount
equal to the available balance of the Deposit Account at such Deposit Bank
to the Canadian Cash Collateral Account, at least once a week, in same day
funds.
(c) The Grantors shall instruct each Depository Bank to transfer to
the US Cash Collateral Account, at the beginning of each Business Day, in
same day funds, an amount equal to the available balance of such Depository
Accounts.
(d) The Borrower shall instruct the Collateral Agent (as defined in
the Receivables Sale and Contribution Agreement) to transfer all amounts
owing to the Borrower under the Receivables Sale and Contribution Agreement
to the US Cash Collateral Account.
(e) Upon any termination of any Depository Letter or other agreement
with respect to the maintenance of a Depository Account, the Borrower shall
immediately notify all Obligors that were making payments to such
Depository Account to make all future payments to another Depository
Account.
(f) Upon any termination of any Deposit Account Letter or other
agreement with respect to the maintenance of a Deposit Account the Borrower
shall immediately notify all Obligors that were making payments to such
Deposit Account to make all future payments to another Deposit Account or
to the Canadian Cash Collateral Account.
(g) The Grantors agree to terminate any or all Depository Accounts,
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12
Depository Letters, Deposit Accounts and Deposit Account Letters upon
request by the Administrative Agent made after the occurrence and during
the continuance of an Event of Default.
5.6 INVESTING OF AMOUNTS IN THE US CASH COLLATERAL ACCOUNT AND THE
L/C CASH COLLATERAL ACCOUNT. If requested by the Borrower, the
Administrative Agent will, subject to the provisions of Section 5.7 and
Section 8, from time to time (a) invest amounts on deposit in the US Cash
Collateral Account and the L/C Cash Collateral Account in such US Cash
Equivalents in the name of the Administrative Agent and (b) invest interest
paid on the US Cash Equivalents referred to in clause (a) above, and reinvest
other proceeds of any such US Cash Equivalents that may mature or be sold, in
each case in such US Cash Equivalents in the name of the Administrative Agent
(the US Cash Equivalents referred to in clauses (a) and (b) above being
collectively "COLLATERAL INVESTMENTS"). Interest and proceeds that are not
invested or reinvested in Collateral Investments as provided above shall be
deposited and held in the US Cash Collateral Account or the L/C Cash
Collateral Account, as the case may be.
5.7 APPLICATION AND RELEASE OF FUNDS. (a) So long as the notice
contemplated by the next succeeding paragraph has not been given or, if
given, is not still in effect, on each Business Day the Administrative Agent
(1) shall apply the available funds then on deposit in the US Cash Collateral
Account in the following order of priority: FIRST, to pay interest, fees,
expenses and other amounts (other than principal) then due and payable under
the Loan Documents, SECOND, to pay the principal amount of any Revolving
Credit Loan that is an ABR Loan, if any such principal amount is then
outstanding, THIRD, if such Business Day is the last day of an Interest
Period for any Eurodollar Loan that is a Revolving Credit Loan, to pay all
such Eurodollar Loans to the extent thereof. Any amounts remaining in the US
Cash Collateral Account after application as set forth in the preceding
sentence shall be held in the US Cash Collateral Account as Collateral for
the Obligations.
If an Event of Default has occurred and is continuing and the
Administrative Agent has given notice to the Borrower of its intent to do so,
the Administrative Agent shall remit any funds on deposit in the US Cash
Collateral Account as follows: FIRST, to pay interest, fees, expenses and
other amounts (other than principal) then due and payable under the Loan
Documents, SECOND, to pay the Aggregate Outstanding Revolving Extensions of
Credit and any amounts then due and payable under any Hedge Agreement between
the Borrower and any Lender and any Overdraft pro rata based upon the
respective amounts owing in respect thereof. Amounts allocable to the
Aggregate Outstanding Revolving Extensions of Credit shall be further
allocated as follows: FIRST to any amounts outstanding under the
Reimbursement Obligations, SECOND upon the payment in full of the
Reimbursement Obligations, to the outstanding Revolving Credit Loans and
THIRD to cash collateralize the aggregate then undrawn and unexpired amount
of all Letters of Credit by releasing any funds from the US Cash Collateral
Account to make the deposit to the L/C Cash Collateral Account in accordance
with Section 8 of the Amended and Restated Credit Agreement).
(b) So long as no Event of Default has occurred and is continuing,
the Borrower may from time to time request that available funds on deposit in
the US Cash Collateral Account be released to the Borrower PROVIDED that on
the date of such requested
<PAGE>
13
release, the conditions set forth in subsection 5.2 of the Amended and
Restated Credit Agreement shall have been satisfied.
5.8 REPRESENTATIONS AND WARRANTIES. (a) The amounts represented by
the Borrower to the Lenders from time to time as owing to the Grantors in
respect of the Accounts will at such times be accurate in material respects.
(b) No Grantor has any Depository Accounts or other deposit accounts
other than the Depository Accounts listed on SCHEDULE 7, the permitted unblocked
accounts listed on SCHEDULE 9, the Deposit Accounts listed on SCHEDULE 7 and the
Canadian Cash Collateral Account. The Grantors have instructed (i) the
Depository Bank to forward all amounts on deposit therein to the US Cash
Collateral Account and (ii) all Deposit Banks to forward all amounts on deposit
in the Deposit Accounts to the Canadian Cash Collateral Account.
5.9 COVENANTS. (a) The Grantors will not (i) grant any extension of
the time of payment of any Account, (ii) compromise or settle any Account for
less than the full amount thereof, (iii) release, wholly or partially, any
Person liable for the payment of any Account, (iv) allow any credit or discount
whatsoever on any Account, (v) amend, supplement or modify any Account in any
manner that could adversely affect the value thereof or (vi) fail to exercise
promptly and diligently each and every material right which it may have under
each agreement giving rise to a Account (other than any right of termination),
except that so long as no Event of Default has occurred and is continuing and
the notice contemplated by the second paragraph of subsection 5.7(a) has not
been given, the Grantors may do any of the foregoing in the ordinary course of
business consistent with their past practice.
(b) The Borrower will deliver to the Administrative Agent a copy of
each material demand, notice or document received by it that questions the
validity or enforceability of more than 5% of the aggregate amount of the then
outstanding Accounts.
6. PROVISIONS RELATING TO CONTRACTS.
6.1 BORROWER REMAINS LIABLE UNDER CONTRACTS. Anything herein to the
contrary notwithstanding, as between each Grantor and the Administrative Agent,
each Grantor shall remain liable under each of the Contracts to observe and
perform all the conditions and obligations to be observed and performed by it
thereunder, all in accordance with and pursuant to the terms and provisions of
such Contract. Neither the Administrative Agent nor any Lender shall have any
obligation or liability under any Contract by reason of or arising out of this
Agreement or the receipt by the Administrative Agent or any such Lender of any
payment relating to such Contract pursuant hereto, nor shall the Administrative
Agent or any Lender be obligated in any manner to perform any of the obligations
of each Grantor under or pursuant to any Contract, to make any payment, to make
any inquiry as to the nature or the sufficiency of any payment received by it or
as to the sufficiency of any performance by any party under any Contract, to
present or file any claim, to take any action to enforce any performance or to
collect the payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
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14
6.2 COMMUNICATION WITH CONTRACTING PARTIES. After prior notice to
the Borrower of its intention to do so, the Administrative Agent in its own
name or in the name of others may communicate with parties to the Contracts
to verify with them to the Administrative Agent's reasonable satisfaction the
existence, amount and terms of any Contracts.
6.3 REPRESENTATIONS AND WARRANTIES. (a) No consent of any party
(other than each Grantor) to any Contract is required, or purports to be
required, in connection with the execution, delivery and performance of this
Agreement.
(b) Each Contract is in full force and effect and constitutes a
valid and legally enforceable obligation of each Grantor and to each
Grantor's knowledge, the other parties thereto, subject to the effects of
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally,
general equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.
(c) No consent or authorization of, filing with or other act by or
in respect of any Governmental Authority is required in connection with the
execution, delivery, performance, validity or enforceability of any of the
Contracts by any party thereto other than those which have been duly
obtained, made or performed, are in full force and effect and do not subject
the scope of any such Contract to any material adverse limitation, either
specific or general in nature.
(d) Neither each Grantor nor (to the best of each Grantor's
knowledge) any of the other parties to the Contracts is in default in the
performance or observance of any of the terms thereof in any manner that, in
the aggregate, could reasonably be expected to have a Material Adverse Effect.
(e) The right, title and interest of each Grantor in, to and under
the Contracts are not subject to any defenses, offsets, counterclaims or
claims that, in the aggregate, could reasonably be expected to have a
Material Adverse Effect.
6.4 COVENANTS. (a) Each Grantor will perform and comply in all
material respects with all its obligations under the Contracts which the
failure to so do could reasonably be expected to materially adversely affect
the value of such Contract as Collateral.
(b) Each Grantor will not amend, modify, terminate or waive any
provision of any Contract in any manner which could reasonably be expected to
materially adversely affect the value of such Contract as Collateral.
(c) Each Grantor will exercise promptly and diligently each and
every material right which it may have under each Contract (other than any
right of termination) which the failure to so do could reasonably be expected
to materially adversely affect the value of such Contract as Collateral.
(d) Each Grantor will deliver to the Administrative Agent a copy of
each material demand, notice or document received by it relating in any way
to any Contract that questions the
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15
validity or enforceability of such Contract.
7. PROVISIONS RELATING TO COPYRIGHTS, PATENTS AND TRADEMARKS.
7.1 REPRESENTATIONS AND WARRANTIES. (a) SCHEDULE 1 includes all
material Copyright and Copyright Licenses owned by each Grantor in its own
name on the date hereof.
(b) SCHEDULE 2 includes all Patents and Patent Licenses owned by
each Grantor in its own name on the date hereof.
(c) SCHEDULE 3 includes all registered Trademarks, applications
therefor and Trademark Licenses owned by each Grantor in its own name on the
date hereof.
(d) To the best of each Grantor's knowledge, each material
Copyright, Patent and Trademark is on the date hereof valid, subsisting,
unexpired, enforceable and has not been abandoned.
(e) Except as set forth in either SCHEDULE 1, SCHEDULE 2 or
SCHEDULE 3, none of such Copyrights, Patents and Trademarks is on the date
hereof the subject of any licensing or franchise agreement.
(f) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity of
any Copyright, Patent or Trademark in any respect that could reasonably be
expected to have a Material Adverse Effect.
(g) No action or proceeding is pending on the date hereof (1)
seeking to limit, cancel or question the validity of any material Copyright,
Patent or Trademark, or (2) which, if adversely determined, would have a
material adverse effect on the value of any material Copyright, Patent or
Trademark.
7.2 COVENANTS.
(a) Each Grantor (either itself or through licensees) will (1)
continue to use each material Trademark on each and every trademark class of
goods applicable to its current line as reflected in its current catalogs,
brochures and price lists in order to maintain such Trademark in full force
free from any claim of abandonment for non-use,(2) maintain as in the past
the quality of products and services offered under such Trademark, (3)employ
such Trademark with the appropriate notice of registration,(4) not adopt or
use any mark which is confusingly similar or a colorable imitation of such
Trademark unless the Administrative Agent, for the ratable benefit of the
Lenders, shall obtain a perfected security interest in such mark pursuant to
this Agreement, and (5) not (and not permit any licensee or sublicensee
thereof to) do any act or knowingly omit to do any act whereby such Trademark
may become invalidated.
(b) Each Grantor will not do any act, or omit to do any act,
whereby any material Patent may become abandoned or dedicated.
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16
(c) Each Grantor will notify the Administrative Agent and the
Lenders immediately if it knows, or has reason to know, that any application
or registration relating to any material Patent or Trademark may become
abandoned or dedicated, or of any adverse determination or development
(including, without limitation, the institution of, or any such determination
or development in, any proceeding in the United States Patent and Trademark
Office or any similar office or agency in any other county or political
subdivision thereof or any court or tribunal in any country) regarding each
Grantor's ownership of any material Patent or Trademark or its right to
register the same or to keep and maintain the same.
(d) Whenever each Grantor, either by itself or through any agent,
employee, licensee or designee, shall file an application for the
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or any
political subdivision thereof, each Grantor shall report such filing to the
Administrative Agent and the Lenders within five Business Days after the last
day of the fiscal quarter in which such filing occurs. Upon request of the
Administrative Agent, each Grantor shall execute and deliver any and all
agreements, instruments, documents, and papers as the Administrative Agent
may request to evidence the Administrative Agent's and the Lenders' security
interest in any Patent or Trademark and the goodwill and general intangibles
of each Grantor relating thereto or represented thereby.
(e) Each Grantor will take all reasonable and necessary steps,
including, without limitation, in any proceeding before the United States
Patent and Trademark Office, or any similar office or agency in any other
country or any political subdivision thereof, to maintain and pursue each
application (and to obtain the relevant registration) for and to maintain
each registration of the material Patents and Trademarks, including, without
limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
(f) In the event that any Patent or Trademark is infringed,
misappropriated or diluted by a third party, each Grantor shall (i) take such
actions as each Grantor shall reasonably deem appropriate under the
circumstances to protect such Patent or Trademark and (ii) if such Patent or
Trademark is of material economic value, promptly notify the Administrative
Agent and the Lenders after it learns thereof and sue for infringement,
misappropriation or dilution, to seek injunctive relief where appropriate and
to recover any and all damages for such infringement, misappropriation or
dilution.
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17
8. REMEDIES.
8.1 NOTICE TO OBLIGORS AND CONTRACT PARTIES. Upon the request of
the Administrative Agent at any time after the occurrence and during the
continuance of an Event of Default, each Grantor shall notify obligors on the
Accounts and parties to the Contracts that the Accounts and the Contracts
have been assigned to the Administrative Agent for the ratable benefit of the
Lenders and that payments in respect thereof shall be made directly to the
Administrative Agent. At any time and from time to time after the occurrence
and during the continuance of an Event of Default, the Administrative Agent
may in its own name or in the name of others communicate with the parties to
the Contracts (or the parties to any other contract (as defined in the Code)
to which each Grantor is a party) to verify with them to its satisfaction the
existence, amount and terms of any such Contracts (or such other contracts).
8.2 PROCEEDS TO BE TURNED OVER TO ADMINISTRATIVE AGENT. In
addition to the rights of the Administrative Agent specified in subsection 5
and with respect to payments of Accounts, if an Event of Default shall occur
and be continuing and the notice contemplated by the second paragraph of
subsection 5.7(a) has been given, all Proceeds of any Collateral received by
each Grantor consisting of cash, checks and other near-cash items shall be
held by each Grantor in trust for the Administrative Agent for the benefit of
the Lenders, segregated from other funds of each Grantor, and shall,
forthwith upon receipt by each Grantor, be turned over to the Administrative
Agent (duly indorsed by each Grantor to the Administrative Agent, if
required) and held by the Administrative Agent in the US Cash Collateral
Account. All Proceeds while held by the Administrative Agent in the US Cash
Collateral Account (or by each Grantor in trust for the Administrative Agent
for the benefit of the Lenders) shall continue to be held as collateral
security for all the Obligations and shall not constitute payment thereof
until applied as provided in subsection 5.7.
8.3 CODE REMEDIES. If an Event of Default shall occur and be
continuing, the Administrative Agent, on behalf of the Lenders, may exercise, in
addition to all other rights and remedies granted to them in this Agreement and
in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code or any
applicable law. Without limiting the generality of the foregoing, the
Administrative Agent, without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except any notice
required by law referred to below) to or upon each Grantor or any other Person
(all and each of which demands, defenses, advertisements and notices are hereby
waived), may in such circumstances forthwith collect, receive, appropriate and
realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease, assign, give an option or options to purchase, or otherwise dispose of
and deliver the Collateral or any part thereof (or contract to do any of the
foregoing), in one or more parcels at public or private sale or sales, at any
exchange, broker's board or office of the Administrative Agent or any Lender or
elsewhere upon such terms and conditions as it may deem advisable and at such
prices as it may deem best, for cash or on credit or for future delivery without
assumption of any credit risk. The Administrative Agent or any Lender shall
have the right upon any such public sale or sales, and, to the extent permitted
by law, upon any such private sale or sales, to purchase the whole or any part
of the Collateral so sold, free of any right or equity of redemption in each
Grantor, which right or equity is hereby waived or released. Each Grantor
further agrees, at the Administrative
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18
Agent's request, to assemble the Collateral and make it available to the
Administrative Agent at places which the Administrative Agent shall
reasonably select, whether at each Grantor's premises or elsewhere. The
Administrative Agent shall apply the net proceeds of any action taken by it
pursuant to this subsection, after deducting all reasonable costs and
expenses of every kind incurred in connection therewith or incidental to the
care or safekeeping of any of the Collateral or in any way relating to the
Collateral or the rights of the Administrative Agent hereunder, including,
without limitation, reasonable attorneys' fees and disbursements, to the
payment in whole or in part of the Obligations, in such order as provided in
subsection 5.7 and only after such application and after the payment by the
Administrative Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code, need the
Administrative Agent account for the surplus, if any, to each Grantor. To
the extent permitted by applicable law, each Grantor waives all claims,
damages and demands it may acquire against the Administrative Agent arising
out of the exercise by it of any rights hereunder. If any notice of a
proposed sale or other disposition of Collateral shall be required by law,
such notice shall be deemed reasonable and proper if given at least 10 days
before such sale or other disposition.
9. ADMINISTRATIVE AGENT'S APPOINTMENT AS ATTORNEY-IN-FACT;
ADMINISTRATIVE AGENT'S PERFORMANCE OF BORROWER'S OBLIGATIONS.
9.1 POWERS. Upon the occurrence and during the continuance of an
Event of Default, each Grantor hereby irrevocably constitutes and appoints
the Administrative Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of each Grantor and in the name of
each Grantor or in its own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement, and, without limiting the
generality of the foregoing, each Grantor hereby gives the Administrative
Agent the power and right, on behalf of each Grantor, without notice to or
assent by each Grantor, to do any or all of the following:
(a) in the name of each Grantor or its own name, or otherwise, take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Account or Contract or with respect to any other Collateral and file any
claim or take any other action or proceeding in any court of law or equity
or otherwise deemed appropriate by the Administrative Agent for the purpose
of collecting any and all such moneys due under any Account or Contract or
with respect to any other Collateral whenever payable;
(b) in the case of any Copyright, Patent or Trademark, execute and
deliver any and all agreements, instruments, documents and papers as the
Administrative Agent may request to evidence the Administrative Agent's
security interest in such Copyright, Patent or Trademark and the goodwill
and general intangibles of each Grantor relating thereto or represented
thereby;
(c) pay or discharge taxes and Liens levied or placed on or threatened
against the
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19
Collateral, effect any repairs or any insurance called for by the terms
of this Agreement and pay all or any part of the premiums therefor and
the costs thereof;
(d) execute, in connection with any sale provided for in subsection
8.3, any endorsements, assignments or other instruments of conveyance or
transfer with respect to the Collateral; and
(e)(1) direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct;(2) ask or demand for, collect, receive payment of and
receipt for, any and all moneys, claims and other amounts due or to become
due at any time in respect of or arising out of any Collateral;(3) sign and
indorse any invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments, verifications,
notices and other documents in connection with any of the Collateral;(4)
commence and prosecute any suits, actions or proceedings at law or in
equity in any court of competent jurisdiction to collect the Collateral or
any thereof and to enforce any other right in respect of any Collateral;(5)
defend any suit, action or proceeding brought against each Grantor with
respect to any Collateral;(6) settle, compromise or adjust any such suit,
action or proceeding and, in connection therewith, to give such discharges
or releases as the Administrative Agent may deem appropriate;(7) assign any
Copyright, Patent or Trademark (along with the goodwill of the business to
which any such Copyright, Patent or Trademark pertains), throughout the
world for such term or terms, on such conditions, and in such manner, as
the Administrative Agent shall in its sole discretion determine; and (8)
generally, sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as though
the Administrative Agent were the absolute owner thereof for all purposes,
and do, at the Administrative Agent's option and each Grantor's expense, at
any time, or from time to time, all acts and things which the
Administrative Agent deems necessary to protect, preserve or realize upon
the Collateral and the Administrative Agent's security interests therein
and to effect the intent of this Agreement, all as fully and effectively as
each Grantor might do.
Anything in this subsection to the contrary notwithstanding, the
Administrative Agent agrees that it will not exercise any rights under the
power of attorney provided for in this subsection unless an Event of Default
shall have occurred and be continuing.
9.2 PERFORMANCE BY ADMINISTRATIVE AGENT OF BORROWER'S OBLIGATIONS.
If each Grantor fails to perform or comply with any of its agreements
contained herein, the Administrative Agent, at its option, but without any
obligation so to do, may perform or comply, or otherwise cause performance or
compliance, with such agreement.
9.3 BORROWER'S REIMBURSEMENT OBLIGATION. The expenses of the
Administrative Agent incurred in connection with actions undertaken as
provided in this Section, together with interest thereon at a rate per annum
equal to the rate per annum at which interest would then be payable on past
due ABR Loans under the Amended and Restated Credit Agreement, from the date
of payment by the Administrative Agent to the date reimbursed by each
Grantor, shall be
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20
payable by each Grantor to the Administrative Agent on demand.
9.4 RATIFICATION; POWER COUPLED WITH AN INTEREST. Each Grantor
hereby ratifies all that said attorneys shall lawfully do or cause to be done
by virtue hereof and in accordance with the terms hereof. All powers,
authorizations and agencies contained in this Agreement are coupled with an
interest and are irrevocable until this Agreement is terminated and the
security interests created hereby are released.
10. DUTY OF ADMINISTRATIVE AGENT. The Administrative Agent's sole
duty with respect to the custody, safekeeping and physical preservation of
the Collateral in its possession, under Section 9-207 of the Code or
otherwise, shall be to deal with it in the same manner as the Administrative
Agent deals with similar property for its own account. Neither the
Administrative Agent, any Lender nor any of their respective officers,
directors, employees or agents shall be liable for failure to demand, collect
or realize upon any of the Collateral or for any delay in doing so or shall
be under any obligation to sell or otherwise dispose of any Collateral upon
the request of each Grantor or any other Person or to take any other action
whatsoever with regard to the Collateral or any part thereof. The powers
conferred on the Administrative Agent hereunder are solely to protect the
Administrative Agent's interests in the Collateral and shall not impose any
duty upon the Administrative Agent or any Lender to exercise any such powers.
The Administrative Agent and the Lenders shall be accountable only for
amounts that they actually receive as a result of the exercise of such
powers, and neither they nor any of their officers, directors, employees or
agents shall be responsible to each Grantor for any act or failure to act
hereunder, except for their own gross negligence or willful misconduct.
11. EXECUTION OF FINANCING STATEMENTS. Pursuant to Section 9-402
of the Code or any applicable law, each Grantor authorizes the Administrative
Agent to file financing statements with respect to the Collateral without the
signature of each Grantor in such form and in such filing offices as the
Administrative Agent reasonably determines appropriate to perfect the
security interests of the Administrative Agent under this Agreement. A
carbon, photographic or other reproduction of this Agreement shall be
sufficient as a financing statement for filing in any jurisdiction (except in
Canada).
12. AUTHORITY OF ADMINISTRATIVE AGENT. Each Grantor acknowledges
that the rights and responsibilities of the Administrative Agent under this
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Agreement shall, as between the
Administrative Agent and the Lenders, be governed by the Amended and Restated
Credit Agreement and by such other agreements with respect thereto as may
exist from time to time among them, but, as between the Administrative Agent
and each Grantor, the Administrative Agent shall be conclusively presumed to
be acting as agent for the Lenders with full and valid authority so to act or
refrain from acting, and each Grantor shall be under no obligation, or
entitlement, to make any inquiry respecting such authority.
13. NOTICES. All notices, requests and demands to or upon the
Administrative Agent or each Grantor hereunder shall be effected in the
manner provided for in subsection 10.2
<PAGE>
21
of the Amended and Restated Credit Agreement.
14. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
15. AMENDMENTS IN WRITING; NO WAIVER; CUMULATIVE REMEDIES.
15.1 AMENDMENTS IN WRITING. None of the terms or provisions of
this Agreement may be waived, amended, supplemented or otherwise modified
except by a written instrument executed by each Grantor and the
Administrative Agent, PROVIDED that any provision of this Agreement imposing
obligations on any Grantor may be waived by the Administrative Agent in a
written instrument executed by the Administrative Agent.
15.2 NO WAIVER BY COURSE OF CONDUCT. Neither the Administrative
Agent nor any Lender shall by any act (except by a written instrument
pursuant to subsection 15.1), delay, indulgence, omission or otherwise be
deemed to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Lender, any right,
power or privilege hereunder shall operate as a waiver thereof. No single or
partial exercise of any right, power or privilege hereunder shall preclude
any other or further exercise thereof or the exercise of any other right,
power or privilege. A waiver by the Administrative Agent or any Lender of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which the Administrative Agent or such Lender
would otherwise have on any future occasion.
15.3 REMEDIES CUMULATIVE. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive
of any other rights or remedies provided by law.
16. SECTION HEADINGS. The Section and subsection headings used in
this Agreement are for convenience of reference only and are not to affect
the construction hereof or be taken into consideration in the interpretation
hereof.
17. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the successors and assigns of each Grantor and shall inure to the benefit of
the Administrative Agent and the Lenders and their successors and permitted
assigns under the Amended and Restated Credit Agreement.
18. ATTACHMENT. The parties hereby acknowledge that (i) value has
been given; (ii) each Grantor has rights in the Collateral; (iii) they have
not agreed to postpone the time of attachment of the security interest; and
(iv) each Grantor has received a duplicate original copy of this Agreement.
19. GOVERNING LAW. This Agreement shall be governed by, and
construed and
<PAGE>
22
interpreted in accordance with, the law of the State of New York except with
respect to the security interests granted hereby in deposit accounts which
shall be governed by the law of the State of California.
20 TERMINATION AND RELEASE OF COLLATERAL. At such time as the
Obligations then due and payable have been fully satisfied and the
Commitments terminated, the Collateral shall be released from the lien
created by this Agreement, and the security interest created by this
Agreement and all obligations of the Grantors with respect thereto shall
terminate, all without delivery of any instrument or performance of any act
by any party, and all rights to the Collateral shall revert to the Grantors.
Upon request of any Grantor following any such termination, the
Administrative Agent will deliver (at the sole cost and expense of such
Grantor) to such Grantor any Collateral held by the Administrative Agent
hereunder, and execute and deliver (at the sole cost and expense of such
Grantor) to such Grantor such documents as such Grantor shall reasonably
request to evidence such termination.
21. WAIVERS OF JURY TRIAL. EACH GRANTOR, THE ADMINISTRATIVE AGENT
AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN
ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Security
Agreement to be duly executed and delivered as of the date first above
written.
CORE-MARK INTERNATIONAL, INC.
/s/ LEO F. KORMAN
By: ----------------------------------
Name: Leo F. Korman
Title: Sr. VP & CFO
C/M PRODUCTS, INC.
/s/ LEO F. KORMAN
By: ----------------------------------
Name: Leo F. Korman
Title: Sr. VP & CFO
CORE-MARK INTERRELATED COMPANIES, INC.
/s/ LEO F. KORMAN
By: ----------------------------------
Name: Leo F. Korman
Title: Sr. VP & CFO
CORE-MARK MIDCONTINENT, INC.
/s/ LEO F. KORMAN
By: ----------------------------------
Name: Leo F. Korman
Title: Sr. VP & CFO
<PAGE>
Exhibit 10.17
EXECUTION COPY
AMENDMENT TO BORROWER STOCK PLEDGE AGREEMENT
FIRST AMENDMENT, dated as of April 1, 1998 (this "AMENDMENT"), to the
Borrower Stock Pledge Agreement, dated as of August 7, 1996, (the "PLEDGE
AGREEMENT"), made by CORE-MARK INTERNATIONAL, INC., a Delaware corporation (the
"BORROWER"), in favor of THE CHASE MANHATTAN BANK, as Administrative Agent (in
such capacity, the "ADMINISTRATIVE AGENT") for the Lenders parties to the
Amended and Restated Credit Agreement, dated as of April 1, 1998 (as defined
below), among the Borrower, the Administrative Agent and such Lenders (as
defined in the Credit Agreement referred to below).
W I T N E S S E T H:
WHEREAS, the Borrower, certain of the Lenders and the Administrative
Agent entered into that certain Credit Agreement, dated as of August 7, 1996;
WHEREAS, pursuant to the provisions of such Credit Agreement, the
Borrower entered into the Pledge Agreement;
WHEREAS, the parties thereto have agreed to amend and restate the
Credit Agreement in its entirety pursuant to the Amended and Restated Loan
Agreement, dated as of April 1, 1998, among Core-Mark International, Inc., the
Lenders (as defined therein), and the Administrative Agent (herein, as amended,
supplemented or otherwise modified from time to time, called the "CREDIT
AGREEMENT"); and
WHEREAS, it is a condition to the Credit Agreement's becoming
effective that the Pledge Agreement shall be amended as provided below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
provided for herein and for other good and valuable consideration receipt of
which is hereby acknowledged, the Borrower agrees with the Administrative Agent
on behalf of and for the ratable benefit of the Lenders that the Pledge
Agreement shall be amended as follows:
1. DEFINED TERMS. Unless otherwise defined herein, capitalized terms
used herein shall have the respective meanings assigned thereto in the Pledge
Agreement or, if not therein defined, the Credit Agreement.
<PAGE>
2
2. AMENDMENT TO SCHEDULE 1 OF THE PLEDGE AGREEMENT. Schedule 1 of the
Pledge Agreement is hereby amended by deleting said Schedule in its entirety and
substituting in lieu thereof a new Schedule 1 in the form of Schedule 1 to this
Amendment.
3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby confirms that the
representations and warranties contained in the Pledge Agreement are true and
correct as of the date hereof, except in the case of representations and
warranties that relate specifically to an earlier date, which representations
and warranties were true and correct as of such earlier date.
4. CONTINUING EFFECT OF THE PLEDGE AGREEMENT. This Amendment shall not
constitute an amendment of any provision not expressly referred to herein and
shall not be construed as a waiver or consent to any action on the part of the
Borrower that would require a waiver or consent of the Lenders or of the
Administrative Agent except as expressly stated herein. Except as expressly
amended or modified hereby, the provisions of the Pledge Agreement are and shall
remain in full force and effect.
5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed and delivered by their respective proper and duly authorized
officers as of the day and year first above written.
CORE-MARK INTERNATIONAL, INC.
-----------------------------
/s/ LEO F. KORMAN
-----------------------------
By: Leo F. Korman
Title: Sr. VP & CFO
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
Each of the Issuers referred to in the foregoing Amendment to Borrower
Stock Pledge Agreement hereby acknowledges receipt of a copy of the Amendment
to Borrower Stock Pledge Agreement, dated as of April 1, 1998, (the "PLEDGE
AGREEMENT") made by Core-Mark International, Inc. for the benefit of The
Chase Manhattan Bank, as Administrative Agent for the Lenders parties to the
Amended and Restated Credit Agreement, dated as of April ___, 1998. The
undersigned agrees for the benefit of the Administrative Agent and the
Lenders as follows:
1. The undersigned will be bound by the terms of the Pledge Agreement
and will comply with such terms insofar as such terms are applicable to the
undersigned.
2. The undersigned will notify the Administrative Agent promptly in
writing of the occurrence of any of the events described in subsection ERROR!
REFERENCE SOURCE NOT FOUND. of the Pledge Agreement.
3. The terms of subsection ERROR! REFERENCE SOURCE NOT FOUND. of the
Pledge Agreement shall apply to it, MUTATIS MUTANDIS, with respect to all
actions that may be required of it under or pursuant to or arising out of
Section ERROR! REFERENCE SOURCE NOT FOUND. of the Pledge Agreement.
C/M PRODUCTS, INC.
By: /s/ LEO F. KORMAN
---------------------------------
Name: Leo F. Korman
Title: Sr. VP & CFO
Address for
Notices: 395 Oyster Point Blvd., Suite 415,
South San Francisco, CA 94080
Fax: (415) 952-4284
<PAGE>
CORE-MARK INTERRELATED COMPANIES, INC.
By: /s/ LEO F. KORMAN
---------------------------------
Name: Leo F. Korman
Title: Sr. VP & CFO
Address for
Notices: 395 Oyster Point Blvd., Suite 415
South San Francisco, CA 94080
Error!Fax: (415) 952-4284
CORE-MARK MIDCONTINENT, INC.
By: /s/ LEO F. KORMAN
---------------------------------
Name: Leo F. Korman
Title: Sr. VP & CFO
Address for
Notices: 395 Oyster Point Blvd., Suite 415
South San Francisco, CA 94080
Fax: (415) 952-4284
<PAGE>
EXECUTION COPY
Exhibit 10.18
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CM CAPITAL CORPORATION,
as Company,
CORE-MARK INTERNATIONAL, INC.,
as Servicer,
and
THE CHASE MANHATTAN BANK,
as Trustee
on behalf of the Holders
CORE-MARK RECEIVABLES MASTER TRUST
POOLING AGREEMENT
Dated as of April 1, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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----
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . 1
1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Other Definitional and Calculation Provisions . . . . . . . . . . . . 24
ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES. . . . . . . . . . . . . . 25
2.1. Conveyance of Receivables . . . . . . . . . . . . . . . . . . . . . . 25
2.2. Acceptance by Trustee . . . . . . . . . . . . . . . . . . . . . . . . 28
2.3. Representations and Warranties of the Company
Relating to the Company . . . . . . . . . . . . . . . . . . . . . . 28
2.4. Representations and Warranties of the Company
Relating to the Receivables . . . . . . . . . . . . . . . . . . . . 32
2.5. Repurchase of Ineligible Receivables. . . . . . . . . . . . . . . . . 33
2.6. Purchase of Investor Certificateholders' Interest
in Trust Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . 34
2.7. Affirmative Covenants of the Company. . . . . . . . . . . . . . . . . 35
2.8. Negative Covenants of the Company . . . . . . . . . . . . . . . . . . 38
ARTICLE III
RIGHTS OF HOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS. . . . . . . . . . 42
3.1. Rights of Holders . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IV
ARTICLE IV IS RESERVED
AND MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO THE SERIES RELATING THERETO . . . . . . . . . 47
ARTICLE V
THE CERTIFICATES AND INTERESTS . . . . . . . . . . . . 47
5.1. The Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
5.2. Authentication of Certificates. . . . . . . . . . . . . . . . . . . . 48
5.3. Registration of Transfer and Exchange of Certificates . . . . . . . . 48
5.4. Mutilated, Destroyed, Lost or Stolen
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
5.5. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . 51
5.6. Appointment of Paying Agent . . . . . . . . . . . . . . . . . . . . . 52
5.7. Access to List of Investor Certificateholders'
Names and Addresses . . . . . . . . . . . . . . . . . . . . . . . . 52
5.8. Authenticating Agent. . . . . . . . . . . . . . . . . . . . . . . . . 53
5.9. Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
5.10. Company Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . 55
5.11. Book-Entry Certificates . . . . . . . . . . . . . . . . . . . . . . . 57
5.12. Notices to Clearing Agency. . . . . . . . . . . . . . . . . . . . . . 57
5.13. Definitive Certificates . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE VI
OTHER MATTERS RELATING
TO THE COMPANY . . . . . . . . . . . . . . . . 58
6.1. Limitation on Liability . . . . . . . . . . . . . . . . . . . . . . . 58
6.2. Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
ARTICLE VII
EARLY AMORTIZATION EVENTS. . . . . . . . . . . . . . 59
7.1. Early Amortization Events . . . . . . . . . . . . . . . . . . . . . . 59
7.2. Additional Rights Upon the Occurrence of Certain Events . . . . . . . 60
ARTICLE VIII
THE TRUSTEE . . . . . . . . . . . . . . . . . 61
8.1. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 61
8.2. Rights of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . 63
8.3. Trustee Not Liable for Recitals in Certificates . . . . . . . . . . . 65
8.4. Trustee May Own Certificates. . . . . . . . . . . . . . . . . . . . . 66
8.5. Trustee's Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 66
8.6. Eligibility Requirements for Trustee. . . . . . . . . . . . . . . . . 67
8.7. Resignation or Removal of Trustee . . . . . . . . . . . . . . . . . . 67
8.8. Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 68
8.9. Merger or Consolidation of Trustee. . . . . . . . . . . . . . . . . . 68
8.10. Appointment of Co-Trustee or Separate Trustee . . . . . . . . . . . . 69
8.11. Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
8.12. Trustee May Enforce Claims Without Possession of Certificates . . . . 70
8.13. Suits for Enforcement . . . . . . . . . . . . . . . . . . . . . . . . 70
8.14. Rights of Investor Certificateholders to Direct Trustee . . . . . . . 71
8.15. Representations and Warranties of Trustee . . . . . . . . . . . . . . 71
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
8.16. Maintenance of Office or Agency . . . . . . . . . . . . . . . . . . . 71
8.17. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE IX
TERMINATION . . . . . . . . . . . . . . . . . 72
9.1. Termination of Trust; Liquidation of Receivables. . . . . . . . . . . 72
9.2. Clean-Up Call and Final Termination Date of
Investor Certificates of any Series . . . . . . . . . . . . . . . . 72
9.3. Final Payment with Respect to Any Series. . . . . . . . . . . . . . . 74
9.4. Company's Termination Rights. . . . . . . . . . . . . . . . . . . . . 75
ARTICLE X
MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . 75
10.1. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
10.2. Protection of Right, Title and Interest to Trust. . . . . . . . . . . 77
10.3. Limitation on Rights of Holders . . . . . . . . . . . . . . . . . . . 77
10.4. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
10.6. Severability of Provisions. . . . . . . . . . . . . . . . . . . . . . 79
10.7. Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.8. Certificates Nonassessable and Fully Paid . . . . . . . . . . . . . . 79
10.9. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.10. No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . . . . 79
10.11. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
10.12. Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . 80
10.13. Actions by Holders. . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.14. Merger and Integration. . . . . . . . . . . . . . . . . . . . . . . . 80
10.15. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.16. Construction of Agreement . . . . . . . . . . . . . . . . . . . . . . 80
10.17. No Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
10.18. No Bankruptcy Petition. . . . . . . . . . . . . . . . . . . . . . . . 80
10.19. Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . 81
10.20. Certain Information . . . . . . . . . . . . . . . . . . . . . . . . . 81
</TABLE>
-iii-
<PAGE>
EXHIBITS
Exhibit A Form of Lockbox Agreement
Exhibit B Form of Eligible Segregated Account Bank Agreement
Exhibit C Form of Annual Opinion of Counsel
Exhibit D Internal Operating Procedures Memorandum
SCHEDULES
Schedule 1 Receivables
Schedule 2 Identification of the Trust Accounts
Schedule 3 Actions with respect to Chattel Paper
Schedule 4 Location of Chief Executive Office
Schedule 5 Contractual Obligations
Schedule 6 Form of Legend for Receivables Computer Files
Schedule 7 Conditions Precedent to becoming Eligible Receivable
-iv-
<PAGE>
1
POOLING AGREEMENT, dated as of April 1, 1998, among CM Capital
Corporation, a Delaware corporation (the "COMPANY"); Core-Mark International,
Inc., a Delaware corporation ("CORE-MARK"), in its capacity as servicer (the
"SERVICER"); and The Chase Manhattan Bank, a New York banking corporation, not
in its individual capacity, but solely as trustee (in such capacity, the
"TRUSTEE").
W I T N E S S E T H :
WHEREAS, as of the date hereof, (i) the Company, the Servicer and the
Sellers (as hereinafter defined) are entering into a Receivables Sale Agreement
(as amended, supplemented or otherwise modified from time to time, the
"RECEIVABLES SALE AGREEMENT") and (ii) the Company, the Servicer, the Sellers,
in their capacities as servicers of the Receivables (in such capacities, the
"SUB-SERVICERS"), and the Trustee are entering into a Servicing Agreement (as
amended, supplemented or otherwise modified from time to time, the "SERVICING
AGREEMENT"); and
WHEREAS, the parties hereto wish to enter into this Agreement in order
to create a master trust to which the Company will transfer all of its right,
title and interest in, to and under the Receivables and other Trust Assets now
or hereafter owned by the Company, or in which the Company has an interest, and
such master trust shall, from time to time at the direction of the Company,
issue one or more Series of Investor Certificates which shall represent
interests in the Receivables and such other Trust Assets as specified herein and
in the Supplement related to such Series.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section I.1. DEFINITIONS. Whenever used in this Agreement, the
following words and phrases shall have the following meanings:
"ACCOUNTS" shall have the meaning specified in subsection 2.1(a)(v) of
this Agreement.
"ADJUSTED INVESTED AMOUNT" shall have, with respect to any Outstanding
Series, the meaning assigned to such term in the related Supplement for
such Series.
<PAGE>
2
"AFFILIATE" shall mean, with respect to any specified Person, any
other Person which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person; PROVIDED
that a Person shall not be deemed an Affiliate of another Person solely
by reason of an individual serving as an officer or director of such
other Person. For purposes of this definition, "control" of a Person
means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or otherwise, and the
terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"AGED RECEIVABLE" shall mean, as of any date of determination, any
Receivable (a) which is unpaid in whole or in part for more than 61 days
after its original due date or (b) which is, as of such date of
determination, a Charged-Off Receivable.
"AGENT" shall mean, with respect to any Series, the Person or Persons,
if any, so designated in the related Supplement.
"AGGREGATE ADJUSTED INVESTED AMOUNT" shall mean, with respect to any
date of determination, the sum of the Adjusted Invested Amounts with
respect to all Outstanding Series on such date of determination.
"AGGREGATE ALLOCATED RECEIVABLES AMOUNT" shall mean, with respect to
any date of determination, the sum of the Allocated Receivables Amounts
with respect to all Outstanding Series on such date of determination.
"AGGREGATE DAILY COLLECTIONS" shall mean, with respect to any Business
Day, the aggregate amount of all Collections deposited into the Collection
Account which first became Available Funds after 1:00 p.m., New York City
time, on the prior Business Day and prior to 1:00 p.m., New York City time,
on such Business Day; PROVIDED, that during the first three Business Days
following the Issuance Date for Series 1998-1 Certificates, Aggregate Daily
Collections will not include Collections which have become Available Funds
from deposits made prior to such Issuance Date.
"AGGREGATE INVESTED AMOUNT" shall mean, at any date of determination,
the sum of the Invested Amounts with respect to all Outstanding Series on
such date of determination.
"AGGREGATE OVERCONCENTRATION AMOUNT" shall mean, with respect to any
date of determination, the sum of the Overconcentration Amounts of all
Eligible Obligors at the end of the preceding Business Day.
"AGGREGATE RECEIVABLES AMOUNT" shall mean, with respect to any date of
determination, (i) the aggregate Principal Amount of all Eligible
Receivables in the Trust at the end of the Business Day immediately
preceding such date MINUS (ii) the Aggregate Overconcentration Amount for
such date MINUS (iii) to the extent included
<PAGE>
3
in clause (i), the aggregate amount of general price increases by the
Tobacco Companies for which the Tobacco Companies have agreed to
reimburse the Sellers and for which the Sellers give rebates to their
customers relating thereto and which will give rise to Dilution
Adjustments, PLUS (iv) the Aggregate Uncleared Funds Amount.
"AGGREGATE TARGET RECEIVABLES AMOUNT" shall mean, with respect to any
date of determination, the sum of the Target Receivables Amounts with
respect to all Outstanding Series on such date of determination.
"AGGREGATE UNCLEARED FUNDS AMOUNT" shall mean on any date, any amounts
on deposit in any Eligible Segregated Account or Lockbox Account which were
not Available Funds as of the last time that funds were transferred from
such accounts to the Collection Account.
"AGREEMENT" shall mean this Pooling Agreement and all amendments and
modifications hereof and supplements hereto, and including, unless
expressly stated otherwise, each Supplement.
"ALLOCABLE CHARGED-OFF AMOUNT" shall have, with respect to any Series,
the meaning specified in subsection 3.1(e).
"ALLOCABLE RECOVERIES AMOUNT" shall have, with respect to any Series,
the meaning specified in subsection 3.1(e).
"ALLOCATED RECEIVABLES AMOUNT" shall mean, with respect to any
Outstanding Series, the meaning assigned to such term in the related
Supplement for such Series.
"AMORTIZATION PERIOD" shall mean, with respect to any Outstanding
Series, the meaning assigned to such term in the related Supplement for
such Series.
"AVAILABLE FUNDS" shall mean any funds which are immediately available
funds on the applicable date of determination.
"BOOK-ENTRY CERTIFICATES" shall mean the Certificates issued to a
Clearing Agency to facilitate the use of book entries by such Clearing
Agency to evidence ownership of beneficial interests in the Certificates,
transfers of which beneficial interests shall be made through book entries
by such Clearing Agency, all as described in Section 5.11; PROVIDED,
HOWEVER, that after the occurrence of a condition whereupon book-entry
registration and transfer are no longer permitted and Definitive
Certificates are issued to the Certificate Book-Entry Holders, such
Certificates shall no longer be "Book-Entry Certificates".
"BUSINESS DAY" shall mean any day other than (i) a Saturday or a
Sunday or (ii) another day on which commercial banking institutions or
trust companies in the
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4
State of New York or in the city where the Corporate Trust Office is
located, are authorized or obligated by law, executive order or
governmental decree to be closed; PROVIDED that, when used in connection
with the calculation of Certificate Rates which are determined by
reference to the Eurodollar Rate, "Business Day" shall mean any Business
Day on which dealings in Dollars between banks may be carried on in both
London, England and New York, New York.
"BUSINESS DAY RECEIVED" shall have the meaning specified in subsection
2.3(e) of the Servicing Agreement.
"CASH DILUTION PAYMENT" shall have the meaning specified in
subsection 4.6(a) of the Servicing Agreement.
"CERTIFICATE" shall mean any Series of Investor Certificates.
"CERTIFICATE BOOK-ENTRY HOLDER" shall mean, with respect to a Book-
Entry Certificate, the Person who is listed on the books of the Clearing
Agency, or on the books of a Person maintaining an account with such
Clearing Agency, as the beneficial owner of such Book-Entry Certificate
(directly or as an indirect participant, in accordance with the rules of
such Clearing Agency).
"CERTIFICATE RATE" shall mean, with respect to any Series and Class of
Certificates, the percentage interest rate (or formula on the basis of
which such interest rate shall be determined) stated in the applicable
Supplement.
"CERTIFICATE REGISTER" shall mean the register maintained pursuant to
Section 5.3, providing for the registration of the Certificates and
transfers and exchanges thereof.
"CERTIFICATEHOLDERS' INTEREST" shall have the meaning specified in
subsection 3.1(b).
"CHARGED-OFF RECEIVABLES" shall mean all Receivables (or portions
thereof) which, in accordance with the Policies of the applicable Seller,
have or should have been written off as uncollectible, including without
limitation the Receivables of any Obligor which becomes the subject of any
voluntary or involuntary bankruptcy proceeding.
"CLASS" shall mean, with respect to any Series, any one of the classes
of Certificates of that Series as specified in the related Supplement.
"CLEAN-UP CALL PERCENTAGE" shall have, with respect to any Series, the
meaning specified in the related Supplement for such Series.
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5
"CLEAN-UP CALL REPURCHASE PRICE" shall have the meaning specified in
Section 9.2.
"CLEARING AGENCY" shall mean each organization registered as a
"clearing agency" pursuant to Section 17A of the Securities Exchange Act of
1934, as amended.
"CLEARING AGENCY PARTICIPANT" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited
with such Clearing Agency.
"COLLECTION ACCOUNT" shall have the meaning specified in subsection
3.1(b)(i), and shall include, without limitation, all subaccounts thereof.
"COLLECTION P.O. BOX" shall mean each post office box (other than
Lockboxes) of the Company to which Obligors on the Receivables are
instructed to remit payments on the Receivables.
"COLLECTIONS" shall mean all collections, including the Aggregate
Uncleared Funds Amount, and all amounts received in respect of the
Receivables, including Recoveries, Seller Repurchase Payments, Seller
Adjustment Payments, Servicer Indemnification Amounts paid by the Servicer
and any other payments received in respect of Dilution Adjustments,
together with all collections received in respect of the Related Property
in the form of cash, checks, wire transfers or any other form of cash
payment, and all proceeds of Receivables and collections thereof
(including, without limitation, collections constituting an account or
general intangible or evidenced by a note, instrument, letter of credit,
security, contract, security agreement, chattel paper or other evidence of
indebtedness or security, whatever is received upon the sale, exchange,
collection or other disposition of, or any indemnity, warranty or guaranty
payable in respect of, the foregoing and all "proceeds", as defined in
Section 9-306 of the UCC as in effect in the State of New York, of the
foregoing).
"COLLECTOR" shall mean any delivery person or salesperson employed by
the Servicer or any Sub-Servicer who is authorized to collect payments in
respect of Receivables in accordance with the Policies of the Seller which
generated such Receivables.
"COMPANY" shall mean CM Capital Corporation, a Delaware corporation.
"COMPANY COLLECTION SUBACCOUNT" shall have the meaning specified in
subsection 3.1(a).
"COMPANY EXCHANGE" shall have the meaning specified in subsection
5.10(a).
"COMPANY INTEREST" shall have the meaning specified in subsection
3.1(b).
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6
"CONTRACTUAL OBLIGATION" shall mean, as to any Person, any provision
of any security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or any of
its property is bound.
"CORE-MARK" shall mean Core-Mark International, Inc., a Delaware
corporation.
"CORPORATE TRUST OFFICE" shall mean the principal office of the
Trustee at which at any particular time its corporate trust business shall
be administered, which office at the date of the execution of this
Agreement is located at 450 West 33rd St., New York, New York 10001
(Attention: Structured Finance Services).
"CREDIT ENHANCER" shall mean, with respect to any Outstanding Series,
that Person, if any, designated as such in the applicable Supplement.
"CUT-OFF DATE" shall mean the close of business on March 27, 1998.
"DAILY REPORT" shall have the meaning specified in subsection 4.1 of
the Servicing Agreement.
"DCR" shall mean Duff & Phelps Credit Rating Co. or any successor
thereto.
"DEFINITIVE CERTIFICATES" shall have the meaning specified in Section
5.11.
"DEPOSIT DATE" shall have the meaning specified in subsection 3.1(d).
"DEPOSITORY" shall mean, with respect to any Series, the Clearing
Agency designated as the "Depository" in the related Supplement.
"DEPOSITORY AGREEMENT" shall mean, with respect to any Series, an
agreement among the Company, the Trustee and a Clearing Agency, or a letter
of undertaking to a Clearing Agency by the Company and the Trustee, in each
case in a form reasonably satisfactory to the Trustee and the Company.
"DILUTION ADJUSTMENTS" shall mean any rebates, administrative fees,
discounts, credit memos, refunds, non-cash payments or other adjustments
(including, without limitation, as a result of the application of any
special or other discounts or any reconciliations) in respect of any
Receivable, the amount owing for any returns (including, without
limitation, as a result of the return of any defective goods) or
cancellations and the amount of any other reduction in the amount owing
under any Receivable (including, without limitation, any elimination of
service charges), in each case granted, permitted or made by the applicable
Seller or the Servicer to the related Obligor, PROVIDED that a "Dilution
Adjustment" does not include any Charged-Off Receivable.
<PAGE>
7
"DISTRIBUTION DATE" shall mean, except as otherwise set forth in the
applicable Supplement, the 20th day of each calendar month, beginning on
May 20, 1998, or if such 20th day is not a Business Day, the next
succeeding Business Day.
"DOLLARS," "U.S. DOLLARS", "U.S. $" and "$" shall mean dollars in
lawful currency of the United States of America.
"EARLY AMORTIZATION EVENT" shall have, with respect to any Series, the
meaning specified in Section 7.1 of this Agreement (without taking into
account any Supplements) and in any Supplement for such Series.
"EARLY AMORTIZATION PERIOD" shall have, with respect to any Series,
the definition assigned to such term in Section 7.1 of this Agreement
(without taking into account any Supplements) and in any Supplement for
such Series.
"EARLY TERMINATION" shall have the meaning assigned to such term in
the Receivables Sale Agreement.
"ELIGIBLE INSTITUTION" shall mean a depositary institution or trust
company (which may include the Trustee and its affiliates) organized under
the laws of the United States of America or any one of the states thereof
or the District of Columbia; PROVIDED, HOWEVER, that at all times (i) such
depositary institution or trust company is a member of the Federal Deposit
Insurance Corporation, the certificates of deposit or unsecured and
uncollateralized debt obligations of such depositary institution or trust
company are rated in one of the two highest long-term or highest short-term
rating category by each Rating Agency and (ii) such depositary institution
or trust company has a combined capital and surplus of at least
$50,000,000.
"ELIGIBLE INVESTMENTS" shall mean any deposit accounts, book-entry
securities, negotiable instruments or securities represented by instruments
in bearer or registered form which evidence:
(a) direct obligations of, and obligations fully guaranteed as to
timely payment by, the United States of America;
(b) federal funds, demand deposits, time deposits or certificates of
deposit of any depository institution or trust company incorporated under
the laws of the United States of America or any state thereof (or any
domestic branch of a foreign bank) and subject to supervision and
examination by Federal or State banking or depository institution
authorities; PROVIDED, HOWEVER, that at the time of the investment or
contractual commitment to invest therein the commercial paper, certificates
of deposit or other short-term unsecured and uncollateralized debt
obligations (other than such obligations the rating of which is based on
the credit of a Person other than such depository institution or trust
company) thereof shall have a credit rating from each of
<PAGE>
8
the Rating Agencies rating such investment in one of the two highest
investment category granted thereby;
(c) commercial paper rated, at the time of the investment or
contractual commitment to invest therein, in one of the two highest rating
category by each Rating Agency rating such commercial paper;
(d) investments in money market funds (including funds for which the
Trustee or any of its Affiliates is investment manager or adviser) rated in
one of the two highest rating category by each Rating Agency rating such
money market fund (PROVIDED, that if such Rating Agency is S&P, such rating
shall be AAAm-G);
(e) bankers' acceptances issued by any depository institution or
trust company referred to in clause (b) above;
(f) repurchase obligations with respect to any security that is a
direct obligation of, or fully guaranteed by, the United States of America
or any agency or instrumentality thereof the obligations of which are
backed by the full faith and credit of the United States of America, in
either case entered into with a depository institution or trust company
(acting as principal) described in clause (b) above; or
(g) any other investment upon satisfaction of the Rating Agency
Condition with respect thereto.
"ELIGIBLE OBLIGOR" shall mean, as of any date of determination, each
Obligor in respect of a Receivable that satisfies the following eligibility
criteria:
(a) it is a resident of the United States, its territories or
possessions;
(b) it is not the United States federal government, or any
subdivision thereof, or any agency, department or instrumentality thereof
(a "FEDERAL GOVERNMENT OBLIGOR"), or any state or local government, or any
subdivision thereof, or any agency, department, or instrumentality thereof
(a "STATE/LOCAL GOVERNMENT OBLIGOR"; each Federal Government Obligor and
each State/Local Government Obligor being a "GOVERNMENT OBLIGOR"),;
(c) it is not a Seller or an Affiliate of a Seller; and
(d) it is not the subject of any voluntary or involuntary bankruptcy
proceeding;
PROVIDED, HOWEVER, that if 40% or more of the Principal Amount of
Receivables of an Obligor (measured by the Principal Amount of Receivables
of such Obligor in the Trust) is reported as being aged 91 days or more
after the respective original due dates of such Receivables as at the end
of the Settlement Period immediately preceding the most recent Settlement
Report Date (commencing with the Settlement Report Date
<PAGE>
9
occurring on May 15, 1998), such Obligor shall not be deemed an Eligible
Obligor until such time as the Servicer furnishes the Trustee with a
report (which may be part of a Daily Report or a Monthly Settlement
Statement) demonstrating that less than 40% of the Principal Amount of
Receivables of such Obligor then in the Trust are aged 91 days or more
after the respective original due dates of such Receivables.
"ELIGIBLE RECEIVABLE" shall mean, as of any date of determination,
each Receivable owing by an Eligible Obligor that as of such date satisfies
the following eligibility criteria:
(a) it constitutes either (i) an account within the meaning of Section
9-106 of the UCC of the State the law of which governs the perfection of
the interest granted in it, (ii) chattel paper within the meaning of
Section 9-105 of such UCC, subject, in the case of chattel paper, to
compliance with the procedures set forth in Schedule 3 hereto; or (iii) a
general intangible (to the extent that such Receivable includes interest,
finance charges, returned check or late charges or sales or similar taxes)
within the meaning of Section 9-106 of such UCC;
(b) it is not an Aged Receivable;
(c) the goods related to it shall have been shipped or the services
related to it shall have been performed and such Receivable shall have been
billed to the related Obligor;
(d) it is denominated and payable only in U.S. Dollars in the United
States;
(e) it arose in the ordinary course of business from the sale of
goods, products or services of the relevant Seller and in accordance with
the Policies of such Seller and, at such date of determination, no Early
Termination has occurred with respect to such Seller;
(f) (i) it does not contravene any applicable law, rule or regulation
and the applicable Seller is not in violation of any law, rule or
regulation in connection with it, in each case which in any way renders
such Receivable unenforceable or would otherwise impair in any material
respect the collectibility of such Receivable and (ii) it is not subject to
any investigation or proceeding known by such Seller that would reasonably
be expected to adversely affect the payment or enforceability thereof;
(g) it is an account receivable representing all or part of the sales
price of merchandise, insurance or services within the meaning of Section
3(c)(5) of the 1940 Act;
(h) (i) it is not a Receivable of a Seller Division which has not
become a New Division or (ii) it is not a Receivable purchased by a Seller
from any Person other than a Receivable purchased in connection with the
acquisition by a Seller of the
<PAGE>
10
business unit or operating assets of another Person, so long as the
Seller Division consisting of such business unit or operating assets has
become a New Division and the conditions set forth on Schedule 7 hereto
have been satisfied;
(i) it is not a Receivable for which the applicable Seller has
established an offsetting specific reserve; PROVIDED that a Receivable
subject only in part to the foregoing shall be an Eligible Receivable to
the extent not so subject;
(j) it is not a Receivable with original payment terms in excess of 60
days from its original invoice date, or in respect of which the applicable
Seller has (i) altered the basis of the aging from the initial due date for
payment such that the final due date extends to a date more than 60 days
from its original invoice date or (ii) otherwise made any modification
except in the ordinary course of business and consistent with the Policies
of such Seller;
(k) all required consents, approvals or authorizations necessary for
the creation and enforceability of such Receivable and the effective
assignment and sale thereof by the applicable Seller to the Company and by
the Company to the Trust shall have been obtained with respect to such
Receivable;
(l) the applicable Seller is not in default in any material respect
under the terms of the contract, if any, from which such Receivable arose;
provided that if a series of Receivables arise under a single contract
Receivables not subject to such default shall be an Eligible Receivable to
the extent not so subject;
(m) all right, title and interest in it has been validly sold to the
Company by the applicable Seller pursuant to the Receivables Sales
Agreement;
(n) the Company or the Trust will have legal and beneficial ownership
therein free and clear of all Liens other than such Liens described in
clauses (i) and (iv) of the definition of Permitted Liens and such
Receivable has been the subject of either a valid transfer from the Company
to the Trust or, alternatively, the grant of a first priority perfected
security interest therein to the Trust free and clear of all Liens other
than such Liens described in clauses (i) and (iv) of the definition of
Permitted Liens;
(o) it is not subject to any dispute in whole or in part or to any
offset, counterclaim, defense, rescission, recoupment or subordination;
PROVIDED that a Receivable subject only in part to any of the foregoing
shall be an Eligible Receivable to the extent not so subject;
(p) it is at all times the legal, valid and binding obligation of the
Obligor thereon, enforceable against such Obligor to pay the full Principal
Amount thereof in accordance with its terms, except as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting
<PAGE>
11
the enforcement of creditors' rights generally and by general equitable
principles (whether enforcement is sought by proceedings in equity or law);
(q) each of the representations and warranties with respect thereto
made in the Receivables Sale Agreement by the applicable Seller with
respect to such Receivable is true and correct in all material respects;
and
(r) at the time such Receivable was sold by the applicable Seller to
the Company under the Receivables Sale Agreement, no event described in
subsection 6.01(g) (other than clause (v) thereof) of the Receivables Sale
Agreement (without giving effect to any requirement as to the passage of
time) had occurred with respect to such Seller.
"ELIGIBLE SEGREGATED ACCOUNT" shall mean (a) a segregated account or
accounts maintained with a depositary institution or trust company whose
long-term unsecured debt obligations are rated in one of the three highest
long-term or short-term rating categories by each Rating Agency rating such
depository institution or trust company at the time of any deposit therein,
PROVIDED, that if such obligations are only rated by one of S&P or Moody's,
such rating shall suffice, or (b) a segregated account or accounts
maintained with a federal of state chartered depository institution subject
to regulations regarding fiduciary funds on deposit substantially similar
to 12 C.F.R. Section 9.10(b).
"ELIGIBLE SEGREGATED ACCOUNT BANK" shall mean any bank or depositary
institution with which an Eligible Segregated Account has been established.
"ELIGIBLE SEGREGATED ACCOUNT BANK AGREEMENT" shall have the meaning
specified in subsection 2.3(b)(ii) of the Servicing Agreement.
"ELIGIBLE SUCCESSOR SERVICER" shall mean a Person which, at the time
of its appointment as Servicer, (i) is legally qualified and has the
corporate power and authority to service the Receivables transferred to the
Trust, (ii) has demonstrated the ability to service a portfolio of similar
receivables in accordance with the standards set forth in subsection 6.2(c)
of the Servicing Agreement and (iii) has a combined capital and surplus of
at least $5,000,000.
"ENHANCEMENT" shall mean, with respect to any Series, (i) the funds on
deposit in or credited to any bank account (or subaccount thereof) of the
Trust for the benefit of any Holders of such Series, (ii) any surety
arrangement, any letter of credit, guaranteed rate agreement, maturity
guaranty facility, tax protection agreement, interest rate swap, currency
swap or other contract, agreement or arrangement, in each case for the
benefit of any Holders of such Series, as designated in the applicable
Supplement and (iii) the subordination of one Class of Certificates in a
Series to another class in such Series or the subordination of any
Certificate held or interest owned by the Company to the Investor
Certificates of such Series.
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12
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"EXCHANGEABLE COMPANY INTEREST" shall have the meaning specified in
subsection 3.1(a) and shall be exchangeable as provided in Section 5.10.
"EXCHANGE DATE" shall have the meaning, with respect to any Series
issued pursuant to a Company Exchange, specified in Section 5.10.
"EXCHANGE NOTICE" shall have the meaning, with respect to any Series
issued pursuant to a Company Exchange, specified in Section 5.10.
"FORCE MAJEURE DELAY" shall mean, with respect to any Servicing Party,
any cause or event which is beyond the control and not due to the
negligence of such Servicing Party which delays, prevents or prohibits the
Servicer's delivery of Daily Reports and/or Monthly Settlement Statements,
including, without limitation, acts of God or the elements and fire, but
excluding strikes by any Servicing Party's employees; PROVIDED that no such
cause or event shall be deemed to be a Force Majeure Delay unless the
Servicer shall have given the Company and the Trustee written notice
promptly after the beginning of such delay.
"FRACTIONAL UNDIVIDED INTEREST" shall mean the fractional undivided
interest in the Certificateholders' Interest evidenced by an Investor
Certificate.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time.
"GENERAL OPINION" shall mean, with respect to any action, an Opinion
of Counsel to the effect that (A) such action has been duly authorized by
all necessary corporate action on the part of the Servicer, the applicable
Seller or Sellers or the Company, as the case may be, (B) any agreement
executed in connection with such action constitutes a legal, valid and
binding obligation of the Servicer, the applicable Seller or Sellers or the
Company, as the case may be, enforceable in accordance with the terms
thereof, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereinafter in effect, affecting the enforcement of creditors' rights and
except as such enforceability may be limited by general principles of
equity (whether considered in a proceeding at law or in equity), (C) such
action does not violate any Requirement of Law or require any consent or
filing thereunder, (D) such action does not result in a breach of, or
default under any contractual obligation, or creation of any Lien,
pursuant thereto and (E) any condition precedent to any such action
specified in the applicable agreement, if any, has been complied with,
which opinion in the case of clauses (D) or (E) may, to the extent that
such opinion concerns questions of fact, rely on an Officer's Certificate
with respect to such questions of fact.
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13
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"HOLDERS" shall mean the collective reference to (i) the Investor
Certificateholders, (ii) the owner of the Exchangeable Company Interest and
(iii) if applicable, the owner of each Series Subordinated Interest.
"INDEBTEDNESS" shall mean, with respect to any Person at any date, (a)
all indebtedness of such Person for borrowed money, (b) any obligation owed
for the deferred purchase price of property or services which purchase
price is evidenced by a note or similar written instrument, (c) notes
payable and drafts accepted representing extensions of credit whether or
not representing obligations for borrowed money, (d) that portion of
obligations of such Person under capital leases which is properly
classified as a liability on a balance sheet in conformity with GAAP and
(e) all Indebtedness referred to in clauses (a) through (d) above of
another Person secured by any Lien on any property owned by such Person
even though such Person has not assumed or otherwise become liable for the
payment thereof.
"INDEPENDENT PUBLIC ACCOUNTANTS" means any independent certified
public accountants of nationally recognized standing which constitute one
of the accounting firms commonly referred to as the "big six" accounting
firms (or any successor thereto); PROVIDED that such firm is independent
with respect to the Servicer within the meaning of Rule 2-01(b) of
Regulation S-X under the Securities Act.
"INELIGIBLE RECEIVABLE" shall have the meaning specified in Section
2.5.
"INITIAL CLOSING DATE" shall mean April 1, 1998.
"INITIAL INVESTED AMOUNT" shall mean, with respect to any Outstanding
Series, the meaning assigned to such term in the related Supplement for
such Series.
"INSOLVENCY EVENT" shall mean the occurrence of any one or more of the
Early Amortization Events specified in paragraph (a) of Section 7.1.
"INTERNAL OPERATING PROCEDURES MEMORANDUM" shall mean the internal
operating procedures memorandum prepared by the Trustee as set forth in
Exhibit D hereto.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
"INVESTED AMOUNT" shall mean, with respect to any Outstanding Series,
the meaning assigned to such term in the related Supplement for such
Series.
<PAGE>
14
"INVESTED PERCENTAGE" shall mean, with respect to any Outstanding
Series, the meaning assigned to such term in the related Supplement for
such Series.
"INVESTMENT EARNINGS" shall have the meaning specified in subsection
3.1(c).
"INVESTOR CERTIFICATEHOLDER" shall mean the registered holder of, or
the bearer of, an Investor Certificate.
"INVESTOR CERTIFICATES" shall mean the Certificates executed by the
Company and authenticated by or on behalf of the Trustee, substantially in
the form attached to the applicable Supplement, but shall not include any
Certificate held by the Company.
"ISSUANCE DATE" shall mean, with respect to any Series, the date of
issuance of such Series, or the date of any issuance of additional
certificates representing any increase to the Invested Amount of such
Series, as specified in the related Supplement.
"LIEN" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, encumbrance, charge or security interest in or on
such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement relating to such
asset and (c) in the case of securities, any purchase option, call or other
similar right of a third party with respect to such securities; PROVIDED,
HOWEVER, that if a lien is imposed under Section 412(n) of the Internal
Revenue Code or Section 302(f) of ERISA for a failure to make a required
installment or other payment to a plan to which Section 412(n) of the
Internal Revenue Code or Section 302(f) of ERISA applies, then such lien
shall not be treated as a "Lien" from and after the time any Person who is
obligated to make such payment pays to such plan the amount of such lien
determined under Section 412(n)(3) of the Internal Revenue Code or Section
302(f)(3) of ERISA, as the case may be, and provides to the Trustee, any
Agent and each Rating Agency written evidence reasonably satisfactory to
the Rating Agencies of the release of such lien, or such lien expires
pursuant to Section 412(n)(4)(B) of the Internal Revenue Code or Section
302(f)(4)(B) of ERISA.
"LOCKBOX" shall mean the post office boxes listed on Schedule 3 to the
Receivables Sale Agreement to which the Obligors are instructed to remit
payments on the Receivables and/or such other post office boxes as may be
established pursuant to Section 2.3 of the Servicing Agreement.
"LOCKBOX ACCOUNT" shall mean each intervening bank account of the
Company used by a Lockbox Processor for deposit of funds received in a
Lockbox prior to their transfer to the Collection Account, which account
may also be used by Collectors and other employees of the Servicing
Parties for deposit of Collections received by such persons or direct
payment by Obligors.
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15
"LOCKBOX AGREEMENT" shall mean, with respect to each Lockbox
Processor, a lockbox agreement in substantially the form set forth as
Exhibit A hereto, or such other form of lockbox agreement with a Lockbox
Processor acceptable to each Agent, or if there are no Agents, which upon
execution thereof the Rating Agency Condition is satisfied.
"LOCKBOX BANK" shall mean the depositary institution that holds a
Lockbox Account.
"LOCKBOX PROCESSOR" shall mean the depositary institution or
processing company (which may be the Trustee) which processes payments on
the Receivables sent by the Obligors thereon forwarded to a Lockbox.
"MATERIAL ADVERSE EFFECT" shall mean (a) a material impairment of the
ability of a Seller, a Servicing Party or the Company, as the case may be,
to perform its obligations under the Transaction Documents, (b) a
materially adverse effect on the business, operations, property or
condition (financial or otherwise) of the Company, (c) a material
impairment of the validity or enforceability of any of the Transaction
Documents against a Seller, a Servicing Party or the Company, (d) a
material impairment of the collectibility of the Receivables taken as a
whole or (e) a material impairment of the interests, rights or remedies of
the Trustee or the Investor Certificateholders under or with respect to the
Transaction Documents or the Receivables taken as a whole.
"MONTHLY SERVICING FEE" shall have the meaning specified in subsection
2.5(a) of the Servicing Agreement.
"MONTHLY SETTLEMENT STATEMENT" shall have the meaning specified in
Section 4.2 of the Servicing Agreement.
"NEW DIVISION" shall mean any Seller Division which has satisfied the
criteria for the addition of a Seller Division specified in any Pooling and
Servicing Agreement.
"1940 ACT" shall mean the Investment Company Act of 1940, as amended.
"OBLIGOR" shall mean, with respect to any Receivable, the party
obligated to make payments with respect to such Receivable, including any
guarantor thereof.
"OFFICER'S CERTIFICATE" shall mean, unless otherwise specified in this
Agreement, a certificate signed by the President, Chief Financial Officer,
Treasurer, Controller, or any Vice President of the Servicer or the
Company, as the case may be, or, in the case of a Successor Servicer, a
certificate signed by a Vice President and the financial controller (or an
officer holding an office with equivalent or more senior responsibilities)
of such Successor Servicer.
<PAGE>
16
"OPINION OF COUNSEL" shall mean a written opinion or opinions of one
or more counsel (who, unless otherwise specified in this Agreement, may be
internal counsel) to the Company or the Servicer, designated by the Company
or the Servicer, as the case may be, which is reasonably acceptable to the
Trustee.
"OPTIONAL TERMINATION NOTICE" shall have, with respect to any Series,
the meaning specified in the related Supplement for such Series.
"OUTSTANDING SERIES" shall mean, at any time, a Series issued pursuant
to an effective Supplement for which the Series Termination Date for such
Series has not occurred.
"OVERCONCENTRATION AMOUNT" shall mean, at any date with respect to an
Eligible Obligor, the Principal Amount of Eligible Receivables due from
such Obligor at such date which, expressed as a percentage of the Principal
Amount of all Eligible Receivables in the Trust at such date, exceeds the
percentage set forth below for the applicable category of that Obligor at
such date (or such higher percentage after giving effect to which the
Rating Agency Condition is satisfied):
MINIMUM RATING
<TABLE>
<CAPTION>
S&P DCR MOODY'S PERCENTAGE
--- --- ------- ----------
<S> <C> <C> <C>
A-1+ or AA- D-1+ or AA- P-1 or Aa3 15%
A-1 or A+ D-1 or A+ P-1 or A1 11.25%
A-2 or BBB+ D-2 or BBB+ P-2 or Baa1 5.625%
A-3 or BBB- D-3 or BBB- P-3 or Baa3 3.75%
Not rated/other Less than D-3 or BBB- Not rated/other 2.25%
/Not rated
</TABLE>
; PROVIDED, HOWEVER, (i) that all Eligible Obligors that are Affiliates of
each other shall be deemed to be a single Eligible Obligor to the extent
the Servicer knows or has reason to know of the affiliation and in that
case, the applicable debt rating for such group of Obligors shall be the
debt rating of the ultimate parent of the group.
The percentage applicable to any Obligor (or the ultimate parent of
the affiliated group of which such Obligor is a member, as the case may be)
will be the percentage associated with the lowest of such Obligor's (or
such ultimate parent's, as the case may be) short-term and long-term senior
debt rating issued by S&P, Moody's and DCR; PROVIDED THAT: (i) if such debt
is not rated by DCR, the applicable percentage will be the percentage
associated with the rating issued by S&P
<PAGE>
17
or Moody's and (ii) if S&P or Moody's issues no rating with respect to
the debt of such Obligor (or such ultimate parent, as the case may be),
then the percentage applicable to such Obligor (or such ultimate parent,
as the case may be) shall be the percentage associated with the
categories "Not rated/other" and "Less than D-3 or BBB-/Not rated and NOT
rated/other." The ratings specified in the table are minimums for each
percentage category, so that a rating not shown in the table falls in the
category associated with the highest rating shown in the table that is
lower than that rating.
"PAYING AGENT" shall mean any paying agent and co-paying agent
appointed pursuant to Section 5.6 and, unless otherwise specified in the
related Supplement of any Outstanding Series and with respect to such
Series, shall initially be the Trustee.
"PERMITTED LIENS" shall mean, at any time, for any Person:
(i) Liens created pursuant to this Agreement or the
Receivables Sale Agreement;
(ii) Liens for taxes, assessments or other governmental
charges or levies not yet due and payable or if such Person shall
currently be contesting the validity thereof in good faith by
appropriate proceedings and with respect to which reserves in
conformity with GAAP have been provided on the books of such Person;
(iii) Liens on a Receivable arising as a result of offsetting
specific reserves and rights of set-off, counterclaim or other
defenses with respect to such Receivable; and
(iv) Liens for federal taxes, state tobacco excise taxes or
ERISA obligations in an aggregate at any one time outstanding not in
excess of $250,000 and any other Liens securing obligations not in
excess of $100,000 in the aggregate at any one time outstanding.
"PERSON" shall mean any individual, partnership, limited liability
company, corporation, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental Authority or other
entity of whatever nature.
"POLICIES" shall mean, with respect to each Seller, the credit and
collection policies and the returned goods policies of such Seller, copies
of which have been delivered to the Trustee, as the same may be amended,
supplemented or otherwise modified from time to time in accordance with the
Transaction Documents.
"POOLING AND SERVICING AGREEMENTS" shall mean, collectively, this
Agreement, the Servicing Agreement and each Supplement for an Outstanding
Series.
<PAGE>
18
"POTENTIAL EARLY AMORTIZATION EVENT" shall mean an event which, with
the giving of notice and/or the lapse of time, would constitute an Early
Amortization Event hereunder or under any Supplement for an Outstanding
Series.
"POTENTIAL SERVICER DEFAULT" shall mean an event which, with the
giving of notice and/or the lapse of time, would constitute a Servicer
Default.
"PREPAYMENT REQUEST" shall have, with respect to any Series, the
meaning specified in the related Supplement.
"PRINCIPAL AMOUNT" shall mean, with respect to any Receivable, the
amount due thereunder.
"PRINCIPAL TERMS" shall have, with respect to any Series issued
pursuant to a Company Exchange, the meaning specified in subsection
5.10(c).
"RATING AGENCY" shall mean, with respect to each Outstanding Series,
any rating agency or agencies designated as such in the related Supplement;
PROVIDED that in the event that no Outstanding Series has been rated, then
for purposes of the definitions of "Eligible Institution", "Eligible
Investments" and Section 2.3(b) of the Servicing Agreement, "RATING AGENCY"
shall mean S&P and references to "each Rating Agency" shall refer solely to
S&P.
"RATING AGENCY CONDITION" shall mean, subject to the applicable
Supplement, with respect to any action, that each Rating Agency shall have
notified the Company, the Servicer, any Agent and the Trustee in writing
that such action will not result in a reduction or withdrawal of the rating
of any Outstanding Series or any Class of any such Outstanding Series with
respect to which it is a Rating Agency.
"RECEIVABLE" shall mean the indebtedness and payment obligations of
any Person to a Seller or acquired by a Seller (including, without
limitation, obligations constituting an account or general intangible or
evidenced by a note, instrument, contract, security agreement, chattel
paper or other evidence of indebtedness or security) arising from a sale of
merchandise or the provision of services by such Seller or the Person from
whom such indebtedness and payment obligation was acquired by a Seller,
including, without limitation, any right to payment for goods sold or for
services rendered, and including the right to payment of any interest,
sales taxes, finance charges, returned check or late charges and other
obligations of such Person with respect thereto.
"RECEIVABLES PURCHASE DATE" shall mean, with respect to any
Receivable, the Business Day on which the Company purchases such Receivable
from the applicable Seller and transfers such Receivable to the Trust.
<PAGE>
19
"RECEIVABLES SALE AGREEMENT" shall have the meaning specified in the
recitals hereto.
"RECORD DATE" shall mean, with respect to any Series, the dates
specified as such in the applicable Supplement.
"RECOVERIES" shall mean all amounts collected (net of out-of-pocket
costs of collection) in respect of Charged-Off Receivables.
"RELATED PROPERTY" shall mean, with respect to each Receivable:
(a) all of the applicable Seller's interest in the goods (other
than returned goods), if any, sold and delivered to an Obligor
relating to the sale which gave rise to such Receivable;
(b) all other security interests or Liens, and the applicable
Seller's interest in the property subject thereto, from time to time
purporting to secure payment of such Receivable, together with all
financing statements signed by an Obligor describing any collateral
securing such Receivable; and
(c) all guarantees, insurance, letters of credit and other
agreements or arrangements of whatever character from time to time
supporting or securing payment of such Receivable;
in the case of clauses (b) and (c), without limitation, whether pursuant to
the contract related to such Receivable or otherwise or pursuant to any
obligations evidenced by a note, instrument, contract, security agreement,
chattel paper or other evidence of indebtedness or security and the
proceeds thereof.
"REPORTED DAY" shall have the meaning specified in Section 4.1 of the
Servicing Agreement.
"REPURCHASE OBLIGATION DATE" shall have the meaning specified in
subsection 2.5(a).
"REQUIREMENT OF LAW" for any Person shall mean the certificate or
articles of incorporation and by-laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or a court or other Governmental Authority,
in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"RESPONSIBLE OFFICER" shall mean (i) when used with respect to the
Trustee, any officer within the Corporate Trust Office of the Trustee
including any Vice President, any Assistant Vice President, Trust Officer
or Assistant Trust Officer or any other
<PAGE>
20
officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers and (ii) when used with
respect to any other Person, the Chairman or Vice Chairman of the Board,
President, Chief Financial Officer, any Vice President, Treasurer,
Controller, Assistant Treasurer or Secretary of such Person.
"REVOLVING PERIOD" shall mean, with respect to any Outstanding Series,
the meaning assigned to such term in the related Supplement for such
Series.
"S&P" shall mean Standard & Poor's Ratings Services, or any successor
thereto.
"SECURITIES ACT" shall mean the United States Securities Act of 1933,
as amended.
"SELLER ADJUSTMENT PAYMENTS" shall have the meaning specified in
Section 2.05 of the Receivables Sale Agreement.
"SELLER DIVISION" shall mean any business unit or operating assets
acquired by a Seller which is made part of an existing division of a Seller
or made a new division (but not a subsidiary) of a Seller.
"SELLER REPURCHASE PAYMENTS" shall have the meaning specified in
Section 2.06 of the Receivables Sale Agreement.
"SELLERS" shall mean the collective reference to Core-Mark, in its
capacity as a Seller under the Receivables Sale Agreement, the wholly-owned
Subsidiaries of Core-Mark listed as Sellers on the signature pages thereof
and any wholly-owned Subsidiaries of Core-Mark which have been added as
Sellers in accordance with the provisions of the Receivables Sale Agreement
and the other Transaction Documents (but, in each case, excluding any such
Subsidiaries which have been terminated as Sellers in accordance with the
provisions thereof and of the other Transaction Documents), all of the
foregoing in their capacities as Sellers under the Receivables Sale
Agreement; each, individually, a "SELLER".
"SERIES" shall mean any series of Investor Certificates, the terms of
which are set forth in a Supplement.
"SERIES ACCOUNT" shall mean any deposit, trust, escrow, reserve or
similar account maintained by the Trustee for the benefit of the Investor
Certificateholders of any Series or Class, as specified in any Supplement.
"SERIES COLLECTION SUBACCOUNT" shall have the meaning specified in
subsection 3.1(a).
<PAGE>
21
"SERIES COLLECTION SUB-SUBACCOUNT" shall have the meaning specified in
subsection 3.1(a).
"SERIES NON-PRINCIPAL COLLECTION SUB-SUBACCOUNT" shall have the
meaning specified in subsection 3.1(a).
"SERIES PRINCIPAL COLLECTION SUB-SUBACCOUNT" shall have the meaning
specified in subsection 3.1(a).
"SERIES SUBORDINATED INTEREST" shall mean, with respect to any Series,
the interest of the Company in the Trust Assets, if any, which is
subordinated to the Certificateholders' Interest of such Series, as set
forth in the Supplement for such Series.
"SERIES TERMINATION DATE" shall mean, with respect to any Outstanding
Series, the meaning assigned to such term in the related Supplement for
such Series.
"SERVICE TRANSFER" shall have the meaning specified in Section 6.1 of
the Servicing Agreement.
"SERVICER" shall initially mean Core-Mark in its capacity as Servicer
under the Transaction Documents and, after any Service Transfer, the
Successor Servicer.
"SERVICER DEFAULT" shall have, with respect to any Series, the meaning
specified in Section 6.1 of the Servicing Agreement and, if applicable, as
supplemented by the related Supplement for such Series.
"SERVICER INDEMNIFICATION AMOUNTS" shall have the meaning specified in
Section 5.2(c) of the Servicing Agreement.
"SERVICER SITE REVIEW" shall mean a review performed by the Trustee of
the servicing operations of the Servicer at its offices.
"SERVICING AGREEMENT" shall have the meaning specified in the recitals
hereto.
"SERVICING FEE" shall have the meaning specified in subsection 2.5(a)
of the Servicing Agreement.
"SERVICING FEE PERCENTAGE" shall mean 1% per annum.
"SERVICING PARTY" shall mean the collective reference to the Servicer
and each Sub-Servicer.
<PAGE>
22
"SETTLEMENT PERIOD" shall mean (i) initially, the period commencing
April 1, 1998 and ending on the last day of the April 1998 fiscal month of
the Servicer, and (ii) thereafter, each fiscal month of the Servicer.
"SETTLEMENT REPORT DATE" shall mean, except as otherwise set forth in
the applicable Supplement, the 15th day of each calendar month (or if such
15th day is not a Business Day, the next succeeding Business Day).
"SPECIAL ALLOCATION SETTLEMENT REPORT DATE" shall have the meaning
specified in subsection 3.1(e).
"SPECIFIED BANKRUPTCY OPINION PROVISIONS" shall mean the factual
assumptions and the actions to be taken by any Seller or the Company, in
each case as specified in the legal opinion of Paul, Weiss, Rifkind,
Wharton & Garrison relating to certain bankruptcy matters and delivered on
the Initial Closing Date.
"STANDBY LIQUIDATION SYSTEM" shall mean a system satisfactory to the
Trustee by which the Trustee will receive and store electronic information
regarding Receivables from the Servicer and each Sub-Servicer which may be
utilized in the event of a liquidation of the Receivables to be carried out
by the Trustee.
"SUBORDINATED NOTE" shall have the meaning specified in Section 8.01
of the Receivables Sale Agreement.
"SUB-SERVICER" shall have the meaning specified in the recitals
hereto.
"SUBSIDIARY" shall mean, as to any Person, a corporation, partnership
or other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the time
owned, or the management of which is otherwise controlled, directly or
indirectly through one or more intermediaries, or both, by such Person.
"SUCCESSOR SERVICER" shall have the meaning specified in Section 6.2
of the Servicing Agreement.
"SUPPLEMENT" shall mean, with respect to any Series, a supplement to
this Agreement complying with the terms of Section 5.10(c), executed in
conjunction with the issuance of any Series.
"TARGET RECEIVABLES AMOUNT" shall mean, with respect to any
Outstanding Series, the meaning assigned to such term in the related
Supplement for such Series.
<PAGE>
23
"TAX OPINION" shall mean, with respect to any action, an Opinion of
Counsel of one or more outside law firms (a) to the effect that, for
federal income tax purposes, (i) such action will not adversely affect the
characterization as debt or as an interest in a partnership (other than a
partnership taxable as a corporation), as the case may be, of any Investor
Certificates of any Outstanding Series or Class not retained by the
Company, (ii) following such action, the Trust will not be classified as an
association or a publicly traded partnership taxable as a corporation,
(iii) such action will not cause or constitute a taxable event in which
gain or loss would be recognized by any Investor Certificateholder or the
Trust and (iv) in the case of Section 5.9, the Investor Certificates of the
new Series which are not retained by the Company will be characterized as
debt or as an interest in a partnership (other than a partnership taxable
as a corporation) and (b) with respect to state taxation issues, in
substantially the form delivered on the Initial Closing Date.
"TERMINATION NOTICE" shall have the meaning specified in Section 6.1
of the Servicing Agreement.
"TOBACCO COMPANIES" shall mean the collective reference to any company
engaged in the manufacture and sale of cigarettes.
"TRANSACTION DOCUMENTS" shall mean the collective reference to this
Agreement, the Servicing Agreement, each Supplement with respect to any
Outstanding Series, the Receivables Sale Agreement, the Lockbox Agreements,
the Eligible Segregated Account Bank Acknowledgements, the Certificates and
any other documents delivered pursuant to or in connection therewith.
"TRANSFER AGENT AND REGISTRAR" shall have the meaning specified in
Section 5.3 and shall initially be the Trustee.
"TRANSFER DEPOSIT AMOUNT" shall have the meaning specified in
subsection 2.5(b).
"TRANSFERRED AGREEMENTS" shall have the meaning specified in
subsection 2.1(b).
"TRUST" shall mean the Core-Mark Receivables Master Trust created by
this Agreement.
"TRUST ACCOUNT" shall have the meaning, with respect to any Series,
specified in the applicable Supplement for such Series.
"TRUST ASSETS" shall have the meaning specified in Section 2.1.
"TRUST TERMINATION DATE" shall have the meaning specified in
subsection 9.1(a).
<PAGE>
24
"TRUSTEE" shall mean the institution executing this Agreement as
trustee, or its successor in interest, or any successor trustee appointed
as herein provided.
"UCC" shall mean the Uniform Commercial Code, as amended from time to
time, as in effect in any specified jurisdiction or if no jurisdiction is
specified, as in effect in the State of New York.
Section I.2. OTHER DEFINITIONAL AND CALCULATION PROVISIONS. (a) All
terms defined in this Agreement, the Servicing Agreement or in any Supplement
shall have such defined meanings when used in any certificate or other document
made or delivered pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.1, and accounting terms partly defined in Section 1.1 to the extent not
defined, shall have the respective meanings given to them under GAAP. To the
extent that the definitions of accounting terms herein are inconsistent with the
meanings of such terms under GAAP, the definitions contained herein shall
control.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement; and Section, subsection,
Schedule and Exhibit references contained in this Agreement are references to
Sections, subsections, Schedules and Exhibits in or to this Agreement unless
otherwise specified.
(d) All references herein to any agreement or instrument shall be
deemed references to such agreement or instrument as amended, supplemented or
otherwise modified from time to time in which case such reference shall be to
the agreement or instrument.
(e) The definitions contained in Section 1.1 are applicable to the
singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such terms.
(f) Where a definition contained in Section 1.1 specifies that such
term shall have the meaning set forth in the related Supplement, the definition
of such term set forth in the related Supplement may be preceded by a prefix
indicating (or include in its definition) the specific Series or Class to which
such definition shall apply.
(g) Where reference is made in this Agreement or any related
Supplement to the amount of Receivables, such reference shall, unless explicitly
stated otherwise, be deemed a reference to the Principal Amount (as such term is
defined in Section 1.1) of such Receivables.
<PAGE>
25
(h) Any reference herein or in any other Transaction Document to a
provision of the Internal Revenue Code or ERISA shall be deemed a reference to
any successor provision thereto.
(i) To the extent that any provision of this Agreement or any other
Transaction Document requires that a calculation be performed with respect to a
date occurring prior to the effective date of such Transaction Document, such
calculation shall be performed as provided therein as though such Transaction
Document had been effective on and as of such prior date.
(j) In calculating the Principal Amount of Receivables on any day, the
Principal Amount of Receivables shall be reduced by the amount of collections
received on such day (whether or not such Collections have resulted in Available
Funds); PROVIDED, that to the extent that a Collection is subsequently
dishonored by the bank on which such Collection is drawn, the Principal Amount
of Receivables shall be reinstated by the amount of such dishonored Collection.
In addition, for purposes of making the allocations required by Article III of
this Agreement, as supplemented by the Supplements, on any day, the Servicer
shall only direct, and the Trustee shall only be required to transfer, Available
Funds.
ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES
Section 2.1. CONVEYANCE OF RECEIVABLES.
(a) By execution and delivery of this Agreement, the Company does
hereby transfer, assign, set over and otherwise convey to the Trust for the
benefit of the Holders, without recourse (except as specifically provided
herein), all of its present and future right, title and interest in, to and
under:
(i) all Receivables, including those existing at the close of
business on the Initial Closing Date and all Receivables thereafter arising
from time to time until but not including the Trust Termination Date;
(ii) the Related Property;
(iii) all Collections;
(iv) all payment, enforcement and other rights (including
rescission, replevin or reclamation), but none of the obligations,
relating to any Receivable or arising therefrom;
(v) the Collection Account, each Eligible Segregated Account,
each Lockbox and each Lockbox Account (collectively, the "ACCOUNTS"),
including (A) all
<PAGE>
26
funds and other evidences of payment held therein and all certificates
and instruments, if any, from time to time representing or evidencing any
of such Accounts or any funds and other evidences of payment held
therein, (B) all investments of such funds held in such Accounts and all
certificates and instruments from time to time representing or evidencing
such investments, (C) all notes, certificates of deposit and other
instruments from time to time hereafter delivered or transferred to, or
otherwise possessed by, the Trustee for and on behalf of the Company in
substitution for any of the then existing Accounts and (D) all interest,
dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in
exchange for any and all of the then existing Accounts;
(vi) all monies due or to become due and all amounts received
with respect to the items listed in clauses (i) through (v) and all
proceeds (including, without limitation, whatever is received upon the
sale, exchange, collection or other disposition of the foregoing and all
"proceeds" as defined in Section 9-306 of the UCC as in effect in the State
of New York) thereof, including all Recoveries relating thereto;
(b) The Company, to secure its obligations hereunder, hereby
transfers, assigns, sets over and otherwise conveys to the Trustee for the
benefit of the Holders, and grants to the Trustee, for the benefit of the
Holders, a first priority perfected security interest in, all its right,
title and interest in, to and under the following: each of the Receivables
Sale Agreement and the Servicing Agreement, including in respect of each
agreement, (A) all property assigned thereunder and all rights of the Company
to receive monies due and to become due under or pursuant to such agreement,
whether payable as fees, expenses, costs or otherwise, (B) all rights of the
Company to receive proceeds of any credit or similar types of insurance,
indemnity, warranty or guaranty with respect to such agreement, (C) claims of
the Company for damages arising out of or for breach of or default under such
agreement, (D) the right of the Company to amend, waive or terminate such
agreement, to perform thereunder and to compel performance and otherwise
exercise all remedies thereunder, (E) all other rights, remedies, powers,
privileges and claims of the Company under or in connection with such
agreement (whether arising pursuant to such agreement or otherwise available
to the Company at law or in equity), including the rights of the Company to
enforce such agreement and to give or withhold any and all consents,
requests, notices, directions, approvals, extensions or waivers under or in
connection therewith and (F) all monies due or to become due and all amounts
received with respect to the items listed in clauses (A) through (F) and all
proceeds (including, without limitation, whatever is received upon the sale,
exchange, collection or other disposition of the foregoing and all "proceeds"
as defined in Section 9-306 of the UCC as in effect in the State of New York)
thereof, including all Recoveries relating thereto (all of the foregoing set
forth in subclauses (A)-(F), inclusive, the "TRANSFERRED AGREEMENTS");
Such property described in the foregoing paragraphs (a) and (b), together
with all investments and all monies on deposit in any other bank account or
accounts maintained for the benefit of any Holders and all monies available
under any Enhancement to be provided by any
<PAGE>
27
Enhancement Provider for any Series for payment to Holders shall constitute
the assets of the Trust (the "TRUST ASSETS").
Subject to Section 5.9, although it is the intent of the parties to
this Agreement that the conveyance of the Company's right, title and interest
in, to and under the Receivables and the other Trust Assets described in
paragraph (a) pursuant to this Agreement shall constitute a purchase and sale
and not a loan, in the event that such conveyance is deemed to create a loan,
the Company hereby grants to the Trustee, for the benefit of the Investor
Certificateholders, a perfected first priority security interest in all of
the Company's present and future right, title and interest in, to and under
the Receivables and such other Trust Assets to secure the payment of the
applicable Invested Amounts, interest thereon and the other fees and expenses
payable to the Investor Certificateholders, and that this Agreement shall
constitute a security agreement under applicable law in favor of the Trustee,
for the benefit of the Investor Certificateholders.
(c) The assignment, set over and conveyance to the Trust pursuant
to Section 2.1(a) shall be made to the Trustee, on behalf of the Trust, and
each reference in this Agreement to such assignment, set over and conveyance
shall be construed accordingly. In connection with the foregoing assignment,
except as expressly provided otherwise in the Transaction Documents, the
Company, the Servicer and each Sub-Servicer agree to deliver to the Trustee
each Trust Asset (including any original documents or instruments included in
the Trust Assets as are necessary to effect such assignment) in which the
transfer of an interest is perfected under the UCC or otherwise solely by
possession and not by filing a financing statement or similar document.
Notwithstanding the assignment of the Transferred Agreements set
forth in Section 2.1(b), the Company does not hereby assign or delegate any
of its duties or obligations under the Transferred Agreements to the Trust or
the Trustee and neither the Trust nor the Trustee accepts such duties or
obligations, and the Company shall continue to have the right and the
obligation to purchase Receivables from the Sellers thereunder from time to
time. The foregoing assignment, set-over and conveyance does not constitute
and is not intended to result in a creation or an assumption by the Trust,
the Trustee, any Investor Certificateholder or the Company, in its capacity
as a Holder, of any obligation of the Servicer, the Company, any Seller or
any other Person in connection with the Receivables or under any agreement or
instrument relating thereto, including, without limitation, any obligation to
any Obligor.
In connection with such assignment, the Company agrees to record
and file, at its own expense, any financing statements (and continuation
statements with respect to such financing statements when applicable) or,
where applicable, registrations in the appropriate records, (i) with respect
to the Receivables now existing and hereafter created and (ii) with respect
to any other Trust Assets a security interest in which may be perfected under
the relevant UCC, legislation or similar statute by such filing or
registration, as the case may be, in each case meeting the requirements of
applicable law in such manner and in such jurisdictions as are necessary to
perfect and maintain perfection of the assignment of the
<PAGE>
28
Receivables and such other Trust Assets to the Trust, and to deliver a
file-stamped copy or certified statement of such financing statement or
registration or other evidence of such filing or registration to the Trustee
on or prior to the date of issuance of any Certificates. The Trustee shall
be under no obligation whatsoever to file such financing statement, or a
continuation statement to such financing statement, or to make any other
filing or other registration under the UCC, other relevant legislation or
similar statute in connection with such transfer. The Trustee shall be
entitled to conclusively rely on the filings or registrations made by or on
behalf of the Company without any independent investigation and the Company's
obligation to make such filings as evidence that such filings have been made.
In connection with such assignment, the Company further agrees, at
its own expense, on or prior to the Initial Closing Date (a) to indicate, or
to cause to be indicated, in its computer files (but not on individual
invoices or individual collection files) relating to such Receivables (by
means of a general legend, substantially in the form described on Schedule 6
hereto, that will automatically appear each time a Person enters the Sellers'
Receivables program that unless otherwise specifically identified as a
receivable not so sold, transferred, assigned and conveyed, all Receivables
(and any such other receivables) included therein and all other Receivables
Property (and any other similar related property) have been sold,
transferred, assigned and conveyed pursuant to the Receivables Sale Agreement
or this Agreement, respectively, to the Company or the Trust for the benefit
of the Holders, as the case may be, and (b) to deliver, or cause to be
delivered, to the Trustee computer files, microfiche lists or typed or
printed lists (the "RECEIVABLES LISTS") containing true and complete lists of
all such Receivables transferred to the Trust, identified by Obligor and
setting forth the Receivables balance for each such Receivable, as of the
Cut-Off Date. Such tapes or disks shall be marked as Schedule 1 to this
Agreement and are hereby incorporated into and made a part of this Agreement.
Section 2.2. ACCEPTANCE BY TRUSTEE. (a) The Trustee hereby
acknowledges its acceptance on behalf of the Trust of all right, title and
interest to the property, now existing and hereafter created, assigned to the
Trust pursuant to Section 2.1 and declares that it shall maintain such right,
title and interest, upon the trust herein set forth, for the benefit of all
Holders. The Trustee further acknowledges that prior to, or simultaneously
with, the execution and delivery of this Agreement, the Company delivered or
caused to be delivered to the Trustee the computer file printout or
microfiche list described in the last paragraph of Section 2.1.
(b) The Trustee shall have no power to create, assume or incur
indebtedness or other liabilities in the name of the Trust other than as
contemplated in this Agreement.
Section 2.3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
RELATING TO THE COMPANY. The Company hereby represents and warrants to the
Trustee and the Trust, for the benefit of the holders of Certificates of each
Outstanding Series, as of the Issuance Date of such Series, that:
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29
(a) CORPORATE EXISTENCE; COMPLIANCE WITH LAW. The Company (i) is a
corporation duly incorporated, validly existing and in good standing under
the laws of the jurisdiction of its organization, (ii) has all requisite
corporate power and authority and all legal right to own and operate its
properties, to lease the properties it operates as lessee and to conduct
its business as now conducted, (iii) is duly qualified as a foreign
corporation to do business and is in good standing under the laws of each
jurisdiction where such qualification is necessary and (iv) is in
compliance with its certificate or articles of incorporation and by-laws or
other organizational or governing documents and, in all material respects,
any other Requirements of Law. The Company does not engage in activities
prohibited by the Transaction Documents or its certificate of
incorporation.
(b) CORPORATE POWER; AUTHORIZATION; CONSENTS. The Company has the
corporate power and authority, and the legal right, to execute, deliver and
perform this Agreement and the other Transaction Documents to which it is a
party and has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement and the other
Transaction Documents to which it is a party. No consent or authorization
of, filing with, notice to or other act by or in respect of, any
Governmental Authority or any other Person is required in connection with
the execution, delivery, performance, validity or enforceability of this
Agreement and the other Transaction Documents to which it is a party by or
against the Company other than (i) those which have duly been obtained or
made and are in full force and effect on the Initial Closing Date, (ii) any
filings of UCC-1 financing statements or similar documents necessary to
perfect the Company's or the Trust's interest in the Trust Assets and (iii)
those that may be required under the state securities or "blue sky" laws in
connection with the offering or sale of certificates. This Agreement and
each other Transaction Document to which the Company is a party have been
duly executed and delivered on behalf of the Company.
(c) ENFORCEABILITY. This Agreement and each of the other Transaction
Documents to which the Company is a party (i) constitute the legal, valid
and binding obligations of the Company enforceable against it in accordance
with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights generally and except as such enforceability may be
limited by general principles of equity (whether considered in a proceeding
at law or in equity) and (ii) are effective to, and all action has been
taken to, cause compliance with paragraph (n) of the definition of Eligible
Receivables.
(d) NO LEGAL BAR. The execution, delivery and performance of this
Agreement and the other Transaction Documents to which the Company is a
party will not violate its certificate or articles of incorporation and
by-laws or other organizational or governing documents and, any other
Requirement of Law in any material respect, and will not result in, or
require, the creation or imposition of any Lien (other than Liens
<PAGE>
30
contemplated or permitted hereby) on any of its properties or revenues
pursuant to any such Requirement of Law or Contractual Obligation.
(e) NO CONFLICT. The execution and delivery of this Agreement and the
other Transaction Documents to which the Company is a party, the
performance of the transactions contemplated hereby and thereby and the
fulfillment of the terms hereof and thereof will not, in any material
respect, conflict with, result in any breach of any of the material terms
and provisions of, or constitute (with or without notice or lapse of time
or both) a default under, any indenture, contract, agreement, mortgage,
deed of trust, or other instrument to which the Company is a party or by
which it or any of its property is bound.
(f) NO MATERIAL LITIGATION. There are no actions, suits,
investigations or proceedings at law or in equity (including, without
limitation, injunctions, writs or restraining orders) by or before any
arbitrator, court or Governmental Authority now pending or, to the
knowledge of the Company, threatened against or affecting the Company or
any properties, revenues or rights of the Company which (i) involve this
Agreement or any of the other Transaction Documents or any of the
transactions contemplated hereby or thereby, (ii) which could reasonably be
expected to affect adversely the income tax or franchise tax attributes of
the Trust under the United States federal or any state or franchise tax
systems or (iii) would be reasonably likely to have a Material Adverse
Effect. The transactions contemplated hereunder and the use of the proceeds
thereof will not violate any Requirement of Law.
(g) NO DEFAULT. The Company is not in default, in any material
respect, under or with respect to any of its Contractual Obligations. No
Early Amortization Event or Potential Early Amortization Event has occurred
and is continuing.
(h) COMPLIANCE WITH LAW. The Company has complied with all applicable
provisions of its certificate or articles of incorporation and by-laws or
other organizational or governing documents and, in all material respects,
any other Requirements of Law with respect to the Company, its business and
properties and the Trust Assets.
(i) TAX RETURNS. The Company has filed or caused to be filed all tax
returns which are required to have been filed by it and has paid or caused
to be paid all taxes shown thereon to be due and payable, and any
assessments made against it or any of its property. No tax Lien has been
filed, and, to the best knowledge of the Company, no claim is being
asserted, with respect to any taxes other than Liens permitted pursuant to
clause (iv) of the definition of Permitted Liens. For purposes of this
paragraph, "taxes" shall mean any present or future tax, levy, impost,
duty, charge, assessment or fee of any nature (including interest,
penalties and additions thereto) that is imposed by any Governmental
Authority.
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31
(j) LOCATION OF RECORDS; CHIEF EXECUTIVE OFFICE. The offices at which
the Company keeps its records concerning the Receivables either (x) are
located at the addresses set forth for the Sellers on Schedule 2 of the
Receivables Sale Agreement or (y) have been reported to the Trustee in
accordance with the provisions of subsection 2.8(l) of this Agreement. The
chief executive office of the Company is located at the address set forth
on Schedule 4 (as such location may be changed from time to time in
accordance with Section 2.8(1) of the Agreement) and is the place where the
Company is "located" for the purposes of Section 9-103(3)(d) of the UCC as
in effect in the State of New York. The state and county where the chief
executive office of the Company is "located" for the purposes of Section
9-103(3)(d) of the UCC as in effect in the State of New York has not
changed in the past four months.
(k) SOLVENCY. Both prior to and after giving effect to the
transactions occurring on each Issuance Date, (i) the fair value of the
assets of the Company at a fair valuation will exceed the debts and
liabilities, subordinated, contingent or otherwise, of the Company; (ii)
the present fair salable value of the property of the Company will be
greater than the amount that will be required to pay the probable
liability of the Company on its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and liabilities
become absolute and matured; (iii) the Company will be able to pay its
debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; and (iv) the Company
will not have unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is
proposed to be conducted. For all purposes of clauses (i) through (iv)
above, the amount of contingent liabilities at any time shall be computed
as the amount that, in the light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be
expected to become an actual or matured liability. The Company does not
intend to, nor does it believe that it will, incur debts beyond its
ability to pay such debts as they mature, taking into account the timing
of and amounts of cash to be received by it and the timing of and amounts
of cash to be payable in respect of its debt.
(l) INVESTMENT COMPANY. Neither the Company nor the Trust (before and
after giving effect to the issuance of Certificates on such Issuance Date)
is an "investment company" within the meaning of the Investment Company Act
of 1940, as amended, or is exempt from all provisions of such act.
(m) OWNERSHIP; SUBSIDIARIES. All of the issued and outstanding
capital stock of the Company is owned, legally and beneficially, by
Core-Mark. The Company has no Subsidiaries.
(n) NAMES. The legal name of the Company is as set forth in this
Agreement. The Company has not had, nor has, any trade names, fictitious
names, assumed names or "doing business as" names.
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32
(o) LIABILITIES. Other than, (i) the liabilities, commitments or
obligations (whether absolute, accrued, contingent or otherwise) arising
under or in respect of the Transaction Documents and (ii) immaterial
amounts due and payable in the ordinary course of business of a special-
purpose company, the Company does not have any liabilities, commitments or
obligations (whether absolute, accrued, contingent or otherwise), whether
due or to become due.
(p) USE OF PROCEEDS; FEDERAL RESERVE BOARD REGULATION. No proceeds of
the issuance of any Investor Certificates will be used by the Company to
purchase or carry any margin stock (as defined in Regulation U of the Board
of Governors of the Federal Reserve System, as in effect from time to
time). The Company is in compliance with all applicable regulations of the
Board of Governors of the Federal Reserve System (including, without
limitation, Regulations U and G with respect to "margin stock").
(q) COLLECTION PROCEDURES. The Company and each Seller have in place
procedures pursuant to the Policies which are either necessary or advisable
to ensure the timely collection of Receivables in accordance with the
Transaction Documents.
(r) LOCKBOX ACCOUNTS; ELIGIBLE SEGREGATED ACCOUNTS. The Lockbox Banks
and Eligible Segregated Account Banks are the only institutions holding any
Lockbox Accounts or Eligible Segregated Accounts for the receipt of
payments from Obligors in respect of Receivables and no Persons other than
Obligors have been instructed to make payments to Lockbox Accounts or
Eligible Segregated Accounts. (i) Each Lockbox Agreement to which the
Company is party is in full force and effect, (ii) each Lockbox Account is
free and clear of any Lien (other than any right of set-off expressly
provided for in the applicable Lockbox Agreement), (iii) each Eligible
Segregated Account Agreement to which the Company is party is in full force
and effect and (iv) each Eligible Segregated Account established pursuant
to subsection 2.3(b) of the Servicing Agreement is free and clear of any
Lien.
(s) BULK SALES. The execution, delivery and performance of this
Agreement do not require compliance with any "bulk sales" law by the
Company.
The representations and warranties set forth in this Section 2.3 shall
survive after the date made and the transfer and assignment of the Trust Assets
to the Trust. Upon discovery by a Responsible Officer of the Company or the
Servicer or by a Responsible Officer of the Trustee of a breach of any of the
foregoing representations and warranties, the party discovering such breach
shall give prompt written notice to the other parties and to each Agent with
respect to all Outstanding Series. The Trustee's obligations in respect of any
breach are limited as provided in subsection 8.2(g).
<PAGE>
33
Section 2.4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY RELATING
TO THE RECEIVABLES. The Company hereby represents and warrants to the Trustee
and the Trust, for the benefit of the holders of Certificates of each
Outstanding Series, (x) as of the Issuance Date of such Series, and (y) with
respect to each Receivable transferred to the Trust after such Issuance Date, as
of the related Receivables Purchase Date, unless, in either case, otherwise
stated in the applicable Supplement or unless such representation or warranty
expressly relates only to a prior date, that:
(a) Schedule 1 to this Agreement sets forth an accurate and complete
listing as of the Cut-Off Date of all Receivables to be transferred to the
Trust as of the Initial Closing Date and the information contained therein
with respect to the identity of the Obligor of, and Principal Amount of,
each such Receivable is true and correct in all material respects as of the
Cut-Off Date. As of the Cut-Off Date, the aggregate amount of Receivables
owned by the Company is accurately set forth in all material respects in
Schedule 1 hereto.
(b) Each Receivable existing on the Initial Closing Date or, in the
case of Receivables transferred to the Trust after the Initial Closing
Date, on the date that each such Receivable shall have been transferred to
the Trust, has been conveyed to the Trust free and clear of any Lien,
except for Permitted Liens specified in clauses (i) and (iv) of the
definition thereof.
(c) On the Initial Closing Date, each Receivable transferred to the
Trust that is included in the calculation of the initial Aggregate
Receivables Amount is an Eligible Receivable and, in the case of
Receivables transferred to the Trust after the Initial Closing Date, on the
date such Receivable shall have been transferred to the Trust, each such
Receivable that is included in the calculation of the Aggregate Receivables
Amount on such date is an Eligible Receivable. Each Receivable classified
as an "Eligible Receivable" by the Company in any document or report
delivered hereunder satisfies the requirements of eligibility contained in
the definition of Eligible Receivable.
The representations and warranties set forth in this Section 2.4 shall
survive after the date made and the transfer and assignment of the Trust Assets
to the Trust. Upon discovery by a Responsible Officer of the Company or the
Servicer or a Responsible Officer of the Trustee of a breach of any of the
representations and warranties, the party discovering such breach shall give
prompt written notice to the other parties and to each Agent with respect to all
Outstanding Series. The Trustee's obligations in respect of any breach are
limited as provided in Section 8.2(g).
Section 2.5. REPURCHASE OF INELIGIBLE RECEIVABLES. (a) REPURCHASE
OBLIGATION. If (i) any representation or warranty under subsections 2.4(a), (b)
or (c) is not true and correct in any material respect as of the date specified
therein with respect to any Receivable transferred to the Trust, (ii) there is a
breach of any covenant under subsection 2.8(c) with respect to any Receivable
and such breach has a material adverse effect on the
<PAGE>
34
Certificateholders' Interest in such Receivable or (iii) the Trust's interest
in any Receivable is not a first priority perfected ownership or security
interest at any time as a result of any action taken by, or any failure to
take action by, the Company (any Receivable as to which the conditions
specified in any of clauses (i), (ii) or (iii) of this subsection 2.5(a)
exists is referred to herein as an "INELIGIBLE RECEIVABLE") then, upon the
earlier (the date on which such earlier event occurs, the "REPURCHASE
OBLIGATION DATE") of the discovery by the Company of any such event which
continues unremedied or receipt by the Company of written notice given by the
Trustee or the Servicer of any such event which continues unremedied, the
Company shall become obligated to repurchase or cause to be repurchased such
Ineligible Receivable on the terms and conditions set forth in subsection
2.5(b).
(b) REPURCHASE OF RECEIVABLES. Subject to the last sentence of
this subsection 2.5(b), the Company shall repurchase, or cause to be
repurchased, each Ineligible Receivable required to be repurchased
pursuant to subsection 2.5(a) by depositing in the Collection Account in
immediately available funds on the Business Day following the related
Repurchase Obligation Date an amount equal to the lesser of (x) the
amount by which the Aggregate Target Receivables Amount exceeds the
Aggregate Receivables Amount (after giving effect to the reduction
thereof by the Principal Amount of such Ineligible Receivable) and (y)
the aggregate outstanding Principal Amount of each such Ineligible
Receivable (the "TRANSFER DEPOSIT AMOUNT"). Upon transfer or deposit of
the Transfer Deposit Amount, the Trust shall automatically and without
further action be deemed to sell, transfer, assign, set over and
otherwise convey to the Company, without recourse, representation or
warranty, all the right, title and interest of the Trust in and to such
Ineligible Receivable, all monies due or to become due with respect
thereto and all proceeds thereof; and such repurchased Ineligible
Receivable shall be treated by the Trust as collected in full as of the
date on which it was transferred. The Trustee shall execute such
documents and instruments of transfer or assignment and take such other
actions as shall reasonably be requested by the Company to effect the
conveyance of such Receivables pursuant to this subsection. Except as
otherwise specified in any Supplement, the obligation of the Company to
repurchase any Ineligible Receivable shall constitute the sole remedy
respecting the event giving rise to such obligation available to Investor
Certificateholders (or the Trustee on behalf of Investor
Certificateholders) unless such obligation is not satisfied in full in
accordance with the terms of this Agreement.
Section 2.6. PURCHASE OF INVESTOR CERTIFICATEHOLDERS' INTEREST IN
TRUST PORTFOLIO. (a) In the event of any breach of any of the representations
and warranties set forth in Section 2.3, which breach has a material adverse
effect on the interests of the holders of an Outstanding Series (without giving
effect to any Enhancement) under or with respect to the Transaction Documents,
then the Trustee, at the written direction of holders of Certificates evidencing
more than 50% of the Invested Amount of such Outstanding Series shall notify the
Company to purchase such Outstanding Series and the Company shall be obligated
to make such purchase on the next Distribution Date occurring at least five
Business Days after receipt of such notice on the terms and conditions set forth
in subsection 2.6(b) below; PROVIDED, HOWEVER, that no such purchase shall be
required to be made if, by such Distribution Date, the representations and
warranties contained in Section 2.3 shall be satisfied in all material
<PAGE>
35
respects and any material adverse effect on the holders of such Outstanding
Series caused thereby shall have been cured.
(b) As required under subsection 2.6(a) above, the Company shall
deposit into the Collection Account for credit to the applicable subaccount of
the Collection Account on the Business Day preceding such Distribution Date an
amount equal to the purchase price (as described in the next succeeding
sentence) for the Certificateholders' Interest for such Outstanding Series on
such day. The purchase price for any such purchase will be equal to (i) the
Adjusted Invested Amount of such Outstanding Series on the date on which the
purchase is made plus (ii) an amount equal to all interest accrued but unpaid on
such Series up to the Distribution Date on which the distribution of such
deposit is scheduled to be made pursuant to Section 9.2 plus (iii) any other
amount required to be paid in connection therewith pursuant to any Supplement.
Notwithstanding anything to the contrary in this Agreement, the entire amount of
the purchase price deposited in the Collection Account (together with amounts on
deposit in the applicable Series Principal Collection Sub-subaccount) shall be
distributed to the related Investor Certificateholders on such Distribution Date
pursuant to Section 9.2. If the Trustee gives notice directing the Company to
purchase the Certificates of an Outstanding Series as provided above, except as
otherwise specified in any Supplement, the obligation of the Company to purchase
such Certificates pursuant to this Section 2.6 shall constitute the sole remedy
respecting an event of the type specified in the first sentence of this Section
2.6 available to the applicable Investor Certificateholders (or the Trustee on
behalf of such Investor Certificateholders) unless such obligation is not
satisfied in full in accordance with the terms of this Agreement.
Section II.7. AFFIRMATIVE COVENANTS OF THE COMPANY. The Company
hereby covenants that, until the Trust Termination Date occurs, the Company
shall:
(a) FINANCIAL STATEMENTS. (i) Furnish to the Trustee, each Agent and
the Rating Agencies, within 120 days after the end of each fiscal year, the
balance sheet and related statements of income, stockholders' equity and
cash flows showing the financial condition of the Company as of the close
of such fiscal year and the results of its operations during such year,
certified by an appropriate Responsible Officer of the Company to the
effect that such financial statements fairly present the financial
condition and results of operations of the Company in accordance with GAAP
consistently applied;
(ii) Furnish to the Trustee, each Agent and the Rating
Agencies, within 60 days after the end of each of the first three
fiscal quarters of each fiscal year, the Company's balance sheet
and related income statement showing the financial condition of the
Company as of the close of such fiscal quarter and the results of
its operations during such fiscal year (and, beginning with the
second fiscal year, showing, on a comparative basis, such
information as of and for the corresponding dates and periods of
the preceding fiscal year), all certified by a Responsible Officer
of such Person as fairly presenting the financial condition and
results of operations of the Company in accordance
<PAGE>
36
with GAAP consistently applied, subject to normal year-end audit
adjustments; and
(iii) Furnish to the Trustee and each Agent, promptly, from time
to time, such other information regarding the operations, business
affairs and financial condition of the Company, or compliance with the
terms of any Transaction Document, in each case as any Agent or the
Trustee may reasonably request.
(b) ANNUAL OPINION. Deliver to the Trustee an Opinion of Counsel,
substantially in the form of Exhibit C, by March 31st of each year, the
first such delivery hereunder to occur in March 1999.
(c) PAYMENT OF OBLIGATIONS; COMPLIANCE WITH OBLIGATIONS. Pay,
discharge or otherwise satisfy at or before maturity or before they become
delinquent, as the case may be, all its obligations of whatever nature
(including, without limitation, all taxes, assessments, levies and other
governmental charges imposed on it), except where the amount or validity
thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have
been provided on the books of the Company. The Company shall defend the
right, title and interest of the Trustee and the Holders in, to and under
the Receivables and the other Trust Assets, whether now existing or
hereafter created, against all claims of third parties claiming through or
under the Company, any Seller, any Sub-Servicer or the Servicer.
(d) INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. Keep
proper books of records and accounts in which full, true and correct
entries in conformity in all material respects with GAAP and all
Requirements of Law shall be made of all dealings and transactions in
relation to its business and activities; and permit representatives of the
Trustee or any Agent for any Outstanding Series upon reasonable advance
notice to visit and inspect any of its properties and examine and make
abstracts from any of its books and records during normal business hours
on any Business Day and as often as may reasonably be desired and to
discuss the business, operations, properties and financial and other
condition of the Company with officers and employees of the Company and
with its Independent Public Accountants; PROVIDED, that the Trustee shall
notify the Company prior to any contact with such accountants and, prior
to the occurrence of an Early Amortization Event, shall permit
representatives of the Company to be present during such discussions.
(e) COMPLIANCE WITH LAW AND POLICIES. (i) Comply in all material
respects with all Requirements of Law applicable to the Company.
(ii) Cause each Seller to perform its obligations in
accordance with, and comply in all material respects with, the
Policies, as amended from time to
<PAGE>
37
time in accordance with the Transaction Documents, in regard to the
Receivables and the Related Property.
(f) PURCHASE OF RECEIVABLES. Purchase Receivables solely pursuant to
(i) the Receivables Sale Agreement or (ii) this Agreement.
(g) DELIVERY OF COLLECTIONS. In the event that the Company receives
Collections directly from Obligors, deposit such Collections into the
applicable Lockbox Account, Eligible Segregated Account or the Collection
Account within one Business Day after receipt thereof by the Company.
(h) NOTICES. Promptly (and, in any event, within five Business Days
after a Responsible Officer of the Company becomes aware of such event)
give written notice to the Trustee, each Rating Agency and each Agent for
any Outstanding Series of:
(i) the occurrence of any Early Amortization Event or
Potential Early Amortization Event; and
(ii) any Lien not permitted by subsection 2.8(c) on any
Receivable or any other Trust Assets.
(i) LOCKBOXES; ELIGIBLE SEGREGATED ACCOUNTS. (i) Maintain, and keep
in full force and effect, each Lockbox Agreement and Eligible Segregated
Account Agreement to which the Company is a party, and not amend or
otherwise modify each such agreement, except in each case to the extent
otherwise permitted under the terms of this Agreement and the other
Transaction Documents; PROVIDED, HOWEVER, that the Company may enter into
any amendments or modifications of a Lockbox Agreement or Eligible
Segregated Account Agreement that the Company reasonably deems necessary to
conform such Lockbox Agreement or Eligible Segregated Account Agreement to
the cash management system of the Servicer and that are reasonably
acceptable to the Trustee and each Agent, (ii) ensure that each related
Lockbox Account shall be free and clear of, and defend each such Lockbox
Account against and (iii) ensure that each related Eligible Segregated
Account shall be free and clear of, and defend such Eligible Segregated
Account against, any writ, order, stay, judgment, warrant of attachment or
execution or similar process.
(j) SEPARATE CORPORATE EXISTENCE.
(i) Maintain its own deposit account or accounts, separate
from those of any Affiliate, with commercial banking institutions and
ensure that the funds of the Company will not be diverted to any other
Person or for other than corporate uses of the Company, nor will any
material amount of such funds be commingled with the funds of any
Seller or any other Subsidiary or Affiliate of any Seller;
<PAGE>
38
(ii) To the extent that it shares the same officers or other
employees as any of its stockholders or Affiliates, the salaries of
and the expenses related to providing benefits to such officers and
other employees shall be fairly allocated among such entities, and
each such entity shall bear its fair share of the salary and benefit
costs associated with all such common officers and employees;
(iii) To the extent that it jointly contracts with any of its
stockholders or Affiliates to do business with vendors or service
providers or to share overhead expenses, the costs incurred in so
doing shall be allocated fairly among such entities, and each such
entity shall bear its fair share of such costs. To the extent that
the Company contracts or does business with vendors or service
providers where the goods and services provided are partially for the
benefit of any other Person, the costs incurred in so doing shall be
fairly allocated to or among such entities for whose benefit the goods
or services are provided, and each such entity shall bear its fair
share of such costs. All material transactions between the Company
and any of its Affiliates, whether currently existing or hereafter
entered into, shall be only on an arm's-length basis, it being
understood and agreed that the transactions contemplated in the
Transaction Documents meet the requirements of this clause (iii);
(iv) Maintain a principal executive office at a separate
address from the address of Core-Mark and its Affiliates; PROVIDED
that a separate space within, but segregated from, that of Core-Mark
and its Affiliates shall constitute separate addresses for purposes of
this clause (iv). To the extent that the Company and any of its
stockholders or Affiliates have offices in the same location, there
shall be a fair and appropriate allocation of overhead costs among
them, and each such entity shall bear its fair share of such expenses;
(v) Issue separate financial statements prepared not less
frequently than quarterly and prepared in accordance with GAAP;
(vi) Conduct its affairs in its own name and strictly in
accordance with its articles of incorporation and observe all
necessary, appropriate and customary corporate formalities, including,
but not limited to, holding all regular and special stockholders' and
directors' meetings appropriate to authorize all corporate action,
keeping separate and accurate minutes of its meetings, passing all
resolutions or consents necessary to authorize actions taken or to
be taken, and maintaining accurate and separate books, records and
accounts, including, but not limited to, payroll and intercompany
transaction accounts;
(vii) Not assume or guarantee any of the liabilities of any
Seller, any Servicing Party or any Affiliate of any thereof; and
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39
(viii) Take, or refrain from taking, as the case may be, all
other actions that are necessary to be taken or not to be taken in
order to (x) ensure that the assumptions and factual recitations set
forth in the Specified Bankruptcy Opinion Provisions remain true and
correct in all material respects with respect to the Company and (y)
comply in all material respects with those procedures described in
such provisions which are applicable to the Company.
(k) PRESERVATION OF CORPORATE EXISTENCE. (i) Preserve and
maintain its corporate existence, rights, franchises and privileges in
the jurisdiction of its incorporation and (ii) qualify and remain
qualified in good standing as a foreign corporation in each jurisdiction
where the failure to preserve and maintain such existence, rights,
franchises, privileges and qualification would, if not remedied within
30 days, be reasonably likely to have a Material Adverse Effect.
(l) NET WORTH. Maintain at all times a consolidated net worth, as
determined in accordance with GAAP, of at least $9,500,000.
(m) MAINTENANCE OF PROPERTY. Keep all property and assets useful
and necessary to permit the monitoring and collection of Receivables.
(n) FURTHER ASSURANCES. File, or cause to be filed, at the
applicable Seller's expense and in accordance with the provisions of the
UCC of the applicable jurisdiction, duly completed and executed
continuation statements with respect to all financing statements filed
in connection with the transactions contemplated by the Receivables Sale
Agreement.
Section 2.8. NEGATIVE COVENANTS OF THE COMPANY. The Company hereby
covenants that, until the Trust Termination Date occurs, it shall not directly
or indirectly:
(a) ACCOUNTING OF TRANSFERS. Prepare any financial statements which
shall account for the transactions contemplated by the Receivables Sale
Agreement in any manner other than as a sale of (or capital contribution
of) Receivables and the other Trust Assets by the Sellers to the Company or
in any other respect account for or treat the transactions under the
Receivables Sale Agreement (including for financial accounting purposes,
except as required by law) in any manner other than as transfers of
Receivables and the other Trust Assets by the Sellers to the Company;
PROVIDED, HOWEVER, that this subsection shall not apply for any tax or tax
accounting purposes.
(b) LIMITATION ON INDEBTEDNESS. Create, incur, assume or suffer to
exist any Indebtedness, except: (i) Indebtedness evidenced by the
Subordinated Note; (ii) Indebtedness representing fees, expenses and
indemnities payable pursuant to and in accordance with the Transaction
Documents; and (iii) Indebtedness for services supplied or furnished to
the Company in an amount not to exceed $25,000 at any one time
outstanding; PROVIDED that any Indebtedness permitted hereunder and
described in clauses (i) and (iii) shall be payable by the Company solely
from funds available to
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40
the Company which are not otherwise required to be applied to the payment
of any amounts by the Company pursuant to any Pooling and Servicing
Agreements.
(c) LIMITATION ON LIENS AND SALES. Except for the conveyance
hereunder, the Company will not sell, pledge, assign or transfer to any
Person, or create, incur, assume or suffer to exist any Lien upon any
Receivables or any of its property, assets or revenues, whether now owned
or hereafter acquired, except for Permitted Liens, it being understood that
no Permitted Lien under clause (ii) of the definition thereof shall cover
any of the Trust Assets (except to the limited extent permitted by clause
(iv) of such definition).
(d) LIMITATION ON GUARANTEE OBLIGATIONS. Become or remain liable,
directly or contingently, in connection with any Indebtedness or other
liability of any other Person, whether by guarantee, endorsement (other
than endorsements of negotiable instruments for deposit or collection in
the ordinary course of business), agreement to purchase or repurchase,
agreement to supply or advance funds, or otherwise, except in connection
with indemnification obligations of the Company to the limited extent
provided in the Company's articles of incorporation and by-laws; PROVIDED
that any such indemnification shall be paid solely from funds available to
the Company which are not otherwise needed to be applied to the payment of
any amounts pursuant to any Pooling and Servicing Agreements, and shall not
constitute a claim against the Company to the extent that insufficient
funds exist to make such payment.
(e) LIMITATION ON FUNDAMENTAL CHANGES. Enter into any merger,
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or make any material change in its
present method of conducting business (other than as contemplated by the
Transaction Documents), or convey, sell, lease, assign, transfer or
otherwise dispose of, all or substantially all of its property, business or
assets other than the assignments and transfers contemplated hereby .
(f) LIMITATION ON DIVIDENDS AND OTHER PAYMENTS. Declare or pay any
dividend on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of capital
stock of the Company, whether now or hereafter outstanding, or make any
other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Company (any of the
foregoing, a "restricted payment"), or make, directly or indirectly,
payments in any form in respect of the Subordinated Note unless (i) at the
date such restricted payment or payment in respect of the Subordinated Note
is made, the Company shall have made all payments in respect of its
repurchase obligations pursuant to this Agreement outstanding at such date,
(ii) at the date such restricted payment is made, outstanding principal
amount of the Subordinated Note shall be zero, and (iii) any such
restricted payment is made no more frequently than on a monthly basis and
is effected in accordance with all corporate and legal formalities
applicable to the Company; PROVIDED, HOWEVER, that (A) no restricted
payment or payment in
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41
respect of the Subordinated Note, shall be made on any date if (x) a
Potential Early Amortization Event of a type referred to in clause
(a)(ii) or (iii) of Section 7.1 or (y) an Early Amortization Event has
occurred and is continuing (or would occur as a result of such payment)
on such date and (B) all restricted payments, and payments in respect of
the Subordinated Note, made on any date shall be payable by the Company
solely from funds available to the Company which are not otherwise needed
on such date to be applied to the payment of any amounts by the Company
pursuant to any Pooling and Servicing Agreement.
(g) BUSINESS OF THE COMPANY. Engage at any time in any business or
business activity other than the acquisition of Receivables pursuant to the
Receivables Sale Agreement, the assignments and transfers hereunder and the
other transactions contemplated by the Transaction Documents, and any
activity incidental to the foregoing and necessary or convenient to
accomplish the foregoing, or enter into or be a party to any agreement or
instrument other than in connection with the foregoing, except those
agreements or instruments permitted under subsection 2.8(i).
(h) LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. Make any advance,
loan, extension of credit or capital contribution to, or purchase any
stock, bonds, notes, debentures or other securities of or any assets
constituting a business unit of, or make any other investment in, any
Person, except for any Exchangeable Company Interest, any Series
Subordinated Interest, the Receivables and the other Trust Assets.
(i) AGREEMENTS. (A) Become a party to, or permit any of its
properties to be bound by, any indenture, mortgage, instrument, contract,
agreement, lease or other undertaking, except the Transaction Documents,
leases of office space, equipment or other facilities for use by the
Company in its ordinary course of business, employment agreements, service
agreements, agreements relating to shared employees and the other
Transaction Documents and agreements necessary to perform its obligations
under the Transaction Documents, (B) issue any power of attorney (except to
the Trustee or the Servicer or except for the purpose of permitting any
Person to perform any ministerial functions on behalf of the Company that
are not prohibited by or inconsistent with the terms of the Transaction
Documents), or (C) amend, supplement, modify or waive any of the provisions
of the Receivables Sale Agreement or any Lockbox Agreement or Eligible
Segregated Account Agreement or request, consent or agree to or suffer to
exist or permit any such amendment, supplement, modification or waiver or
exercise any consent rights granted to it thereunder unless such amendment,
supplement, modification or waiver or such exercise of consent rights would
not be reasonably likely to have a Material Adverse Effect and, in the case
of the Receivables Sale Agreement, the Rating Agency Condition shall have
been satisfied with respect to any such amendments, supplements,
modifications or waivers.
(j) POLICIES; AMENDMENTS TO RECEIVABLES. (i) Make any change or
modification (or permit any change or modification to be made) in any
material respect to the Policies, except (x) if such changes or
modifications are necessary under
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42
any Requirement of Law, (y) if such changes or modifications would not
reasonably be likely to have a Material Adverse Effect or (z) if the
Rating Agency Condition is satisfied with respect thereto; PROVIDED,
HOWEVER, that if any change or modification, other than a change or
modification permitted pursuant to clause (x) or (y) above, would be
reasonably likely to have a material adverse effect on the interests of
the Investor Certificateholders of a Series which is not rated by a
Rating Agency, the consent of the applicable Agent (or as specified in
the related Supplement) shall be required to effect such change or
modification.
(ii) Take any action with respect to the Receivables of the
type which if taken by the Servicer would violate the provisions of
Section 4.6 of the Servicing Agreement.
(k) RECEIVABLES NOT TO BE EVIDENCED BY PROMISSORY NOTES. Subject to
the delivery requirement set forth in subsection 2.1(c), take any action to
cause any Receivable to be evidenced by any "instrument" other than,
provided that the procedures set forth in Schedule 3 are fully implemented
with respect thereto, an instrument which alone or together with a security
agreement constitutes "chattel paper" (each as defined in the UCC as in
effect in any state in which the Company's or the applicable Seller's chief
executive office or books and records relating to such Receivable are
located), except in connection with its enforcement or collection of an
Aged Receivable.
(l) OPTIONAL TERMINATION. Fail to deliver an Optional Termination
Notice to the Trustee with respect to any Outstanding Series, unless it
shall deliver an Optional Termination Notice to the Trustee with respect to
all Outstanding Series.
(m) OFFICES. Move outside or within the state where such office is
now located the location of its chief executive office or of any of the
offices where it keeps its records with respect to the Receivables without
(i) in the case of moves outside such state, giving 30 days' prior written
notice to the Trustee and each Rating Agency, (ii) in the case of moves
within such state, giving the Trustee prompt notice of a change within the
state where such office is now located of the location of its chief
executive office or any office where it keeps its records with respect to
the Receivables and (iii) taking all actions reasonably requested by the
Trustee (including but not limited to all filings and other acts necessary
or advisable under the UCC or similar statute of each relevant
jurisdiction) in order to continue the Trust's first priority perfected
ownership or security interest in all Receivables now owned or hereafter
created; PROVIDED, HOWEVER, that the Company shall not change the location
of its chief executive office to outside of the United States, or to a
state which is within the Tenth Circuit unless it delivers an Opinion of
Counsel reasonably acceptable to the Rating Agencies to the effect that
OCTAGON GAS SYSTEMS, INC. V. RIMMER, 995 F.2d 948 (10th Cir. 1993), is no
longer controlling precedent in the Tenth Circuit.
<PAGE>
43
(n) CHANGE IN NAME. Change its name, identity or corporate structure
in any manner which would or might make any financing statement or
continuation statement (or other similar instrument) filed in accordance
herewith seriously misleading within the meaning of Section 9-402(7) of the
UCC as in effect in any applicable jurisdiction in which UCC filings have
been made in respect of the Trust Assets without 30 days' prior written
notice to the Trustee and each Rating Agency.
(o) CHARTER. Amend or make any change or modification to its
certificate of incorporation or by-laws without first satisfying the Rating
Agency Condition (other than an amendment, change or modification made
pursuant to changes in law of the state of its incorporation or amendments
to change the Company's name (subject to compliance with clause (m) above),
resident agent or address of resident agent).
(p) ADDITION OF SELLERS. Agree to the addition of any Subsidiary of
Core-Mark as an additional Seller pursuant to Section 9.12 of the
Receivables Sale Agreement without (i) such Subsidiary complying with all
conditions precedent set forth in Section 3.02 of the Receivables Sale
Agreement, or such Subsidiary's being simultaneously added as a Sub-
Servicer (or without another Subsidiary's simultaneously agreeing to act as
a Sub-Servicer in respect of such additional Seller) under the Transaction
Documents pursuant to Section 2.6 of the Servicing Agreement.
ARTICLE III
RIGHTS OF HOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
THE FOLLOWING PORTION OF THIS ARTICLE III
IS APPLICABLE TO ALL SERIES.
Section III.1. RIGHTS OF HOLDERS. (a) Each Series of Investor
Certificates shall represent Fractional Undivided Interests in the Trust
(including any Enhancement applicable to such Series as specified in the related
Supplement) relating to such Series and the right to receive Collections and
other amounts at the times and in the amounts specified in this Article III (as
supplemented by the Supplement related to such Series) to be deposited in the
Collection Account and any other accounts maintained for the benefit of the
Investor Certificateholders or paid to the Investor Certificateholders (with
respect to each outstanding Series, the "CERTIFICATEHOLDERS' INTEREST"). The
"EXCHANGEABLE COMPANY INTEREST" shall be the interest in the Trust not
represented by any Series of Investor Certificates then outstanding or Series
Subordinated Interests then in existence, including the right to receive
Collections and other amounts at the times and in the amounts specified in this
Article III to be paid to the Company (the "COMPANY INTEREST"), and each Series
Subordinated Interest, if any, shall be the interest specified as such pursuant
to the related Supplement; PROVIDED, HOWEVER, that no such Exchangeable Company
Interest or Series Subordinated Interest shall include any interest in any Trust
Account or any other accounts maintained for the benefit of the Investor
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44
Certificateholders or the benefit of any Enhancement Provider, except as
specifically provided in this Article III.
(b) ESTABLISHMENT OF COLLECTION ACCOUNT; AUTHORITY OF THE TRUSTEE IN
RESPECT OF THE COLLECTION ACCOUNT AND HOLDERS' INTERESTS THEREIN. (i) The
Trustee, for the benefit of the Investor Certificateholders, shall cause to be
established and maintained in the name of the Trust with an Eligible Institution
or with the corporate trust department of the Trustee or an affiliate of the
Trustee, a segregated trust account (the "COLLECTION ACCOUNT"), bearing a
designation clearly indicating that the funds deposited therein are held for the
benefit of the Investor Certificateholders. Schedule 2, which is hereby
incorporated into and made a part of this Agreement, identifies the Collection
Account by setting forth the account number of such account, the account
designation of such account and the name of the institution with which such
account has been established. The Collection Account shall be divided into
individual subaccounts for each Outstanding Series (each, respectively, a
"SERIES COLLECTION SUBACCOUNT" and, collectively, the "SERIES COLLECTION
SUBACCOUNTS") and for the Company (the "COMPANY COLLECTION SUBACCOUNT"). For
administrative purposes only, the Trustee shall establish or cause to be
established for each Series, so long as such Series is an Outstanding Series,
sub-subaccounts of the Series Collection Subaccounts with respect to such Series
(respectively, the "SERIES PRINCIPAL COLLECTION SUB-SUBACCOUNT" and "SERIES NON-
PRINCIPAL COLLECTION SUB-SUBACCOUNT" and, collectively, the "SERIES COLLECTION
SUB-SUBACCOUNTS").
(ii) The Trustee, on behalf of the Investor Certificateholders,
shall possess all right, title and interest in all funds on deposit from time to
time in the Collection Account and in all proceeds thereof. The Collection
Account shall be under the sole dominion and control of the Trustee for the
benefit of the Investor Certificateholders and, to the extent set forth in any
Supplement, any Enhancement Provider set forth therein. If, at any time, the
Servicer has actual notice or knowledge that any institution holding the
Collection Account is other than the corporate trust department of the Trustee
or an affiliate of the Trustee, or that any other institution holding the
Collection Account has ceased to be an Eligible Institution, the Servicer shall
direct the Trustee in writing to establish within 30 days a substitute account
therefor with an Eligible Institution, transfer any cash and/or any Eligible
Investments to such new account and from the date any such substitute accounts
are established, such account shall be the Collection Account. Neither the
Company nor the Servicer, nor any person or entity claiming by, through or under
the Company or Servicer, shall have any right, title or interest in, except to
the extent expressly provided under the Transaction Documents, or any right to
withdraw any amount from, the Collection Account. Pursuant to the authority
granted to the Servicer in subsection 2.2(a) of the Servicing Agreement, the
Servicer shall have the power, revocable by the Trustee, to instruct the Trustee
in writing to make withdrawals from and payments to the Collection Account for
the purposes of carrying out the Servicer's or the Trustee's duties hereunder.
(c) ADMINISTRATION OF THE COLLECTION ACCOUNT. At the written
direction of the Servicer, funds on deposit in the Collection Account available
for investment shall be invested by the Trustee in Eligible Investments selected
by the Servicer. All such Eligible Investments shall be held by the Trustee for
the benefit of the Investor Certificateholders.
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45
Amounts on deposit in each Series Non-Principal Collection Sub-subaccount shall,
if applicable, be invested in Eligible Investments that will mature, or that
are payable or redeemable upon demand of the holder thereof, so that such
funds will be available on or before the Business Day immediately preceding
the next Distribution Date. None of such Eligible Investments shall be
disposed of prior to the maturity date with respect thereto unless such
disposition is reasonably necessary to prevent a loss. All interest and
investment earnings (net of losses and investment expenses) (the "INVESTMENT
EARNINGS") on funds deposited in a Series Non-Principal Collection
Sub-subaccount shall be deposited in such sub-subaccount. Amounts on deposit
in the Series Principal Collection Sub-subaccounts and any other
sub-subaccounts as specified in the related Supplement shall be invested in
Eligible Investments that mature, or that are payable or redeemable upon
demand of the holder thereof, so that such funds will be available not later
than the date which is specified in any Supplement. The Trustee, or its
nominee or custodian, shall maintain possession of the instruments or
securities, if any, evidencing any Eligible Investments from the time of
purchase thereof until the time of sale or maturity. Any Investment Earnings
on such invested funds in a Series Principal Collection Sub-subaccount and
any other sub-subaccounts as specified in the related Supplement will be
deposited in the related Series Non-Principal Collection Sub-subaccount. If
the Servicer fails to give such written instruction, the amounts in the
Collection Account available for investment shall remain uninvested.
(d) DAILY COLLECTIONS. (i) Promptly following its receipt of
Collections in the form of available funds in the Lockbox Accounts or Eligible
Segregated Accounts, but in no event later than the Business Day following such
receipt, the Servicer shall transfer, or cause to be transferred, all
Collections on deposit (less the aggregate amount of set-offs permitted to be
retained pursuant to any applicable Lockbox Agreement or Eligible Segregated
Accounts Agreement) in the form of available funds in the Lockbox Accounts, or
Eligible Segregated Accounts directly to the Collection Account.
(ii) On the date funds become available in the Collection Account
(unless received after 1:00 p.m., New York City time, on such date, then on
the next Business Day) (the "DEPOSIT DATE"), the Trustee shall (in accordance
with the written directions received from the Servicer pursuant to subsection
(h) below, upon which the Trustee may conclusively rely) transfer from
Aggregate Daily Collections for such Deposit Date, to the respective Series
Collection Subaccount for each Outstanding Series, an amount equal to the
product of (x) the applicable Invested Percentage for such Outstanding Series
and (y) such Aggregate Daily Collections.
(iii) On each Deposit Date, the Trustee shall (in accordance with
the written directions received from the Servicer pursuant to subsection (h)
below, upon which the Trustee may conclusively rely) allocate funds
transferred to the Series Collection Subaccount for each Outstanding Series
pursuant to subsection (d)(ii) above to the Series Non-Principal Collection
Sub-subaccount, the Series Principal Collection Sub-subaccount and such other
Sub-subaccounts of each such Series in accordance with the related Supplement
for such Series.
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46
(iv) On each Deposit Date, except as otherwise provided in a
Supplement, the Trustee shall (in accordance with the written directions
received from the Servicer pursuant to subsection (h) below, upon which the
Trustee may conclusively rely) transfer to the Company Collection Subaccount
from Aggregate Daily Collections deposited into the Collection Account
pursuant to subsection (d)(i) above on such Deposit Date, the remaining funds
(less an amount equal to the costs and expenses, if any, incurred by the
Trustee with respect to the sale of the Receivables pursuant to subsection
7.2(a) or 9.1(b) and reimbursable to the Trustee as provided in Section 8.5),
if any, on deposit in the Collection Account on such date after giving effect
to transfers to be made pursuant to subsection (d)(ii) above.
(e) CERTAIN ALLOCATIONS FOLLOWING AN AMORTIZATION PERIOD. (i) If, on
any Settlement Report Date, an Amortization Period has occurred and is
continuing with respect to any Outstanding Series and at such Settlement Report
Date, a Revolving Period is still in effect with respect to any other
Outstanding Series (a "SPECIAL ALLOCATION SETTLEMENT REPORT DATE"), then the
Servicer shall make the following calculations:
(A) the amount (the "ALLOCABLE CHARGED-OFF AMOUNT") equal to the
excess, if any, of (I) the aggregate Principal Amount of Charged-Off
Receivables for the related Settlement Period over (II) the aggregate
amount of Recoveries received during the related Settlement Period;
(B) the amount (the "ALLOCABLE RECOVERIES AMOUNT") equal to the
excess, if any, of (I) the aggregate amount of Recoveries received during
the related Settlement Period over (II) the aggregate Principal Amount of
Charged-Off Receivables for the related Settlement Period; and
(ii) If, on any Special Allocation Settlement Report Date, any of
the Allocable Charged-Off Amount or the Allocable Recoveries Amount is
greater than zero for the related Settlement Period, the Trustee shall (in
accordance with written directions received pursuant to subsection (h) above,
upon which the Trustee may conclusively rely) make (A) a pro rata allocation
to each Outstanding Series (based on the Invested Percentage for such Series)
of a portion of each such positive amount and (B) an allocation to the
Exchangeable Company Interest of the remaining portion of each such positive
amount; PROVIDED, that the aggregate Allocable Recoveries Amount allocated
pursuant to this subsection 3.1(e)(ii) shall never exceed the Allocable
Charged-Off Amount previously allocated pursuant to this subsection
3.1(e)(ii).
(iii) With respect to each portion of the Allocable Charged-Off
Amount and the Allocable Recoveries Amount which is allocated to an
Outstanding Series pursuant to subsection 3.1(e)(ii), the Trustee shall apply
each such amount to such Series in accordance with the related Supplement for
such Series.
(f) ALLOCATIONS FOR THE EXCHANGEABLE COMPANY INTEREST. Until the
occurrence and continuance of a Potential Early Amortization Event or an Early
Amortization Event, in each case set forth in Section 7.1 of the Agreement, or
an Early Amortization
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47
Period, on each Business Day and, after the occurrence and continuance of a
Potential Early Amortization Event or an Early Amortization Event, in each
case set forth in Section 7.1 of the Agreement, or an Early Amortization
Period, and until the Trust Termination Date, on each Distribution Date,
after making all allocations required pursuant to subsection 3.1(d), the
Trustee shall (in accordance with the written direction of the Servicer, upon
which the Trustee may conclusively rely) transfer to the owner of the
Exchangeable Company Interest the remaining amount on deposit in the Company
Collection Subaccount.
(g) SET-OFF. (i) In addition to the provisions of Section 8.5, if
the Company shall fail to make a payment as provided in this Agreement or any
Supplement, the Servicer or the Trustee may set off and apply any amounts
otherwise payable to the Company under any Pooling and Servicing Agreement,
including without limitation any amounts allocable to the Exchangeable
Company Interest or any Series Subordinated Interest. The Company hereby
waives demand, notice or declaration of such set-off and application;
PROVIDED that notice will promptly be given to the Company of such set-off;
PROVIDED FURTHER that failure to give such notice shall not affect the
validity of such set-off.
(ii) In addition to the provisions of Section 8.5, in the event
the Servicer shall fail to make a payment as provided in any Pooling and
Servicing Agreement, the Trustee may set off and apply any amounts otherwise
payable to the Servicer in its capacity as Servicer under the Transaction
Documents on account of such obligation. The Servicer hereby waives demand,
notice or declaration of such set-off and application; PROVIDED that notice
will promptly be given to the Servicer of such set-off; PROVIDED FURTHER that
failure to give such notice shall not affect the validity of such set-off.
(h) ALLOCATION AND APPLICATION OF FUNDS. The Servicer shall direct
the Trustee in writing (which may be given in the form of the Daily Report and
Monthly Settlement Statement) in a timely manner to apply all Collections with
respect to the Receivables in accordance with this Article III and in the
Supplement with respect to each Outstanding Series. The Servicer shall direct
the Trustee in writing to pay Collections to the owner of the Exchangeable
Company Interest to the extent such Collections are allocated to the
Exchangeable Company Interest under subsection 3.1(f) and as otherwise provided
in Article III. Notwithstanding anything in this Agreement, any Supplement or
any other Transaction Document to the contrary, to the extent that the Trustee
receives any Daily Report prior to 2:00 p.m., New York City time, on any
Business Day, the Trustee shall make any applications of funds required thereby
on the same Business Day and otherwise on the next succeeding Business Day.
THE REMAINDER OF ARTICLE III SHALL BE SPECIFIED
IN THE SUPPLEMENT WITH RESPECT TO EACH SERIES.
SUCH REMAINDER SHALL BE APPLICABLE ONLY TO THE
SERIES RELATING TO THE SUPPLEMENT IN WHICH
SUCH REMAINDER APPEARS.
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48
ARTICLE IV
ARTICLE IV IS RESERVED
AND MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO THE SERIES RELATING THERETO
ARTICLE V
THE CERTIFICATES AND INTERESTS
Section V.1. THE CERTIFICATES. The Investor Certificates of each
Series and any Class thereof shall be in fully registered form and shall be
substantially in the form of the exhibits with respect thereto attached to
the applicable Supplement. The Certificates shall, upon issue, be executed
and delivered by the Company to the Trustee for authentication and redelivery
as provided in Section 5.2. The Investor Certificates shall be issued in
minimum denominations of $1,000,000 and in integral multiples of $100,000 in
excess thereof unless otherwise specified in any Supplement for any Series
and Class. Unless otherwise specified in any Supplement for any Series, the
Investor Certificates of any Series or Class shall be issued upon initial
issuance as one or more global certificates in an aggregate original
principal amount equal to the Initial Invested Amount with respect to such
Series or Class. The Company is hereby authorized to execute and deliver
each Certificate on behalf of the Trust. Each Certificate shall be executed
by manual or facsimile signature on behalf of the Company by a Responsible
Officer. Certificates bearing the manual or facsimile signature of the
individual who was, at the time when such signature was affixed, authorized
to sign on behalf of the Company or the Trustee shall not be rendered
invalid, notwithstanding that such individual has ceased to be so authorized
prior to or on the date of the authentication and delivery of such
Certificates or does not hold such office at the date of such Certificates.
No Certificate shall be entitled to any benefit under this Agreement, or be
valid for any purpose, unless there appears on such Certificate a certificate
of authentication substantially in the form provided for herein executed by
or on behalf of the Trustee by the manual signature of a duly authorized
signatory, and such certificate of authentication upon any Certificate shall
be conclusive evidence, and the only evidence, that such Certificate has been
duly authenticated and delivered hereunder. All Certificates shall be dated
the date of their authentication but failure to do so shall not render them
invalid.
Section V.2. AUTHENTICATION OF CERTIFICATES. Contemporaneously
with the execution and delivery of this Agreement, the Trustee shall
authenticate and deliver the initial Series of the Investor Certificates that
is issued upon original issuance, upon the written order of the Company in a
form reasonably satisfactory to the Trustee, to the holders of the initial
Series of Investor Certificates, against payment to the Company of the
Initial Invested Amount. The Investor Certificates shall be duly
authenticated by or on behalf of the Trustee in authorized denominations
equal to (in the aggregate) the Initial Invested Amount and the interests
evidenced thereby, and together with any Series Subordinated Interest and the
Exchangeable Company Interest, shall constitute the entire ownership of the
Trust. Upon a
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49
Company Exchange as provided in Section 5.10 and the satisfaction of certain
other conditions specified therein, the Trustee shall authenticate and
deliver the Certificates of additional Series (with the designation provided
in the applicable Supplement) (or, if provided in any Supplement, the
additional Investor Certificates of an existing Series), upon the written
order of the Company, to the Persons designated in such Supplement or order
(if no additional Supplement is required). Upon the order of the Company,
the Investor Certificates of any Series shall be duly authenticated by or on
behalf of the Trustee, in authorized denominations equal to (in the
aggregate) the Initial Invested Amount of such Series (or, if provided in any
Supplement, the additional Investor Certificates of an existing Series), of
Investor Certificates.
Section V.3. REGISTRATION OF TRANSFER AND EXCHANGE OF CERTIFICATES.
(a) The Trustee shall cause to be kept at the office or agency to be maintained
by a transfer agent and registrar (which may be the Trustee) (the "TRANSFER
AGENT AND REGISTRAR") in accordance with the provisions of Section 8.16 a
register (the "CERTIFICATE REGISTER") in which, subject to such reasonable
regulations as the Trustee may prescribe, the Transfer Agent and Registrar shall
provide for the registration of the Investor Certificates and of transfers and
exchanges of the Investor Certificates as herein provided. The Company hereby
appoints the Trustee as Transfer Agent and Registrar for the purpose of
registering the Investor Certificates and transfers and exchanges of the
Investor Certificates as herein provided. The Trustee shall be permitted to
resign as Transfer Agent and Registrar upon 30 days' written notice to the
Company and the Servicer; PROVIDED, HOWEVER, that such resignation shall not be
effective and the Trustee shall continue to perform its duties as Transfer Agent
and Registrar until the Trustee has appointed a successor Transfer Agent and
Registrar reasonably acceptable to the Company and such successor Transfer Agent
and Registrar has accepted such appointment. The provisions of Sections 8.1,
8.2, 8.3, 8.5 and 10.19 shall apply to the Trustee also in its role as Transfer
Agent or Registrar, as the case may be, for so long as the Trustee shall act as
Transfer Agent or Registrar, as the case may be.
The Company hereby agrees to provide the Trustee from time to time
sufficient funds, on a timely basis and in accordance with and subject to
Section 8.5, for the payment of any reasonable compensation payable to the
Transfer Agent and Registrar for their services under this Section 5.3. The
Trustee hereby agrees that, upon the receipt of such funds from the Company,
it shall pay the Transfer Agent and Registrar such amounts.
Upon surrender for registration of transfer of any Investor
Certificate at any office or agency of the Transfer Agent and Registrar
maintained for such purpose, the Company shall execute, and, upon the written
request of the Company, the Trustee shall authenticate and deliver, in the
name of the designated transferee or transferees, one or more new Investor
Certificates in authorized denominations of the same Series (and Class)
representing like aggregate Fractional Undivided Interests and which bear
numbers that are not contemporaneously outstanding.
At the option of an Investor Certificateholder, Investor
Certificates may be exchanged for other Investor Certificates of the same
Series (and Class) in authorized
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50
denominations of like aggregate Fractional Undivided Interests, bearing
numbers that are not contemporaneously outstanding, upon surrender of the
Investor Certificates to be exchanged at any such office or agency of the
Transfer Agent and Registrar maintained for such purpose.
Whenever any Investor Certificates of any Series are so surrendered
for exchange, the Company shall execute, and, upon the written request of the
Company, the Trustee shall authenticate and (unless the Transfer Agent and
Registrar is different from the Trustee, in which case the Transfer Agent and
Registrar shall) deliver, the Investor Certificates of such Series which the
Investor Certificateholder making the exchange is entitled to receive. Every
Investor Certificate presented or surrendered for registration of transfer or
exchange shall be accompanied by a written instrument of transfer
substantially in the form attached to the form of such Investor Certificate
and duly executed by the holder thereof or his attorney-in-fact duly
authorized in writing delivered to the Trustee (unless the Transfer Agent and
Registrar is different from the Trustee, in which case to the Transfer Agent
and Registrar) and complying with any requirements set forth in the
applicable Supplement.
No service charge shall be made for any registration of transfer or
exchange of Investor Certificates, but the Transfer Agent and Registrar may
require any Investor Certificateholder that is transferring or exchanging one
or more Certificates to pay a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer or exchange of
Investor Certificates.
All Investor Certificates surrendered for registration of transfer
and exchange shall be cancelled and disposed of in a customary manner
satisfactory to the Trustee.
The Company shall execute and deliver Certificates to the Trustee
or the Transfer Agent and Registrar in such amounts and at such times as are
necessary to enable the Trustee and the Transfer Agent and Registrar to
fulfill their respective responsibilities under this Agreement and the
Certificates.
(b) The Transfer Agent and Registrar will maintain at its expense
in the Borough of Manhattan, The City of New York and, subject to subsection
5.3(a), if specified in the related Supplement for any Series, any other city
designated in such Supplement, an office or offices or agency or agencies
where Investor Certificates may be surrendered for registration or transfer
or exchange.
(c) Unless otherwise stated in any related Supplements,
registration of transfer of Certificates containing a legend relating to
restrictions on transfer of such Certificates (which legend shall be set
forth in the Supplement relating to such Investor Certificates) shall be
effected only if the conditions set forth in the related Supplement are
complied with.
Certificates issued upon registration or transfer of, or in
exchange for, Certificates bearing the legend referred to above shall also
bear such legend unless the
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51
Company, the Servicer, the Trustee and the Transfer Agent and Registrar
receive an Opinion of Counsel satisfactory to each of them, to the effect
that such legend may be removed.
(d) (i) The Company may not transfer, assign, exchange or otherwise
pledge or convey the Series Subordinated Interest of any Series or the
Exchangeable Company Interest except, with respect to the Exchangeable
Company Interest, pursuant to Section 5.10.
(ii) Neither the Company nor the Servicer shall at any time
participate in the listing of any Targeted Investor Certificate (as defined
below) on an "established securities market" within the meaning of Section
7704(b)(1) of the Internal Revenue Code and any proposed, temporary or
final treasury regulation thereunder as of the date hereof, including,
without limitation, an over-the-counter or interdealer quotation system
that regularly disseminates firm buy or sell quotations. "TARGETED
INVESTOR CERTIFICATE" shall mean any Certificate representing a right to
receive interest or principal with respect to any Class or Series of
Investor Certificates with respect to which an Opinion of Counsel has not
been rendered that such Certificates will be treated as debt for federal
income tax purposes (it being understood that any Certificate with respect
to which an Opinion of Counsel has been rendered that such Certificate will
be treated EITHER as debt or as an interest in a partnership for federal
income tax purposes shall be a Targeted Investor Certificate).
(e)(i) No transfer of a Targeted Investor Certificate or grant of a
participation therein shall be permitted if (A) such transfer or grant would
cause the number of Targeted Holders (as defined below) to exceed 75 or (B)
the transferee or grantee, as the case may be, is a trust, partnership or "S
corporation" (within the meaning of Section 1361(a) of the Code) (a
"FLOW-THROUGH ENTITY"), unless such flow-through entity represents that less
than 50% of the aggregate value of such flow-through entity's assets consist
of Targeted Investor Certificates. "TARGETED HOLDER" shall mean each holder
of a Targeted Investor Certificate; PROVIDED, HOWEVER, that any Person
holding more than one interest with respect to the Investor Certificates or
the Trust, each of which separately would cause such Person to be a Targeted
Holder, shall be treated as a single Targeted Holder.
(ii) The Company and the Servicer hereby jointly and severally
agree not to permit the sum of (x) the number of Persons holding a right to
receive any amount in respect of the Exchangeable Company Interest or any
Series Subordinated Interest and (y) the number of Servicing Parties that
receive any portion of the Servicing Fee to exceed 25.
(iii) Any determination by the Transfer Agent and Registrar (in
accordance with the information contained in the Certificate Register and the
certifications made by each transferee and participant pursuant to the
applicable Supplement, upon which information the Transfer Agent and
Registrar may conclusively rely) that the event described in either clause
(i)(A) or (i)(B) of this subsection 5.3(e) would occur as the result of a
transfer of a Targeted Investor Certificate or the grant of a participation
therein shall be (X) communicated in writing to the transferring or granting
Investor Certificateholder prior to the effective date set
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52
out in the notice of transfer or participation required by, or otherwise
provided for under, the related Supplement and (Y) binding upon the parties
absent manifest error.
(iv) Except as specified in any Supplement for a related Series,
all Investor Certificates of any Series shall be equally and ratably entitled
as provided herein to the benefits hereof without preference, priority or
distinction on account of the actual time or times of authentication and
delivery, all in accordance with the terms and provisions of this Agreement
and the applicable Supplement.
Section V.4. MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.
If (a) any mutilated Certificate is surrendered to the Transfer Agent and
Registrar, or the Transfer Agent and Registrar receives evidence in the form
of a certification by the holder thereof of the destruction, loss or theft of
any Certificate and (b) there is delivered to the Transfer Agent and
Registrar and the Trustee such security or indemnity as may be required by
them to save the Trust and each of them harmless, then, in the absence of
actual notice to the Trustee or Transfer Agent and Registrar that such
Certificate has been acquired by a bona fide purchaser, the Company shall
execute and, upon the written request of the Company, the Trustee shall
authenticate and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like tenor and
aggregate Fractional Undivided Interest and bearing a number that is not
contemporaneously outstanding. In connection with the issuance of any new
Certificate under this Section 5.4, the Trustee or the Transfer Agent and
Registrar may require the payment by the Holder of a sum sufficient to cover
any tax or other governmental expenses (including the fees and expenses of
the Trustee and Transfer Agent and Registrar) connected therewith. Any
duplicate Certificate issued pursuant to this Section 5.4 shall constitute
complete and indefeasible evidence of ownership in the Trust, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
Section V.5. PERSONS DEEMED OWNERS. At all times prior to due
presentation of a Certificate for registration of transfer, the Company, the
Trustee, the Paying Agent, the Transfer Agent and Registrar, any Agent and
any agent of any of them may treat the Person in whose name any Certificate
is registered as the owner of such Certificate for the purpose of receiving
distributions pursuant to Article IV of the related Supplement and for all
other purposes whatsoever, and neither the Trustee, the Paying Agent, the
Transfer Agent and Registrar, any Agent nor any agent of any of them shall be
affected by any notice to the contrary. Notwithstanding the foregoing
provisions of this Section 5.5, in determining whether the holders of the
requisite Fractional Undivided Interests have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Certificates
(or interests therein) owned by the Company, the Servicer or any Affiliate
thereof shall be disregarded and deemed not to be outstanding, except that,
in determining whether the Trustee shall be protected in relying upon any
such request, demand, authorization, direction, notice, consent or waiver,
only Certificates which a Responsible Officer of the Trustee actually knows
to be so owned shall be so disregarded. Certificates (or interests therein)
so owned by the Company, the Servicer or any Affiliate thereof which have
been pledged in good faith shall not be disregarded and may be regarded as
outstanding if the pledgee establishes to the
<PAGE>
53
satisfaction of the Trustee the pledgee's right so to act with respect to
such Certificates (or interests therein) and that the pledgee is not the
Company, the Servicer or an Affiliate thereof.
Section V.6. APPOINTMENT OF PAYING AGENT. The Paying Agent shall
make distributions to Investor Certificateholders from the Collection Account
(and/or any other account or accounts maintained for the benefit of the
Investor Certificateholders as specified in the related Supplement for any
Series) pursuant to Articles III and IV. The Trustee may revoke such power
and remove the Paying Agent if the Trustee determines in its sole discretion
that the Paying Agent shall have failed to perform its obligations under this
Agreement in any material respect. Unless otherwise specified in the related
Supplement for any Series and with respect to such Series, the Paying Agent
shall initially be the Trustee and, if the Trustee so chooses, any co-paying
agent chosen by the Trustee. Each Paying Agent shall have a combined capital
and surplus of at least $50,000,000. The Paying Agent shall be permitted to
resign upon 30 days' written notice to the Trustee. In the event that the
Paying Agent shall so resign, the Trustee shall appoint a successor to act as
Paying Agent (which shall be a depositary institution or trust company)
reasonably acceptable to the Company which appointment shall be effective on
the date on which the Person so appointed gives the Trustee written notice
that it accepts the appointment. Any resignation or removal of the Paying
Agent and appointment of successor Paying Agent pursuant to this Section 5.6
shall not become effective until acceptance of appointment by the successor
Paying Agent, as provided in this Section 5.6. The Trustee shall cause such
successor Paying Agent or any additional Paying Agent appointed by the
Trustee to execute and deliver to the Trustee an instrument in which such
successor Paying Agent or additional Paying Agent shall agree with the
Trustee that as Paying Agent, such successor Paying Agent or additional
Paying Agent will hold all sums, if any, held by it for payment to the
Investor Certificateholders in trust for the benefit of the Investor
Certificateholders entitled thereto until such sums shall be paid to such
Holders. The Paying Agent shall return all unclaimed funds to the Trustee
and upon removal of a Paying Agent such Paying Agent shall also return all
funds in its possession to the Trustee. The provisions of Sections 8.1, 8.2,
8.3, 8.5 and 10.19 shall apply to the Trustee also in its role as Paying
Agent, for so long as the Trustee shall act as Paying Agent. Any reference
in this Agreement to the Paying Agent shall include any co-paying agent, if
any, unless the context requires otherwise.
The Company hereby agrees to provide the Trustee from time to time
sufficient funds, on a timely basis and in accordance with and subject to
Section 8.5, for the payment of any reasonable compensation payable to the
Paying Agent for its services under this Section 5.6. The Trustee hereby
agrees that, upon the receipt of such funds from the Company, it shall pay
the Paying Agent such amounts.
Section V.7. ACCESS TO LIST OF INVESTOR CERTIFICATEHOLDERS' NAMES
AND ADDRESSES. The Trustee will furnish or cause to be furnished by the
Transfer Agent and Registrar to the Company, the Servicer or the Paying
Agent, within ten Business Days after receipt by the Trustee of a request
therefor from the Company, the Servicer or the Paying Agent, respectively, in
writing, a list of the names and addresses of the Investor Certificateholders
as then recorded by or on behalf of the Trustee. If three or more Investor
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54
Certificateholders of record or any Investor Certificateholder of any Series
or a group of Investor Certificateholders of record representing Fractional
Undivided Interests aggregating not less than 10% of the Invested Amount of
the related Outstanding Series (the "APPLICANTS") apply in writing to the
Trustee, and such application states that the Applicants desire to
communicate with other Investor Certificateholders of any Series with respect
to their rights under this Agreement or under the Investor Certificates and
is accompanied by a copy of the communication which such Applicants propose
to transmit, then the Trustee, after having been adequately indemnified by
such Applicants for its costs and expenses, shall transmit or shall cause the
Transfer Agent and Registrar to transmit, such communication to the Investor
Certificateholders reasonably promptly after the receipt of such application.
Every Investor Certificateholder, by receiving and holding an
Investor Certificate, agrees with the Trustee that neither the Trustee, the
Transfer Agent and Registrar, nor any of their respective agents, officers,
directors or employees shall be held accountable by reason of the disclosure
or mailing of any such information as to the names and addresses of the
Investor Certificateholders hereunder, regardless of the sources from which
such information was derived.
As soon as practicable following each Record Date, the Trustee
shall provide to the Paying Agent or its designee, a list of Investor
Certificateholders in such form as the Paying Agent may reasonably request.
Section V.8. AUTHENTICATING AGENT. (a) The Trustee may appoint
one or more authenticating agents with respect to the Certificates which
shall be authorized to act on behalf of the Trustee in authenticating the
Certificates in connection with the issuance, delivery, registration of
transfer, exchange or repayment of the Certificates. Whenever reference is
made in this Agreement to the authentication of Certificates by the Trustee
or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication on behalf of the Trustee by an
authenticating agent and a certificate of authentication executed on behalf
of the Trustee by an authenticating agent. Each authenticating agent must be
acceptable to the Company.
(b) Any institution succeeding to the corporate trust business of
an authenticating agent shall continue to be an authenticating agent without
the execution or filing of any paper or any further act on the part of the
Trustee or such authenticating agent.
(c) An authenticating agent may at any time resign by giving
written notice of resignation to the Trustee. Upon the receipt by the
Trustee of any such notice of resignation and upon the giving of any such
notice of termination by the Trustee, the Trustee shall immediately give
notice of such resignation or termination to the Company. Any resignation of
an authenticating agent shall not become effective until acceptance of
appointment by the successor authenticating agent as provided in this Section
5.8. The Trustee may at any time terminate the agency of an authenticating
agent by giving notice of termination to such authenticating agent. Upon
receiving such a notice of resignation or upon such a termination, or in case
at any time an authenticating agent shall cease to be acceptable to the
Trustee, the
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55
Trustee promptly may appoint a successor authenticating agent. Any successor
authenticating agent upon acceptance of its appointment hereunder shall
become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an authenticating
agent. No successor authenticating agent (other than an Affiliate of the
Trustee) shall be appointed unless reasonably acceptable to the Trustee and
the Company.
(d) The Company hereby agrees to provide the Trustee from time to
time sufficient funds, on a timely basis and in accordance with and subject
to Section 8.5, for the payment of any reasonable compensation payable to
each authenticating agent for its services under this Section 5.8. The
Trustee hereby agrees that, upon the receipt of such funds from the Company
it shall pay each authenticating agent such amounts.
(e) The provisions of Sections 8.1, 8.2, 8.3 and 8.5 shall be
applicable to any authenticating agent.
(f) Pursuant to an appointment made under this Section 5.8, the
Certificates may have endorsed thereon, in lieu of the Trustee's certificate
of authentication, an alternate certificate of authentication in
substantially the following form:
"This is one of the Certificates described in the Pooling Agreement
dated as of April 1, 1998, among CM Capital Corporation, Core-Mark
International, Inc., as Servicer, and The Chase Manhattan Bank, as Trustee.
---------------------------
as Authenticating Agent
for the Trustee
By
------------------------
Authorized Signatory"
Section V.9. TAX TREATMENT. It is the intent of the Servicer, the
Company, the Investor Certificateholders and the Trustee that, for federal,
state and local income and franchise tax purposes, the Investor Certificates
be treated as evidence of indebtedness secured by the Trust Assets and the
Trust not be characterized as an association taxable as a corporation. The
Company, the Servicer and the Trustee, by entering into this Agreement, and
each Investor Certificateholder, by its acceptance of its Investor
Certificate, agree to treat the Investor Certificates for federal, state and
local income and franchise tax purposes as indebtedness. The provisions of
this Agreement and all related Transaction Documents shall be construed to
further these intentions of the parties. This Section 5.9 shall survive the
termination of this Agreement and shall be binding on all transferees of any
of the foregoing persons.
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56
Section V.10. COMPANY EXCHANGES. (a) The Company may, in
accordance with the procedures set forth below, call for an adjustment of the
Exchangeable Company Interest in exchange for (i) an increase in the Invested
Amount of Investor Certificates of an Outstanding Series (or a Class thereof)
and an increase in the related Series Subordinated Interest or (ii) one or
more newly issued Series of Investor Certificates and the related newly
created Series Subordinated Interest (a "NEW SERIES") (any such exchange, a
"COMPANY EXCHANGE"). The Company may perform a Company Exchange by notifying
the Trustee, in writing at least five days in advance (an "EXCHANGE NOTICE")
of the date upon which the Company Exchange is to occur (an "EXCHANGE DATE").
Any Exchange Notice shall state the designation of any Series (and/or Class,
if applicable) to be issued (or increased) on the Exchange Date and, with
respect to each such Series (and/or Class, if applicable): (a) its
additional or Initial Invested Amount, as the case may be, if any, which in
the aggregate at any time may not be greater than the current value of the
Exchangeable Company Interest, if any, at such time, (b) its Certificate Rate
(or the method for allocating interest payments or other cash flow to such
Series), if any, and (c) whether such New Series will be a companion series
to an Outstanding Series as described in paragraph (d) below (an "EXISTING
COMPANION SERIES"; and together with the New Series, a "COMPANION SERIES").
On the Exchange Date, the Trustee shall, upon the written order of the
Company, authenticate and deliver any Certificates evidencing an increase in
the Invested Amount of Investor Certificates of an Outstanding Series (or a
Class thereof) or a newly issued Series only upon delivery by the Company to
the Trustee of the following (together with the delivery by the Company to
the Trustee of any additional agreements, instruments or other documents as
are specified in the related Supplement): (a) a Supplement executed by the
Company and specifying the Principal Terms of such Series (provided that no
such Supplement shall be required for any increase in the Invested Amount of
an Outstanding Series (or Class thereof) of Investor Certificates unless it
is so required by the related Supplement; PROVIDED that if the Certificate
Rate for the new Certificates is different from the Certificate Rate
applicable to the outstanding Certificates of such Series (or Class thereof)
the new Certificate Rate shall be set forth in an Officer's Certificate of
the Company delivered to the Trustee), (b) a Tax Opinion addressed to the
Trustee and the Trust, (c) a General Opinion addressed to the Trustee and the
Trust, (d) an agreement pursuant to which the Enhancement Provider, if any,
agrees to provide Enhancement, (e) an Officer's Certificate that the Exchange
will not result in the occurrence of a Potential Early Amortization Event or
Early Amortization Event with respect to any Outstanding Series and that all
conditions precedent to the Exchange contained in the Pooling and Servicing
Agreements have been complied with, and (f) written confirmation from each
Rating Agency that the Company Exchange will not result in the Rating
Agency's reducing or withdrawing its rating on any then Outstanding Series
rated by it. Upon the delivery of the items listed in clauses (a) through
(f) above, the existing Exchangeable Company Interest and the applicable
Series Subordinated Interests, as the case may be, shall be deemed adjusted
as of the Exchange Date, and the new Series Subordinated Interests, if any,
shall be deemed duly created as of the Exchange Date, in each case as
provided above. There is no limit to the number of Company Exchanges that
the Company may perform under this Agreement. If the Company shall, on any
Exchange Date, retain any Investor Certificates issued on such Exchange Date,
it shall, prior to transferring any such Certificates to another Person,
obtain a
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57
Tax Opinion. Additional restrictions relating to a Company Exchange may be
set forth in any Supplement.
(b) Upon any Company Exchange, the Trustee, in accordance with the
written directions of the Company, shall issue to the Company under Section
5.1, for execution and redelivery to the Trustee for authentication under
Section 5.2, (i) one or more Certificates representing an increase in the
Invested Amount of an Outstanding Series (or Class thereof) or (ii) one or
more new Series of Investor Certificates. Any such Certificates shall be
substantially in the form specified in the applicable Supplement and each
shall bear, upon its face, the designation for such Series (and Class
thereof) to which each such certificate belongs so selected by the Company.
(c) In conjunction with a Company Exchange, the parties hereto
shall, except as otherwise provided in subsection (a) above, execute a
Supplement to this Agreement, which shall define, with respect to any
additional Investor Certificates or newly issued Series, as the case may be:
(i) its name or designation, (ii) its additional or initial principal amount,
as the case may be (or method for calculating such amount), (iii) its coupon
rate (or formula for the determination thereof), (iv) the interest payment
date or dates and the date or dates from which interest shall accrue, (v) the
method for allocating Collections to Holders, including the applicable
Investor Percentage, (vi) the names of any accounts to be used by such Series
and the terms governing the operation of any such accounts, (vii) the issue
and terms of a letter of credit or other form of Enhancement, if any, with
respect thereto, (viii) the terms, if any, on which the Certificates of such
Series may be repurchased by the Company or may be remarketed to other
investors, (ix) the Series Termination Date, (x) any deposit account
maintained for the benefit of Holders, (xi) the number of Classes of such
Series, and if more than one Class, the rights and priorities of each such
Class, (xii) the rights of the owner of the Exchangeable Company Interest
that have been transferred to the holders of such Series, (xiii) the
designation of any Series Accounts and the terms governing the operation of
any such Series Accounts, (xiv) provisions reasonably acceptable to the
Trustee concerning the payment of the Trustee's fees and expenses and (xv)
other relevant terms (all such terms, the "PRINCIPAL TERMS" of such Series).
The Supplement executed in connection with the Company Exchange shall contain
administrative provisions which are reasonably acceptable to the Trustee.
(d) In order for a New Series to be part of a Companion Series, the
Supplement for the related Existing Companion Series must provide for or
permit the Amortization Period to commence on the Issuance Date for such New
Series, and on or prior to the Issuance Date for the New Series the Servicer
and the Company shall take all actions, if any, necessary to cause the
Amortization Period for such Existing Companion Series to commence on such
Issuance Date. The proceeds from the issuance of the New Series shall be
deposited in the applicable Series Principal Collection Sub-subaccount and
the Company shall, on the Issuance Date for such New Series, deposit into the
applicable Series Non-Principal Sub-subaccount the amount of interest that
will accrue on the New Series over a period specified in the related
Supplement for such New Series. On each day on which principal is paid to the
holders of the Existing Companion Series, the Trustee shall distribute
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58
to the Company from the applicable Series Principal Collection Sub-subaccount
of the New Series an amount (up to the amount of available funds in such
account) equal to the amount distributed on such day to the Investor
Certificateholders of any Existing Companion Series; PROVIDED that, after
giving effect to such distributions, the Aggregate Receivables Amount shall
equal or exceed the sum of (i) the Target Receivables Amount with respect to
such Existing Companion Series on such day, PLUS (ii) the Target Receivables
Amount with respect to the New Series on such day, PLUS (iii) the Target
Receivables Amount with respect to any other Outstanding Series on such day;
PROVIDED FURTHER that the Trustee may conclusively rely on the calculations
of the Servicer of such amounts.
Section V.11. BOOK-ENTRY CERTIFICATES. If specified in any
related Supplement, the Investor Certificates, or any portion thereof, upon
original issuance, shall be issued in the form of one or more typewritten
Certificates representing the Book-Entry Certificates, to be delivered to the
depository specified in such Supplement (the "DEPOSITORY") which shall be the
Clearing Agency, specified by, or on behalf of, the Company for such Series.
The Investor Certificates shall initially be registered on the Certificate
Register in the name of the nominee of such Clearing Agency, and no
Certificate Book-Entry Holder will receive a definitive certificate
representing such Certificate Book-Entry Holder's interest in the Investor
Certificates, except as provided in Section 5.13. Unless and until
definitive, fully registered Investor Certificates ("DEFINITIVE
CERTIFICATES") have been issued to Holders pursuant to Section 5.13 or the
related Supplement:
(a) the provisions of this Section 5.11 shall be in full force and
effect;
(b) the Company, the Servicer and the Trustee may deal with each
Clearing Agency for all purposes (including the making of distributions on
the Investor Certificates) as the Holder without respect to whether there
has been any actual authorization of such actions by the Certificate
Book-Entry Holders with respect to such actions;
(c) to the extent that the provisions of this Section 5.11 conflict
with any other provisions of this Agreement, the provisions of this Section
5.11 shall control; and
(d) the rights of Certificate Book-Entry Holders shall be exercised
only through the Clearing Agency and the related Clearing Agency
Participants and shall be limited to those established by law and
agreements between such related Certificate Book-Entry Holders and the
Clearing Agency and/or the Clearing Agency Participants. Pursuant to the
Depository Agreement, the initial Clearing Agency will make book-entry
transfers among the Clearing Agency Participants and receive and transmit
distributions of principal and interest on the Investor Certificates to
such Clearing Agency Participants.
Notwithstanding the foregoing, no Class or Series of Investor Certificates may
be issued as Book Entry Certificates (but, instead, shall be issued as
Definitive Certificates) unless at the time of issuance of such Class or Series
the Company and the Trustee receive an opinion of
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59
independent counsel that the Certificates of such Class or Series will be
treated as indebtedness for federal income tax purposes.
Section V.12. NOTICES TO CLEARING AGENCY. Whenever notice or other
communication to the Holders is required under this Agreement, unless and until
Definitive Certificates shall have been issued to Certificate Book-Entry Holders
pursuant to Section 5.13, the Trustee shall, give all such notices and
communications specified herein to be given to the Investor Certificateholders
to the Clearing Agencies.
Section V.13. DEFINITIVE CERTIFICATES. If (a)(i) the Company advises
the Trustee in writing that any Clearing Agency is no longer willing or able to
properly discharge its responsibilities under the applicable Depository
Agreement, and (ii) the Company is unable to locate a qualified successor, (b)
the Company, at its option, advises the Trustee in writing that it elects to
terminate the book-entry system through the Clearing Agency or (c) after the
occurrence of a Servicer Default or an Early Amortization Event, Certificate
Book-Entry Holders representing Fractional Undivided Interests aggregating more
than 50% of the Invested Amount held by such Certificate Book-Entry Holders of
each affected Series then issued and outstanding advise the Clearing Agency
through the Clearing Agency Participants in writing, and the Clearing Agency
shall so notify the Trustee, that the continuation of a book-entry system
through the Clearing Agency is no longer in the best interests of the
Certificate Book-Entry Holders, the Trustee shall notify the Clearing Agency,
which shall be responsible to notify the Certificate Book-Entry Holders, of the
occurrence of any such event and of the availability of Definitive Certificates
to Certificate Book-Entry Holders requesting the same. Upon surrender to the
Trustee of the Book-Entry Certificates by the Clearing Agency, accompanied by
registration instructions from the Clearing Agency for registration, the Company
shall execute and the Trustee shall authenticate the Definitive Certificates.
Neither the Company nor the Trustee shall be liable for any delay in delivery of
such instructions and may conclusively rely on, and shall be protected in
relying on, such instructions.
ARTICLE VI
OTHER MATTERS RELATING
TO THE COMPANY
Section VI.1. LIMITATION ON LIABILITY. None of the Company's
directors or officers or employees or agents, shall be under any liability to
the Trust, the Trustee, the Holders or any other Person for any action taken or
for refraining from the taking of any action pursuant to this Agreement, whether
or not such action or inaction arises from express or implied duties under this
Agreement; PROVIDED, that this provision shall not protect any such director,
officer, employee or agent against any liability which would otherwise be
imposed on such Person by reason of wilful misconduct, bad faith or gross
negligence in the performance of such Person's duties or by reason of reckless
disregard of such Person's obligations and duties hereunder.
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Section VI.2. LIABILITIES. By entering into this Agreement, the
Company agrees to be liable, directly to the injured party, for the entire
amount of any losses, claims, damages or liabilities, arising out of or based on
the arrangement created by any Pooling and Servicing Agreement or the actions of
the Servicer taken pursuant hereto or thereto (except those losses, claims,
damages or liabilities incurred by an Investor Certificateholder in the capacity
of an investor in the Investor Certificates as a result of the performance of
the Receivables, market fluctuations or other similar market or investment
risks) as though the Pooling and Servicing Agreements created a partnership
under the New York Uniform Limited Partnership Act with the Company as a general
partner thereof. The Company agrees to pay, indemnify and hold harmless each
Investor Certificateholder against and from any and all such losses, claims,
damages and liabilities, except to the extent they arise from any action or
omission by such Investor Certificateholder; PROVIDED that any payments made by
the Company in respect of any of the foregoing items shall be made solely from
funds available to the Company which are not otherwise required to be applied to
the payment of any amounts pursuant to any Pooling and Servicing Agreements
(other than to the Company), shall be non-recourse other than with respect to
such funds and shall not constitute a claim against the Company to the extent
that insufficient funds exist to make such payment. In the event of a Service
Transfer, the Successor Servicer (except for the Trustee in its capacity as
Successor Servicer) will indemnify and hold harmless the Company for any losses,
claims, damages and liabilities of the Company arising under this Section 6.2
from the actions or omissions of such Successor Servicer.
ARTICLE VII
EARLY AMORTIZATION EVENTS
Section VII.1. EARLY AMORTIZATION EVENTS. Unless modified with
respect to any Series of Investor Certificates by any related Supplement, if any
one of the following events (each, an "EARLY AMORTIZATION EVENT") shall occur:
(a)(i) the Company shall commence any case, proceeding or other action
(A) under any existing or future law of any jurisdiction, domestic or
foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets,
or the Company shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Company any case,
proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced
against the Company any case, proceeding or other action seeking issuance
of a warrant of attachment, execution, distraint or similar process
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against all or any substantial part of its assets which results in the
entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within 60 such days from
the entry thereof; or (iv) the Company shall take any action in
furtherance of any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) the Company shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become due;
(b) the Trust or the Company shall become an "investment company"
within the meaning of the Investment Company Act of 1940, as amended;
(c) the Trust is characterized for federal income tax purposes as a
"publicly traded partnership" or as an association taxable as a
corporation; or
(d) the Trustee shall be appointed as Successor Servicer pursuant to
subsection 6.2(b) of the Servicing Agreement;
then, an "EARLY AMORTIZATION PERIOD" with respect to all Outstanding Series
shall commence without any notice or other action on the part of the Trustee or
any Investor Certificateholder immediately upon the occurrence of such event.
The Servicer shall notify each Rating Agency, each Agent and the Trustee in
writing of the occurrence of any Early Amortization Period, specifying the cause
thereof. Further, upon the commencement against the Company of a case,
proceeding or other action described in clause (a)(ii) or (iii) above, the
Company shall not purchase Receivables from any Seller, or transfer Receivables
to the Trust, until such time, if any, as such case, proceeding or other action
is vacated, discharged, or stayed or bonded pending appeal.
Additional Early Amortization Events and the consequences thereof may
be set forth in each Supplement with respect to the Series relating thereto.
Section VII.2. ADDITIONAL RIGHTS UPON THE OCCURRENCE OF CERTAIN
EVENTS. (a) If an Insolvency Event with respect to the Company occurs, the
Company shall immediately cease to transfer Receivables to the Trust and
shall promptly give notice to the Trustee of such occurrence.
Notwithstanding any cessation of the transfer to the Trust of additional
Receivables, Receivables transferred to the Trust prior to the occurrence of
such Insolvency Event and Collections in respect of such Receivables and
interest, whenever created, accrued in respect of such Receivables, shall
continue to be a part of the Trust. Within 15 days of the Trustee's receipt
of notice of the occurrence of an Insolvency Event in accordance with Section
7.1, if the Aggregate Invested Amount and all accrued and unpaid interest
thereon have not been paid to the Investor Certificateholders, then the
Trustee shall (i) publish a notice in a newspaper with a national circulation
(an "AUTHORIZED NEWSPAPER") that an Insolvency Event has occurred and that
the Trustee intends to sell, dispose of or otherwise liquidate the
Receivables and the other Trust Assets in a commercially reasonable manner
and (ii) send written notice to the Investor Certificateholders and request
instructions from such holders, which notice shall request each Investor
Certificateholder to advise the Trustee in writing that it elects one of the
following options: (A) the Investor Certificateholder wishes
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the Trustee to instruct the Servicer not to sell, dispose of or otherwise
liquidate the Receivables and the other Trust Assets, or (B) the Investor
Certificateholder wishes the Trustee to instruct the Servicer to sell,
dispose of or otherwise liquidate the Receivables and the other Trust Assets
and to instruct the Servicer to reconstitute the Trust upon the same terms
and conditions set forth herein, or (C) the Investor Certificateholder
refuses to advise the Trustee as to the specific action the Trustee shall
instruct the Servicer to take. If after 60 days from the day notice pursuant
to clause (i) above is first published (the "PUBLICATION DATE"), the Trustee
shall not have received written instructions of (x) holders of Certificates
representing undivided interests in the Trust aggregating in excess of 50% of
the related Invested Amount of each Series (or in the case of a series having
more than one Class of Investor Certificates, each Class of such series)
selecting option (A) above and (y) if the owners of the Exchangeable Company
Interest do not include the Company (and following the delivery of written
notice in the form referred to above by the Company to such owners), the
owners thereof representing undivided interests in the Trust aggregating in
excess of 50% of the Company Interest, the Trustee shall instruct the
Servicer to proceed to sell, dispose of, or otherwise liquidate the
Receivables and the other Trust Assets in a commercially reasonable manner
and on commercially reasonable terms, which shall include the solicitation of
competitive bids, and the Servicer shall proceed to consummate the sale,
liquidation or disposition of the Receivables and the other Trust Assets as
provided above with the highest bidder therefor; PROVIDED, HOWEVER, that if
the allocable sale price, less all reasonable fees, expenses and other
amounts due hereunder to the Trustee, its agents and counsel to the Trustee,
to be realized from such sale, liquidation or disposition would be less than
the Aggregate Invested Amount plus accrued and unpaid interest thereon
through the Distribution Date next succeeding the date of such sale, the
Trustee must receive the prior unanimous consent of all the Investor
Certificateholders to such sale, liquidation or disposition. The Company or
any of its Affiliates shall be permitted to bid for the Receivables and the
other Trust Assets. In addition, the Company or any of its Affiliates shall
have the right to match any bid by a third person and be granted the right to
purchase the Receivables and the other Trust Assets at such matched bid
price. The Trustee may obtain a prior determination from any such
conservator, receiver or liquidator that the terms and manner of any proposed
sale, disposition or liquidation are commercially reasonable. The provisions
of Sections 7.1 and 7.2 shall be cumulative and not mutually exclusive. The
costs and expenses incurred by the Trustee in such sale shall be reimbursable
to the Trustee as provided in Section 8.5.
(b) The proceeds from the sale, liquidation or disposition of the
Receivables and the other Trust Assets pursuant to subsection (a) above shall
be treated as Collections on the Receivables and such proceeds will be
distributed to any Servicers who are not Affiliates of the Company for the
payment of servicing fees and to the Trustee in an amount equal to the amount
of any expenses incurred by the Trustee acting in its capacity either as
Trustee or as liquidating agent pursuant to subsection 7.2(a) above which
have not otherwise been reimbursed prior thereto. Thereafter, the remaining
funds, if any, shall be distributed (i) to holders of each Series after
immediately being deposited in the Collection Account, in accordance with the
provisions of subsection 3.1(d) and the related Supplement for such Series
and (ii) after giving effect to the transfer to be made pursuant to the
preceding clause
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(i), the remainder, if any, shall be allocated to the Company Interest and
shall be released to the owner of the Exchangeable Company Interest upon
cancellation thereof.
ARTICLE VIII
THE TRUSTEE
Section VIII.1. DUTIES OF TRUSTEE. (a) The Trustee, prior to the
occurrence of a Servicer Default or an Early Amortization Event of which a
Responsible Officer of the Trustee has actual knowledge and after the curing
of all Servicer Defaults and Early Amortization Events which may have
occurred, undertakes to perform such duties and only such duties as are
specifically set forth in the Pooling and Servicing Agreements and no implied
covenants or obligations shall be read into such Pooling and Servicing
Agreements against the Trustee. If a Servicer Default or Early Amortization
Event to the actual knowledge of a Responsible Officer of the Trustee has
occurred (which has not been cured or waived), the Trustee shall exercise the
rights and powers vested in it in its capacity as Trustee by any Pooling and
Servicing Agreement and shall use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in
the conduct of such person's own affairs. The provisions of this Section
shall be applicable to the Trustee in its capacity as Trustee hereunder. If
the Trustee shall have succeeded to the obligations of the Servicer, the
provisions of the Servicing Agreement shall govern the actions of the Trustee
as Successor Servicer.
(b) The Trustee may conclusively rely as to the truth of the
statements and the correctness of the opinions expressed therein upon
resolutions, certificates, statements, opinions, reports, documents, orders
or other instruments furnished to the Trustee and believed by it to be
genuine and to have been signed or presented to it pursuant to any Pooling
and Servicing Agreement by the proper party or parties; but in the case of
any of the above which are specifically required to be furnished to the
Trustee pursuant to any provision of the Pooling and Servicing Agreements,
the Trustee shall, subject to Section 8.2, examine them to determine whether
they substantially conform to the requirements of this Agreement; PROVIDED,
that the Trustee shall not be responsible for the accuracy or content of any
document furnished pursuant to any Pooling and Servicing Agreement.
(c) Subject to subsection 8.1(a), no provision of any Pooling and
Servicing Agreement shall be construed to relieve the Trustee from liability
for its own negligent action, its own negligent failure to act or its own
misconduct; PROVIDED, HOWEVER, that:
(i) The Trustee shall not be liable in its individual capacity for an
error of judgment unless it shall be proved that the Trustee was negligent,
or acted in bad faith, in ascertaining the pertinent facts;
(ii) The Trustee shall not be liable in its individual capacity with
respect to any action taken, suffered or omitted to be taken by it in good
faith in accordance with
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the Pooling and Servicing Agreement or at the direction of the Servicer or
the holders of Investor Certificates evidencing in excess of 50% (or such
lesser percentage as set forth in any applicable provision) of the
Aggregate Invested Amount;
(iii) The Trustee shall not be charged with knowledge of any
failure by the Servicer to comply with any of its obligations, unless a
Responsible Officer of the Trustee obtains actual knowledge of such
failure or the Trustee receives written notice of such failure from the
Servicer, any Agent or any Investor Certificateholder. In the absence of
written notice, the Trustee may conclusively rely that there is no
Servicer Default or Early Amortization Event;
(iv) The Trustee shall not be charged with knowledge of a Servicer
Default or Early Amortization Event unless a Responsible Officer of the
Trustee obtains actual knowledge of such event or the Trustee receives
written notice of such default or event from the Servicer, any Agent or any
Investor Certificateholder. In the absence of written notice received by a
Responsible Officer of the Trustee, the Trustee may conclusively rely that
there is no Servicer Default or Early Amortization Event;
(v) The Trustee shall not be liable for any investment losses
resulting from any investments of funds on deposit in the Accounts or any
subaccounts thereof; and
(vi) The Trustee shall have no duty to monitor the performance of the
Servicer, nor shall it have any liability in connection with malfeasance or
nonfeasance by the Servicer. The Trustee shall have no liability in
connection with compliance of the Servicer or the Company with statutory or
regulatory requirements related to the Receivables.
(d) The Trustee shall not be required to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its
duties under any Pooling and Servicing Agreement or in the exercise of any of
its rights or powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk or liability is
not reasonably assured to it, and none of the provisions contained in any
Pooling and Servicing Agreement shall in any event require the Trustee to
perform, or be responsible for the manner of performance of, any obligations of
the Servicer under such Agreement except during such time, if any, as the
Trustee shall be the successor to, and be vested with the rights, duties, powers
and privileges of, the Servicer in accordance with the terms of such Agreement.
(e) Except as expressly provided in any Pooling and Servicing
Agreement, the Trustee shall have no power to vary the corpus of the Trust.
(f) Provided that the Servicer and the Company shall have provided to
the Trustee promptly upon request all books, records and other information
reasonably requested by the Trustee and shall have provided the Trustee with all
necessary access to the properties, books and records of the Servicer and the
Company which the Trustee may reasonably
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require, then within 90 days following the Initial Closing Date, the Trustee
shall have (i) completed the Servicer Site Review and (ii) established the
Standby Liquidation System, and shall have notified and delivered
descriptions to the Servicer, each Rating Agency and each Agent of such
events.
(g) The Trustee shall deliver the Internal Operating Procedures
Memorandum to the Company and the Servicer on the Initial Closing Date. From
and after such date, the Trustee shall take such actions as are set forth in
the Internal Operating Procedures Memorandum unless prevented from doing so
through no fault of the Trustee.
Section VIII.2. RIGHTS OF THE TRUSTEE. Except as otherwise
provided in Section 8.1:
(a) The Trustee may conclusively rely on and shall be protected in
acting on, or in refraining from acting in accord with, any resolution,
Officer's Certificate, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, appraisal, bond, note or other paper or document believed
by it to be genuine and to have been signed or presented to it pursuant to
any Pooling and Servicing Agreement by the proper party or parties;
(b) The Trustee may consult with counsel (at the Company's expense)
and any Opinion of Counsel or any advice of such counsel shall be full and
complete authorization and protection in respect of any action taken or
suffered or omitted by it hereunder in good faith and in accordance with
such Opinion of Counsel;
(c) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by any Pooling and Servicing Agreement, or to
institute, conduct or defend any litigation hereunder or in relation
hereto, at the request, order or direction of any of the Holders, pursuant
to the provisions of any Pooling and Servicing Agreement, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein
or thereby; PROVIDED, HOWEVER, that nothing contained herein shall relieve
the Trustee of the obligations, upon the occurrence of a Servicer Default
or Early Amortization Event (which the Trustee has written notice thereof
and which has not been cured), to exercise such of the rights and powers
vested in it by any Pooling and Servicing Agreement, and to use the same
degree of care and skill in their exercise as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs. The right of the Trustee to perform any discretionary act
enumerated in this Agreement shall not be construed as a duty, and the
Trustee shall not be answerable for other than its negligence or wilful
misconduct in the performance of any such act;
(d) The Trustee shall not be personally liable for any action taken,
suffered or omitted by it in good faith and believed by it to be authorized
or within the discretion
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66
or rights or powers conferred upon it by any Pooling and Servicing
Agreement; PROVIDED that the Trustee shall be liable for its negligence or
willful misconduct;
(e) The Trustee shall not be bound to make any investigation into the
facts of matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, direction, order,
approval, bond, note or other paper or document, or to
recompute the amount of any allocations or distributions contained in
any direction from the Servicer provided for under the Agreement, unless
requested in writing so to do by the holders of Investor Certificates
evidencing Fractional Undivided Interests aggregating more than 10% of
the Invested Amount of any Series which could be adversely affected if
the Trustee does not perform such acts; PROVIDED, HOWEVER, that such
holders of Investor Certificates shall reimburse the Trustee for any
expense resulting from any such investigation requested by them to the
extent the Trustee is not otherwise reimbursed hereunder; PROVIDED,
FURTHER, that the Trustee shall be entitled to make such further inquiry
or investigation into such facts or matters as it may reasonably see
fit, and if the Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books and records of
the Company, personally or by agent or attorney, at the sole cost and
expense of the Company;
(f) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through affiliates,
agents or attorneys or a custodian or nominee, and the Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such affiliate, agent, attorney, custodian or nominee
appointed with due care by it hereunder;
(g) The Trustee shall not be required to make any initial or periodic
examination of any documents or records related to the Receivables for the
purpose of establishing the presence or absence of defects, the compliance
by the Company with its representations and warranties or for any other
purpose;
(h) In the event that the Trustee is also acting as Paying Agent or
Transfer Agent and Registrar hereunder, the rights and protections afforded
to the Trustee pursuant to this Article VIII shall also be afforded to such
Paying Agent or Transfer Agent and Registrar;
(i) The Trustee shall not be required to give any bond or surety in
respect of the execution of the Trust created hereby or the powers granted
hereunder;
(j) The Trustee shall not in any way be liable by reason of any
insufficiency in any Account held by Trustee unless it is determined by a
court of competent jurisdiction that the Trustee's negligence or willful
misconduct was the primary cause of such insufficiency;
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(k) The Trustee shall not in any way be liable by reason of any
insufficiency in the Collateral Account resulting from any investment loss
on any Eligible Investment invested pursuant to Section 3.1(c) of this
Agreement; and
(l) Anything in this Agreement to the contrary notwithstanding, in no
event shall the Trustee be liable for special, indirect or consequential
loss or damage of any kind whatsoever (including but not limited to lost
profits), even if the Trustee has been advised of the likelihood of such
loss or damage and regardless of the form of action.
Section VIII.3. TRUSTEE NOT LIABLE FOR RECITALS IN CERTIFICATES.
The Trustee assumes no responsibility for the correctness of the recitals
contained herein and in the Certificates (other than the certificate of
authentication on the Certificates). Except as set forth in Section 8.15,
the Trustee makes no representations as to the validity or sufficiency of any
Pooling and Servicing Agreement or of the Certificates (other than the
certificate of authentication on the Certificates) or of any Receivable or
related document. The Trustee shall not be accountable for the use or
application by the Company of any of the Certificates or of the proceeds of
such Certificates, or for the use or application of any funds paid to the
Company in respect of the Receivables or from the Accounts or other accounts
hereafter established to effectuate the transactions contemplated herein and
in accordance with the terms of any Pooling and Servicing Agreement.
The Trustee shall not be accountable for the use or application by
the Servicer of any of the Certificates or of the proceeds of such
Certificates, or for the use or application of any funds paid to the Servicer
or any Sub-Servicer in respect of the Receivables or deposited in or
withdrawn from the Accounts or any Lockbox by or at the direction of the
Servicer, any Sub-Servicer or the Lockbox Processor, in each case unless the
Trustee, acting in its capacity as Successor Servicer, itself makes such use
or application. The Trustee shall at no time have any responsibility or
liability for or with respect to the legality, validity and enforceability of
any Receivable.
Section VIII.4. TRUSTEE MAY OWN CERTIFICATES. The Trustee in its
individual or any other capacity (a) may become the owner or pledgee of
Investor Certificates with the same rights as it would have if it were not
the Trustee and (b) may transact any banking and trust business with the
Company, the Servicer, any Sub-Servicer or any Seller as it would were it not
the Trustee.
Section VIII.5. TRUSTEE'S FEES AND EXPENSES. The Trustee shall be
entitled to a fee (which shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust) for all services
rendered by the Trustee in the execution of the trusts hereby created and in
the exercise and performance of any of the powers and duties hereunder of the
Trustee. The Servicer covenants and agrees to pay, but only from funds
available to it as the Servicing Fee paid under the Servicing Agreement, to
the Trustee an annual fee agreed upon in writing between the Servicer and the
Trustee, payable in advance on the Initial Closing Date and on each one-year
anniversary thereof. The Trustee also shall be entitled to reimbursement
from the Servicer or the Company upon the Trustee's request for
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all reasonable expenses (including, without limitation, expenses incurred in
connection with notices, requests for documentation or other communications
to or directions from Holders), disbursements, losses, liabilities, damages
and advances incurred or made by the Trustee in accordance with any of the
provisions of any Pooling and Servicing Agreement or by reason of its status
as Trustee under any Pooling and Servicing Agreement (including the
reasonable fees and expenses of its agents, any co-trustee and counsel)
except any such expense, disbursement, loss, liability, damage or advance as
may arise from its negligence or bad faith or willful misconduct; PROVIDED
that any payments made by the Company in respect of any of the foregoing
items shall be made solely from funds available to the Company which are not
otherwise required to be applied to the payment of any amounts pursuant to
any Pooling and Servicing Agreements (other than to the Company), shall be
non-recourse other than with respect to such funds, and shall not constitute
a claim against the Company to the extent that insufficient funds exist to
make such payment. To the extent that the Trustee has not been paid for any
of the foregoing items (including pursuant to the first sentence of this
Section 8.5), the Trustee shall be entitled to be paid for such items from
amounts which otherwise would be distributable to the Company under Article
III of this Agreement. The Trustee shall be entitled to reimbursement for
any reasonable out-of-pocket costs or expenses incurred in connection with
the review, negotiation, preparation, execution and delivery of any of the
Transaction Documents or in connection with the issuance of any Certificates
on the Initial Closing Date. If the Trustee is appointed Successor Servicer
in accordance with the Servicing Agreement, the Trustee, in its capacity as
Successor Servicer, shall also be entitled to be paid the Servicing Fee and
any other compensation to which the Servicer is expressly entitled under any
Pooling and Servicing Agreement. The provisions of this Section 8.5 shall
apply to the reasonable expenses, disbursements and advances made or incurred
by the Trustee, or any other Person, in its capacity as liquidating agent, to
the extent not otherwise paid. The covenants and agreements contained in
this Section 8.5 (including, without limitation, the covenants to pay the
expenses, disbursements, losses, liabilities, damages and advances provided
for in this Section 8.5) shall survive the termination of any Pooling and
Servicing Agreement and shall be binding, as applicable, on (i) the Servicer
and any Successor Servicer and (ii) the Company.
Section VIII.6. ELIGIBILITY REQUIREMENTS FOR TRUSTEE. The Trustee
hereunder shall at all times be a corporation organized and doing business
under the laws of the United States of America or any state thereof and
authorized under such laws to exercise corporate trust powers, having (or
having a holding company parent with) a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by Federal or
State authority. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid supervising
or examining authority, then, for the purpose of this Section 8.6, the
combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. In case at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 8.6, the Trustee
shall resign immediately in the manner and with the effect specified in
Section 8.7.
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Section VIII.7. RESIGNATION OR REMOVAL OF TRUSTEE. (a) Subject to
paragraph (c) below, the Trustee may at any time resign and be discharged
from the trust hereby created by giving written notice thereof to the
Company, the Servicer, each Agent and the Rating Agencies. Upon receiving
such notice of resignation, the Company shall promptly appoint a successor
trustee by written instrument, in duplicate, one copy of which instrument
shall be delivered to the resigning Trustee and one copy to the successor
trustee. If no successor trustee shall have been so appointed and have
accepted appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee.
(b) If at any time the Trustee shall cease to be eligible in
accordance with the provisions of Section 8.6 hereof and shall fail to resign
after written request therefor by the Servicer, or if at any time the Trustee
shall be legally unable to act, or shall be adjudged a bankrupt or insolvent,
or if a receiver of the Trustee or of its property shall be appointed, or any
public officer shall take charge or control of the Trustee or of its property
or affairs for the purpose of rehabilitation, conservation or liquidation,
then the Company may remove the Trustee and promptly appoint a successor
trustee by written instrument, in duplicate, one copy of which instrument
shall be delivered to the Trustee so removed and one copy to the successor
trustee.
(c) Any resignation or removal of the Trustee and appointment of a
successor trustee pursuant to any of the provisions of this Section 8.7 shall
not become effective until acceptance of appointment by the successor trustee
as provided in Section 8.8.
(d) The obligations of the Company described in Sections 6.3 and
8.5 hereof and the obligations of the Servicer described in Section 8.5
hereof and Section 5.1 of the Servicing Agreement shall survive the removal
or resignation of the Trustee as provided in this Agreement.
(e) No Trustee under this Agreement shall be personally liable for
any action or omission of any successor trustee.
Section VIII.8. SUCCESSOR TRUSTEE. (a) Any successor trustee
appointed as provided in Section 8.7 shall execute, acknowledge and deliver
to the Company and to its predecessor Trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor Trustee shall become effective and such successor trustee,
without any further act, deed or conveyance, shall become fully vested with
all the rights, powers, duties and obligations of its predecessor hereunder,
with like effect as if originally named as Trustee herein. The predecessor
Trustee shall deliver to the successor trustee all documents or copies
thereof, at the expense of the Servicer, and statements held by it hereunder;
and the Company and the predecessor Trustee shall execute and deliver such
instruments and do such other things as may reasonably be required for fully
and certainly vesting and confirming in the successor trustee all such
rights, power, duties and obligations. The Servicer shall immediately and,
in any event, no less than ten days prior to any such
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resignation or removal, give notice to each Rating Agency upon the appointment
of a successor trustee.
(b) No successor trustee shall accept appointment as provided in
this Section 8.8 unless at the time of such acceptance such successor trustee
shall be eligible under the provisions of Section 8.6.
(c) Upon acceptance of appointment by a successor trustee as
provided in this Section 8.8, such successor trustee shall mail notice of
such succession hereunder to all Holders at their addresses as shown in the
Certificate Register.
Section VIII.9. MERGER OR CONSOLIDATION OF TRUSTEE. Any Person
into which the Trustee may be merged or converted or with which it may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Trustee shall be a party, or any Person succeeding
to the corporate trust business of the Trustee, shall be the successor of the
Trustee hereunder, provided such corporation shall be eligible under the
provisions of Section 8.6, without the execution or filing of any paper or
any further act on the part of any of the parties hereto, anything herein to
the contrary notwithstanding. The Trustee (unless the Trustee is The Chase
Manhattan Bank) shall promptly give notice (except to the extent prohibited
under any Requirement of Law or Contractual Obligation), but in no event less
than ten days prior to any such merger or consolidation, to the Company, the
Servicer and the Rating Agencies upon any such merger or consolidation of the
Trustee.
Section VIII.10. APPOINTMENT OF CO-TRUSTEE OR SEPARATE TRUSTEE.
(a) Notwithstanding any other provisions of any Pooling and Servicing
Agreement, at any time, for the purpose of meeting any legal requirements of
any jurisdiction in which any part of the Trust may at the time be located,
the Trustee shall have the power and may execute and deliver all instruments
to appoint one or more persons to act as a co-trustee or co-trustees, or
separate trustee or separate trustees, of all or any part of the Trust, and
to vest in such Person or Persons, in such capacity and for the benefit of
the Holders, such title to the Trust, or any part thereof, and, subject to
the other provisions of this Section 8.10, such powers, duties, obligations,
rights and trusts as the Trustee may consider necessary or desirable. No
co-trustee or separate trustee hereunder shall be required to meet the terms
of eligibility as a successor trustee under Section 8.6 and no notice to
Holders of the appointment of any co-trustee or separate trustee shall be
required under Section 8.8. The Trustee shall promptly notify each Rating
Agency of the appointment of any co-trustee.
(b) Every separate trustee and co-trustee shall, to the extent
permitted by law, be appointed and act subject to the following provisions
and conditions:
(i) all rights, powers, duties and obligations conferred or imposed
upon the Trustee shall be conferred or imposed upon and exercised or
performed by the Trustee and such separate trustee or co-trustee jointly
(it being understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in such act),
except to the extent that under any statute of any jurisdiction in which
any
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particular act or acts are to be performed (whether as Trustee hereunder
or as successor to the Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in which event such
rights, powers, duties and obligations (including the holding of title to
the Trust or any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by reason of
any act or omission of any other trustee hereunder; and
(iii) the Trustee may at any time accept the resignation of or
remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the Trustee shall be
deemed to have been given to each of the then separate trustees and co-trustees,
as effectively as if given to each of them. Every instrument appointing any
separate trustee or co-trustee shall refer to this Agreement and the conditions
of this Article VIII. Each separate trustee and co-trustee, upon its acceptance
of the trusts conferred, shall be vested with the estates or property specified
in its instrument of appointment, either jointly with the Trustee or separately,
as may be provided therein, subject to all the provisions of any Pooling and
Servicing Agreement, specifically including every provision of any Pooling and
Servicing Agreement relating to the conduct of, affecting the liability of, or
affording protection to, the Trustee. Every such instrument shall be filed with
the Trustee and a copy thereof given to the Servicer and the Company.
(d) Any separate trustee or co-trustee may at any time constitute
the Trustee, its agent or attorney-in-fact with full power and authority, to
the extent not prohibited by law, to do any lawful act under or in respect to
any Pooling and Servicing Agreement on its behalf and in its name. If any
separate trustee or co-trustee shall die, become incapable of acting, resign
or be removed, all of its estates, properties, rights, remedies and trusts
shall vest in and be exercised by the Trustee, to the extent permitted by
law, without the appointment of a new or successor trustee.
Section VIII.11. TAX RETURNS. In the event the Trust shall be
required to file tax returns, the Company shall prepare and file or shall
cause to be prepared and filed (including, without limitation, by the
Servicer) any tax returns required to be filed by the Trust and shall remit
such returns to the Trustee for signature at least five Business Days before
such returns are due to be filed. The Trustee is hereby authorized to sign
any such return on behalf of the Trust. The Company shall also prepare or
shall cause to be prepared (including, without limitation, by the Servicer)
all tax information required by law to be distributed to Holders and shall
deliver such information to the Trustee at least five Business Days prior to
the date it is required by law to be distributed to the Holders. The
Trustee, upon written request, will furnish the Company, or the Company's
designee, with all such information known to the Trustee as may be reasonably
required in connection with the preparation of all tax returns of the Trust,
and shall, upon request, execute such returns. In no event shall the Trustee
in its
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individual capacity be liable for any liabilities, costs or expenses
of the Trust, the Holders, the Company or the Servicer arising under any tax
law or regulation, including, without limitation, federal, state or local
income or excise taxes or any other tax imposed on or measured by income (or
any interest or penalty with respect thereto or arising from any failure to
comply therewith).
Section VIII.12. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
CERTIFICATES. All rights of action and claims under any Pooling and
Servicing Agreement or the Certificates may be prosecuted and enforced by the
Trustee without the possession of any of the Certificates or the production
thereof in any proceeding relating thereto, and any such proceeding
instituted by the Trustee shall be brought in its own name as trustee. Any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders in respect of which
such judgment has been obtained.
Section VIII.13. SUITS FOR ENFORCEMENT. If a Servicer Default
shall occur and be continuing, the Trustee may, as provided in Section 6.1 of
the Servicing Agreement, proceed to protect and enforce its rights and the
rights of the Holders under this Agreement or any other Transaction Document
by suit, action or proceeding in equity or at law or otherwise, whether for
the specific performance of any covenant or agreement contained in this
Agreement or any other Transaction Document or in aid of the execution of any
power granted in this Agreement or any other Transaction Document or for the
enforcement of any other legal, equitable or other remedy as the Trustee,
being advised by counsel, shall deem most effectual to protect and enforce
any of the rights of the Trustee or the Holders. Nothing herein contained
shall be deemed to authorize the Trustee to authorize or consent to or accept
or adopt on behalf of any Investor Certificateholder any plan of
reorganization, arrangement, adjustment or composition affecting the
Certificates or the rights of any holder thereof, or authorize the Trustee to
vote in respect of the claim of any Investor Certificateholder in any such
proceeding.
Section VIII.14. RIGHTS OF INVESTOR CERTIFICATEHOLDERS TO DIRECT
TRUSTEE. Investor Certificateholders evidencing more than 50% of the
Invested Amount of any Series affected by the conduct of any proceeding or
the exercise of any right conferred on the Trustee shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Trustee, or exercising any trust or power conferred on the
Trustee; PROVIDED, HOWEVER, that, subject to Section 8.1, the Trustee shall
have the right to decline to follow any such direction if the Trustee being
advised by counsel determines that the action so directed may not lawfully be
taken, or if the Trustee in good faith shall, by a Responsible Officer or
Responsible Officers of the Trustee, determine that the proceedings so
directed would be illegal or expose it to personal liability or be unduly
prejudicial to the rights of Investor Certificateholders not party to such
direction; and PROVIDED, FURTHER, that nothing in any Pooling and Servicing
Agreement shall impair the right of the Trustee to take any action deemed
proper by the Trustee and which is not inconsistent with such direction of
the Investor Certificateholders.
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Section VIII.15. REPRESENTATIONS AND WARRANTIES OF TRUSTEE. The
Trustee represents and warrants that:
(a) the Trustee is a banking corporation organized, existing and in
good standing under the laws of the United States or any of its fifty
states and is duly authorized and empowered to exercise trust powers under
applicable law;
(b) the Trustee has the power and authority to enter into this
Agreement and any Supplement, and has taken all necessary action to
authorize the execution, delivery and performance by it of this Agreement
and any Supplement; and
(c) each Pooling and Servicing Agreement and each of the Transaction
Documents executed by it have been duly executed and delivered by the
Trustee and, in the case of all such Transaction Documents, are legal,
valid and binding obligations of the Trustee, enforceable in accordance
with their respective terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights generally and except as such enforceability may be
limited by general principles of equity (whether considered in a suit at
law or in equity).
Section VIII.16. MAINTENANCE OF OFFICE OR AGENCY. The Trustee
will maintain at its expense in the Borough of Manhattan, The City of New
York, an office or offices or agency or agencies where notices and demands to
or upon the Trustee in respect of the Certificates and the Pooling and
Servicing Agreements may be served. The Trustee will give prompt written
notice to the Company, the Servicer and the Holders of any change in the
location of the Certificate Register or any such office or agency.
Section VIII.17. LIMITATION OF LIABILITY. The Certificates are
executed by the Trustee, not in its individual capacity but solely as Trustee
of the Trust, in the exercise of the powers and authority conferred and
vested in it by this Agreement. Each of the undertaking and agreements made
on the part of the Trustee in the Certificates is made and intended not as a
personal undertaking or agreement by the Trustee but is made and intended for
the purpose of binding only the Trust.
ARTICLE IX
TERMINATION
Section IX.1. TERMINATION OF TRUST; LIQUIDATION OF RECEIVABLES.
(a) The Trust and the respective obligations and responsibilities of the
Company, the Servicer, the Sub-Servicers and the Trustee created hereby
(other than the obligation of the Trustee to make payments to Holders as
hereafter set forth and any indemnification obligations hereunder) shall
terminate, except with respect to any such obligations or responsibilities
expressly stated to survive such termination, on the earliest of (i) April 1,
2014, (ii) at the option of
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the Company, at any time where the Aggregate Invested Amount is zero (unless an
Early Amortization Event as specified in Section 7.1 of this Agreement shall
have occurred and be continuing, in which case the Company shall be deemed to
elect to terminate the Trust pursuant to this clause (ii)) and (iii) upon
completion of distribution of the amounts referred to in subsection 7.2(b) (the
"TRUST TERMINATION DATE").
(b) If on the Distribution Date in the month immediately preceding
the month in which the Trust Termination Date occurs (after giving effect to
all transfers, withdrawals, deposits and drawings to occur on such date and
the payment of principal on any Series of Certificates to be made on the
related Distribution Date pursuant to Article III) the Invested Amount of any
Series would be greater than zero, the Trustee, at the written direction of
the Servicer, shall sell within 30 days of such Distribution Date all of the
Receivables and other Trust Assets. The proceeds of such sale shall be
treated as Collections on the Receivables and shall be allocated in
accordance with Article III. During such 30-day period, the Servicer shall
continue to collect Collections on the Receivables and allocate Collections
in accordance with the provisions of Article III. The costs and expenses
incurred by the Trustee in such sale shall be reimbursable to the Trustee as
provided in Section 8.5.
Section IX.2. CLEAN-UP CALL AND FINAL TERMINATION DATE OF INVESTOR
CERTIFICATES OF ANY SERIES. (a) On the Distribution Date during the
Amortization Period with respect to any Series on which the Invested Amount
(or such other amount as may be set forth in the related Supplement) of such
Series is reduced to an amount equal to or less than the Clean-Up Call
Percentage of the Invested Amount for such Series as of the day preceding the
beginning of such Amortization Period (or such other amount as may be set
forth in the related Supplement), the Company shall have the option to
repurchase, and to the extent set forth in the related Supplement, shall
repurchase, the entire Certificateholders' Interest of such Series, at a
purchase price equal to (i) the outstanding Invested Amount of the Investor
Certificates of such Series PLUS (ii) accrued and unpaid interest through the
date of such purchase (after giving effect to any payment of principal and
monthly interest on such date of purchase) PLUS (iii) all other amounts
payable to all Investor Certificateholders of such Series under the related
Supplement (such purchase price, the "CLEAN-UP CALL REPURCHASE PRICE"). The
amount of the Clean-Up Call Repurchase Price will be deposited into the
Collection Account for credit to the Series Collection Subaccount for such
Series on the Business Day prior to such Distribution Date in immediately
available funds and will be passed through in full to the applicable Investor
Certificateholders. Following any such repurchase, such Certificateholders'
Interest in the Trust Assets shall terminate and such interest therein will
be allocated to the Company Interest and such Holders will have no further
rights with respect thereto. In the event that the Company fails for any
reason to deposit the Clean-Up Call Repurchase Price for such Receivables,
the Certificateholders' Interest in the Receivables and the other Trust
Assets will continue and monthly payments will continue to be made to the
Holders.
(b) The amount deposited pursuant to subsection 9.2(a) shall be
paid to the Investor Certificateholders of the related Series pursuant to
Article III on the Distribution Date following the date of such deposit. All
Certificates of a Series which are purchased by
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the Company pursuant to subsection 9.2(a) shall be delivered by the Company
upon such purchase to, and be canceled by (in accordance with the written
directions of the Company), the Transfer Agent and Registrar and be disposed
of in a manner satisfactory to the Trustee and the Company.
(c) All principal or interest with respect to any Series of
Investor Certificates shall be due and payable no later than the Series
Termination Date with respect to such Series. Unless otherwise provided in a
Supplement, in the event that the Invested Amount of any Series of
Certificates is greater than zero on its Series Termination Date (after
giving effect to all transfers, withdrawals, deposits and drawings to occur
on such date and the payment of principal to be made on such Series on such
date), the Trustee will sell or cause to be sold, in accordance with the
directions of Investor Certificateholders representing more than 50% of the
Invested Amount of such Series, and pay the proceeds to all Holders of such
Series PRO RATA (except that unless expressly provided to the contrary in the
related Supplement, no payment shall be made to Holders of any Class of any
Series that is by its terms subordinated to any other Class until such senior
Class of Certificates has been paid in full) in final payment of all
principal of and accrued interest on such Series of Certificates, an amount
of Receivables or interests in Receivables up to the Invested Amount of such
Series at the close of business on such date. Absent such direction from
Investor Certificateholders representing more than 50% of the Invested Amount
of such Series, the Trustee shall continue to hold the Trust Assets in
respect of such Series in accordance with the terms of the Pooling and
Servicing Agreements until the Trust Termination Date (or until Investor
Certificateholders representing more than 50% of the Invested Amount of such
Series shall otherwise direct the Trustee); PROVIDED that the terms of this
Agreement, the related Supplement and the Servicing Agreement shall be deemed
to remain in full force and effect, except that no additional Receivables
shall be allocated with respect to such Series. The reasonable costs and
expenses incurred by the Trustee in such sale shall be reimbursable to the
Trustee as provided in Section 8.5. Any proceeds of such sale in excess of
such principal and interest paid shall be paid to the owner of the
Exchangeable Company Interest, unless and to the extent otherwise specified
in any applicable Supplement. Upon such Series Termination Date with respect
to the applicable Series of Certificates, final payment of all amounts
allocable to any Investor Certificates of such Series shall be made in the
manner provided in this Section 9.2.
Section IX.3. FINAL PAYMENT WITH RESPECT TO ANY SERIES. (a)
Written notice of any termination, specifying the Distribution Date upon
which the Investor Certificateholders of any Series may surrender their
Investor Certificates for payment of the final distribution with respect to
such Series and cancellation, shall be given (subject to at least 30 days'
(or such shorter period as is acceptable to the Trustee) prior written notice
from the Servicer to the Trustee containing all information required for the
Trustee's notice) by the Trustee to Investor Certificateholders of such
Series, mailed not later than the fifth day of the month of such final
distribution and specifying (i) the Distribution Date upon which final
payment of the Investor Certificates will be made upon presentation and
surrender of Investor Certificates at the office or offices therein designated,
(ii) the amount of any such final payment and (iii) that the Record Date
otherwise applicable to such Distribution Date is not applicable,
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payments being made only upon presentation and surrender of the Investor
Certificates at the office or offices therein specified. The Servicer's
notice to the Trustee in accordance with the preceding sentence shall be
accompanied by an Officer's Certificate setting forth the information
specified in Section 4.3 of the Servicing Agreement covering the period
during the then current calendar year through the date of such notice. The
Trustee shall give such notice to the Transfer Agent and Registrar and the
Paying Agent at the time such notice is given to such Investor
Certificateholders.
(b) Notwithstanding the termination of the Trust pursuant to
subsection 9.1(a) or the occurrence of the Series Termination Date with
respect to any Series pursuant to Section 9.2, all funds then on deposit in
the Collection Account (but only to the extent necessary to pay all
outstanding and unpaid amounts to Holders) shall continue to be held in trust
for the benefit of the Holders, and the Paying Agent or the Trustee shall pay
such funds to the Holders upon surrender of their Certificates in accordance
with the terms hereof. Any Certificate not surrendered on the date specified
in subsection 9.3(a)(i) shall cease to accrue any interest provided for such
Certificate from and after such date. In the event that all of the Investor
Certificateholders shall not surrender their Certificates for cancellation
within six months after the date specified in the above-mentioned written
notice, the Trustee shall give a second written notice to the remaining
Investor Certificateholders of such Series to surrender their Certificates
for cancellation and receive the final distribution with respect thereto. If
within one year after the second notice all the Investor Certificates of such
Series shall not have been surrendered for cancellation, the Trustee may take
appropriate steps, or may appoint an agent to take appropriate steps, to
contact the remaining Investor Certificateholders of such Series concerning
surrender of their Certificates, and the cost thereof shall be paid out of
the funds in the Collection Account held for the benefit of such Investor
Certificateholders. The Trustee and the Paying Agent shall pay to the
Company upon request any monies held by them for the payment of principal or
interest that remains unclaimed for two years. After payment to the Company,
Holders entitled to the money must look to the Company for payment as general
creditors unless an applicable abandoned property law designates another
Person.
(c) All Certificates surrendered for payment of the final
distribution with respect to such Certificates and cancellation shall be
canceled by the Transfer Agent and Registrar and be disposed of in a
customary manner satisfactory to the Trustee.
Section IX.4. COMPANY'S TERMINATION RIGHTS. Upon the termination
of the Trust pursuant to Section 9.1 and the cancellation of the Exchangeable
Company Interest and payment to the Trustee (in its capacity as such and/or
in its capacity as Successor Servicer) of all amounts owed to it under any
Pooling and Servicing Agreement, the Trustee shall assign and convey to the
Company (without recourse, representation or warranty) in exchange for the
Exchangeable Company Interest all right, title and interest of the Trust in
the Trust Assets, whether then existing or thereafter created, and all
proceeds thereof except for amounts held by the Trustee pursuant to
subsection 9.3(b). The Trustee shall execute and deliver such instruments of
transfer and assignment, in each case without recourse, representation or
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warranty, as shall be reasonably requested by the Company to vest in the
Company all right, title and interest which the Trust had in the Trust
Assets.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section X.1. AMENDMENT. (a) Any Pooling and Servicing Agreement,
including any schedule or exhibit thereto, may be amended in writing from
time to time by the Servicer, the Company and the Trustee, without the
consent of any holder of any outstanding Certificate, to cure any ambiguity,
to correct or supplement any provisions herein or therein which may be
inconsistent with any other provisions herein or therein or to add any other
provisions hereto to change in any manner or eliminate any of the provisions
with respect to matters or questions raised under any Pooling and Servicing
Agreement which shall not be inconsistent with the provisions of any Pooling
and Servicing Agreement; PROVIDED, HOWEVER, that such action shall not, as
evidenced by an Officer's Certificate from the Company and, to the extent, in
the reasonable view of the Company, a question of law exists, supported by an
Opinion of Counsel delivered to the Trustee, adversely affect in any material
respect the interests of the Investor Certificateholders. The Trustee may,
but shall not be obligated to, enter into any such amendment pursuant to this
paragraph or paragraph (b) below which affects the Trustee's rights, duties
or immunities under any Pooling and Servicing Agreement or otherwise.
(b) Any Pooling and Servicing Agreement and any schedule or exhibit
thereto may also be amended in writing from time to time by the Servicer, the
Company and the Trustee with the consent of Investor Certificateholders
evidencing more than 50% of the Invested Amount of any Series adversely
affected by the amendment (or, if any such Series shall have more than one
Class of Investor Certificates adversely affected by the amendment, 50% or
more of the Invested Amount of each such Class) for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions
of such Pooling and Servicing Agreement or of modifying in any manner the
rights of holders of any Series then issued and outstanding; PROVIDED,
HOWEVER, that no such amendment shall (i) reduce in any manner the amount of,
or delay the timing of, distributions which are required to be made on any
Investor Certificate of such Series without the consent of such Investor
Certificateholder of such Series; (ii) change the definition of or the manner
of calculating the interest of any Investor Certificateholder of such Series
without the consent of such Investor Certificateholder; or (iii) reduce the
aforesaid percentage of Fractional Undivided Interests the holders of which
are required to consent to any such amendment, in each case without the
consent of all Holders of each Series adversely affected in any material
respect.
(c) Notwithstanding anything in this Section 10.1 to the contrary,
the Supplement with respect to any Series may be amended on the terms and
with the procedures provided in such Supplement.
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(d) The Company or the Servicer shall deliver any proposed amendment
to each Agent at least five days prior to the execution and delivery thereof.
The Servicer shall furnish written notification of the substance of such
amendment to each Rating Agency. No such amendment (including, without
limitation, the amendment of any Supplement, notwithstanding anything to the
contrary contained in any Supplement) shall be effective until the Rating Agency
Condition has been satisfied with respect thereto.
(e) Promptly after the execution of any such amendment or consent
the Trustee shall furnish written notification of the substance of such
amendment to each Holder of each Outstanding Series (or with respect to an
amendment of a Supplement, of the applicable Series).
(f) It shall not be necessary for the consent of Investor
Certificateholders under this Section 10.1 to approve the particular form of
any proposed amendment, but it shall be sufficient if such consent shall
approve the substance thereof. The manner of obtaining such consents and of
evidencing the authorization of the execution thereof by Investor
Certificateholders shall be subject to such reasonable requirements as the
Trustee may prescribe.
(g) In executing or accepting any amendment pursuant to this
Section 10.1, the Trustee shall, upon request, be entitled to receive and
rely upon (i) an Opinion of Counsel (A) stating that such amendment is
authorized pursuant to a specific provision of a Pooling and Servicing
Agreement and complies with such provision, (B) stating that all conditions
precedent to the execution and delivery of such amendment shall have been
satisfied in full, which opinion in the case of this clause (B) may, to the
extent that such opinion concerns questions of fact, rely on an Officer's
Certificate with respect to such questions of fact and (C) to the extent such
amendment modifies Article I, II, III or IV hereof, substantially in the form
of Exhibit C, (ii) a certificate from a Responsible Officer of the Company
stating that such amendment shall not adversely affect the interests of the
holders of any outstanding Certificates in any material respect except for
holders of the Series whose consent to such amendment has been obtained in
accordance with clause (b) of this Section 10.1 and (iii) a Tax Opinion.
Section X.2. PROTECTION OF RIGHT, TITLE AND INTEREST TO TRUST. (a)
The Servicer shall cause this Agreement, any Supplement, all amendments
hereto and/or all financing statements and continuation statements and any
other necessary documents covering the Certificateholders' and the Trustee's
right, title and interest to the Trust and the Trust Assets to be promptly
recorded, registered and filed, and at all times to be kept recorded,
registered and filed, all in such manner and in such places as may be
required by law fully to preserve and protect the right, title and interest
of the Trustee hereunder to all property comprising the Trust. The Servicer
shall deliver to the Trustee file-stamped copies of, or filing receipts for,
any document recorded, registered or filed as provided above, as soon as
available following such recording, registration or filing. The Company
shall cooperate fully with the Servicer in connection with the obligations
set forth above and will execute any and all documents reasonably required to
fulfill the intent of this subsection 10.2(a).
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(b) With respect to any prospective change in its name, identity
or corporate structure, the Company shall comply fully with subsection 2.8(m)
hereof and shall file such financing statements or amendments as may be
necessary to continue the perfection of the Trust's security interest in the
Receivables and the proceeds thereof. If the Company determines that no
refiling is required, it shall provide to the Trustee an Opinion of Counsel
so stating.
Section X.3. LIMITATION ON RIGHTS OF HOLDERS. (a) The death or
incapacity of any Holder shall not operate to terminate this Agreement or the
Trust, nor shall such death or incapacity entitle such Holder's legal
representatives or heirs to claim an accounting or to take any action or
commence any proceeding in any court for a partition or winding up of the
Trust, nor otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
(b) Except with respect to the Investor Certificateholders as
expressly provided in any Pooling and Servicing Agreement, no Holder shall
have any right to vote or in any manner otherwise control the operation and
management of the Trust, or the obligations of the parties hereto. Nor shall
any Investor Certificateholder be under any liability to any third person by
reason of any action taken by the parties to this Agreement pursuant to any
provision hereof.
(c) No Investor Certificateholder shall have any right by virtue of
any provisions of this Agreement to institute any suit, action or proceeding
in equity or at law upon or under or with respect to this Agreement, unless
such Investor Certificateholder previously shall have given to the Trustee
written request to institute such action, suit or proceeding in its own name
as Trustee hereunder and shall have offered to the Trustee such reasonable
indemnity as it may require against the costs, expenses and liabilities to be
incurred therein or thereby, and the Trustee, for 60 days after its receipt
of such notice, request and offer of indemnity, shall have neglected or
refused to institute any such action, suit or proceeding; it being understood
and intended, and being expressly covenanted by each Investor
Certificateholder with every other Investor Certificateholder and the
Trustee, that no one or more Holders shall have any right in any manner
whatever by virtue of or by availing itself or themselves of any provisions
of the Pooling and Servicing Agreements to affect, disturb or prejudice the
rights of any other of the Investor Certificateholders, or to obtain or seek
to obtain priority over or preference to any other such Investor
Certificateholder, or to enforce any right under this Agreement, except in
the manner herein provided and for the equal, ratable and common benefit of
all Investor Certificateholders. For the protection and enforcement of the
provisions of this Section 10.3, each and every Investor Certificateholder
and the Trustee shall be entitled to such relief as can be given either at
law or in equity.
(d) By their acceptance of Certificates pursuant to this Agreement
and the applicable Supplement, the Holders agree to the provisions of this
Section 10.3.
Section X.4. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
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THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section X.5. NOTICES. All notices, requests and demands to or
upon the respective parties hereto to be effective shall be in writing
(including by facsimile), and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or
three days after being deposited in the mail, postage prepaid, or, in the
case of facsimile notice, when received, (i) addressed as follows in the case
of the Company, the Servicer and the Trustee and (ii) in the case of the
Sub-Servicers, as set forth under their signatures in the Receivables Sale
Agreement, or, in either case, to such other address as may be hereafter
notified by the respective parties hereto:
The Company: CM CAPITAL CORPORATION
395 Oyster Point Blvd.
Suite 415, Room A
South San Francisco, CA 94080
Attention: Leo F. Korman
Facsimile: (650) 589-4010
with a copy to the Servicer:
The Servicer: Core-Mark International, Inc.
395 Oyster Point Blvd.
Suite 415
South San Francisco, CA 94080
Attention: Leo F. Korman
Facsimile: (650) 589-4010
The Trustee: The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Structured Finance Services
Facsimile: 212-946-8191
Any notice required or permitted to be mailed to an Investor Certificateholder
shall be given by first-class mail, postage prepaid, at the address of such
Investor Certificateholder as shown in the Certificate Register. Any notice so
mailed within the time prescribed in any Pooling and Servicing Agreement shall
be conclusively presumed to have been duly given, whether or not the Investor
Certificateholder receives such notice.
Section X.6. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of any Pooling and Servicing
Agreement shall for any reason whatsoever be held invalid, then such covenants,
agreements, provisions or terms shall be deemed severable from the remaining
covenants, agreements, provisions or terms of such
<PAGE>
81
Pooling and Servicing Agreement and shall in no way affect the validity or
enforceability of the other provisions of any Pooling and Servicing Agreement
or of the Certificates or rights of the Holders.
Section X.7. ASSIGNMENT. Notwithstanding anything to the contrary
contained herein, except as provided in Section 5.3 of the Servicing Agreement,
no Pooling and Servicing Agreement, nor any rights or interests thereunder, may
be assigned by the Company or the Servicer without the prior written consent of
the Trustee acting at the direction of the holders of 66 2/3% of the Invested
Amount of each Outstanding Series and without the Rating Agency Condition's
having been satisfied with respect to such assignment.
Section X.8. CERTIFICATES NONASSESSABLE AND FULLY PAID. It is the
intention of the parties to each Pooling and Servicing Agreement that the
Investor Certificateholders shall not be personally liable for obligations of
the Trust, that the interests in the Trust represented by the Investor
Certificates shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever and that Investor Certificates upon authentication
thereof by the Trustee pursuant to Section 5.2 are and shall be deemed fully
paid.
Section X.9. FURTHER ASSURANCES. The Company and the Servicer agree
to do and perform, from time to time, any and all acts and to execute any and
all further instruments required or reasonably requested by the Trustee more
fully to effect the purposes of each Pooling and Servicing Agreement, including,
without limitation, the execution of any financing statements or continuation
statements relating to the Receivables for filing under the provisions of the
UCC of any applicable jurisdiction.
Section X.10. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise
and no delay in exercising, on the part of the Trustee or the Investor
Certificateholders, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges herein provided are cumulative and
not exhaustive of any rights, remedies, powers and privileges provided by law.
Section X.11. COUNTERPARTS. This Agreement may be executed in two or
more counterparts (and by different parties on separate counterparts), each of
which shall be an original, but all of which together shall constitute one and
the same instrument.
Section X.12. THIRD-PARTY BENEFICIARIES. This Agreement will inure
to the benefit of and be binding upon the parties hereto, the Holders and their
respective successors and permitted assigns. Except as otherwise provided in
Section 6.3 and this Article X and in any Supplement, no other Person will have
any right or obligation hereunder.
Section X.13. ACTIONS BY HOLDERS. (a) Wherever in any Pooling and
Servicing Agreement a provision is made that an action may be taken or a notice,
demand or instruction given by Investor Certificateholders, such action, notice
or instruction may be
<PAGE>
82
taken or given by any Investor Certificateholders of any Series, unless such
provision requires a specific percentage of Investor Certificateholders of a
certain Series or all Series.
(b) Any request, demand, authorization, direction, notice, consent,
waiver or other act by a Investor Certificateholder shall bind such Investor
Certificateholder and every subsequent holder of such Certificate issued upon
the registration of transfer thereof or in exchange therefor or in lieu thereof
in respect of anything done or omitted to be done by the Trustee, the Company or
the Servicer in reliance thereon, whether or not notation of such action is made
upon such Certificate.
Section X.14. MERGER AND INTEGRATION. Except as specifically stated
otherwise herein, this Agreement and the Servicing Agreement sets forth the
entire understanding of the parties relating to the subject matter hereof, and
all prior understandings, written or oral, are superseded by this Agreement and
the Servicing Agreement. This Agreement and the Servicing Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
Section X.15. HEADINGS. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
Section X.16. CONSTRUCTION OF AGREEMENT. (a) The Company hereby
grants to the Trustee, for the benefit of the Holders, a perfected first
priority security interest in all of the Company's right, title and interest in,
to and under the Receivables and the other Trust Assets now existing and
hereafter created, all monies due or to become due and all amounts received with
respect thereto and all "proceeds" thereof (including Recoveries), to secure all
of the Company's and the Servicer's obligations hereunder, including, without
limitation, the Company's obligation to sell or transfer Receivables hereafter
created to the Trust.
(b) This Agreement shall constitute a security agreement under
applicable law.
Section X.17. NO SET-OFF. Except as expressly provided in this
Agreement, the Trustee agrees that it shall have no right of set-off or banker's
lien against, and no right to otherwise deduct from, any funds held in the
Collection Account for any amount owed to it by the Company, the Servicer or any
Investor Certificateholder.
Section X.18. NO BANKRUPTCY PETITION. Each of the Trustee and the
Servicer hereby covenants and agrees that, prior to the date which is one year
and one day after the date of the end of the Amortization Period with respect to
all Outstanding Series, it will not institute against, or join any other Person
in instituting against, the Company any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any federal or
state bankruptcy or similar law.
Section X.19. LIMITATION OF LIABILITY. It is expressly understood
and agreed by the parties hereto that (a) each Pooling and Servicing Agreement
is executed and delivered by the Trustee, not individually or personally but
solely as Trustee of the Trust, in the
<PAGE>
83
exercise of the powers and authority conferred and vested in it, (b) except
with respect to Section 8.15 hereof the representations, undertakings and
agreements herein made on the part of the Trust are made and intended not as
personal representations, undertakings and agreements by the Trustee, but are
made and intended for the purpose of binding only the Trust, (c) nothing
herein contained shall be construed as creating any liability of the Trustee,
individually or personally, to perform any covenant of the Trust either
expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties who are signatories to this Agreement and by
any Person claiming by, through or under such parties; PROVIDED, HOWEVER, the
Trustee shall be liable in its individual capacity for its own willful
misconduct or negligence and (d) under no circumstances shall the Trustee be
personally liable for the payment of any indebtedness or expenses of the
Trust or be liable for the breach or failure of any obligation,
representation, warranty or covenant made or undertaken by the Trust under
any Pooling and Servicing Agreement; PROVIDED FURTHER, that the foregoing
clauses (a) through (d) shall survive the resignation or removal of the
Trustee.
The Company hereby agrees to indemnify and hold harmless the Trustee
and the Trust for the benefit of the Holders (each, an "INDEMNIFIED PERSON")
from and against any loss, liability, expense, damage or injury suffered or
sustained by reason of any acts, omissions or alleged acts or omissions arising
out of, or relating to, activities of the Company pursuant to any Pooling and
Servicing Agreement to which it is a party, including but not limited to any
judgment, award, settlement, reasonable attorneys' fees and other reasonable
costs or expenses incurred in connection with the defense of any actual or
threatened action, proceeding or claim, except to the extent such loss,
liability, expense, damage or injury resulted from the negligence, bad faith
or wilful misconduct of an indemnified person; PROVIDED that any payments
made by the Company pursuant to this subsection shall be made solely from
funds available to the Company which are not otherwise required to be applied
to the payment of any amounts pursuant to any Pooling and Servicing
Agreements (other than to the Company), shall be non-recourse other than with
respect to such funds, and shall not constitute a claim against the Company
to the extent that insufficient funds exist to make such payment.
Section X.20. CERTAIN INFORMATION. The Servicer and the Company
shall promptly provide to the Trustee such information in computer tape, hard
copy or other form regarding the Receivables as the Trustee may reasonably
request to perform its obligations hereunder.
<PAGE>
IN WITNESS WHEREOF, the Company, the Servicer and the Trustee have
caused this Agreement to be duly executed by their respective officers as of the
day and year first above written.
CM CAPITAL CORPORATION, as Company
By: /s/ ROBERT A. ALLEN
---------------------------
Name: Robert A. Allen
Title: President & CEO
CORE-MARK INTERNATIONAL, INC., as
Servicer
By: /s/ LEO F. KORMAN
---------------------------
Name: Leo F. Korman
Title: Sr. VP & CFO
THE CHASE MANHATTAN BANK, not in its
individual capacity but solely as
Trustee
By: /s/ KIMBERLY K. COSTA
---------------------------
Name: Kimberly K. Costa
Title: Second Vice President
<PAGE>
Exhibit 10.19
EXECUTION COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CM CAPITAL CORPORATION,
as Company,
CORE-MARK INTERNATIONAL, INC.,
as Servicer
and
THE CHASE MANHATTAN BANK,
as Trustee
--------------------
SERIES 1998-1 SUPPLEMENT
Dated as of April 1, 1998
to
POOLING AGREEMENT
Dated as of April 1, 1998
--------------------
CORE-MARK RECEIVABLES MASTER TRUST
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
DESIGNATION OF CERTIFICATES AND INTERESTS; PURCHASE AND SALE
OF THE TERM CERTIFICATES. . . . . . . . . . . . . . 16
SECTION 2.1. Designation . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.2. The Term Certificates . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.3. Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 2.4. Restrictions on Transfer. . . . . . . . . . . . . . . . . . . . 17
SECTION 2.5. Application of Proceeds . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.6. Procedure for Decreasing the Series 1998-1 Invested
Amount; Optional Termination. . . . . . . . . . . . . . . . . . 21
SECTION 2.7. Sale of Additional Term Certificates. . . . . . . . . . . . . . 22
SECTION 2.8. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE III
ARTICLE III OF THE AGREEMENT. . . . . . . . . . . . . 25
SECTION 3A.2. Establishment of Trust Accounts. . . . . . . . . . . . . . . . 25
SECTION 3A.3. Daily Allocations. . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 3A.4. Determination of Interest. . . . . . . . . . . . . . . . . . . 28
SECTION 3A.5. Determination of Series 1998-1 Monthly Principal . . . . . . . 29
SECTION 3A.6. Applications . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE IV
DISTRIBUTIONS AND REPORTS
SECTION 4A.1. Distributions. . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 4A.2. Statements and Notices . . . . . . . . . . . . . . . . . . . . 33
SECTION 4A.3. Notice Procedures. . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE V
ADDITIONAL EARLY AMORTIZATION EVENTS
SECTION 5.1. Additional Early Amortization Events. . . . . . . . . . . . . . 34
ARTICLE VI
SERVICING FEE
SECTION 6.1. Servicing Compensation. . . . . . . . . . . . . . . . . . . . . 37
<PAGE>
ARTICLE VII
REPRESENTATIONS AND WARRANTIES, COVENANTS
SECTION 7.1. Representations and Warranties of the Company and the
Servicer. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 7.2. Covenants of the Company and the Servicer . . . . . . . . . . . 37
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Ratification of Agreement . . . . . . . . . . . . . . . . . . . 38
SECTION 8.2. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.3. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.4. No Waiver; Cumulative Remedies. . . . . . . . . . . . . . . . . 38
SECTION 8.5. Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 8.6. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.7. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.8. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 8.9. Limitation on Addition and Termination of Sellers.. . . . . . . 39
ARTICLE IX
FINAL DISTRIBUTIONS
SECTION 9.1. Certain Distributions . . . . . . . . . . . . . . . . . . . . . 41
EXHIBITS
Exhibit A Form of Class A Certificate, Series 1998-1
Exhibit B Form of Class B Certificate, Series 1998-1
Exhibit C Form of Daily Report
Exhibit D Form of Monthly Settlement Statement
Exhibit E Form of Purchaser Letter
Exhibit F Form of Definitive Certificate Conversion Letter
SCHEDULES
Schedule 1 Trust Accounts
</TABLE>
<PAGE>
SERIES 1998-1 SUPPLEMENT, dated as of April 1, 1998 (as amended,
supplemented or otherwise modified from time to time, this "SUPPLEMENT"),
among CM Capital Corporation, a Delaware corporation (the "COMPANY"),
Core-Mark International, Inc., a Delaware corporation ("CORE-MARK"), as
servicer (except where otherwise noted) (in such capacity, the "SERVICER"),
and The Chase Manhattan Bank, a New York banking corporation, in its capacity
as Trustee (the "TRUSTEE") under the Agreement (as defined below).
W I T N E S S E T H :
WHEREAS, the Company, the Servicer and the Trustee have entered
into a Pooling Agreement, dated as of the date hereof (as amended,
supplemented or otherwise modified from time to time, the "AGREEMENT");
WHEREAS, the Agreement provides, among other things, that the
Company, the Servicer and the Trustee may at any time and from time to time
enter into supplements to the Agreement for the purpose of authorizing the
issuance on behalf of the Trust by the Company for execution and redelivery
to the Trustee for authentication of one or more Series of Investor
Certificates; and
WHEREAS, the Company, the Servicer and the Trustee wish to
supplement the Agreement as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby expressly acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION I.1. DEFINITIONS. (a) The following words and phrases
shall have the following meanings with respect to Series 1998-1 and the
definitions of such terms are applicable to the singular as well as the
plural form of such terms and to the masculine as well as the feminine and
neuter genders of such terms:
"ACCRUAL PERIOD" shall mean the period from and including a
Distribution Date, or, in the case of the initial Accrual Period, the
Issuance Date, to but excluding the immediately succeeding Distribution
Date.
"ACCRUED EXPENSE AMOUNT" shall mean, for each Business Day during an
Accrual Period, the sum of (i) the Series 1998-1 Daily Interest Expense for
such Business Day, (ii) for each of the first ten of such Business Days,
one-tenth of the Series 1998-1 Monthly Servicing Fee due and payable on the
immediately succeeding Distribution Date and zero on each Business Day
thereafter (until such immediately
<PAGE>
2
succeeding Distribution Date) and (iii) all Program Costs which have
accrued since the preceding Business Day; PROVIDED, HOWEVER, that if by
the tenth Business Day of an Accrual Period, the entire amount of (A) the
Series 1998-1 Monthly Interest, (B) the Series 1998-1 Monthly Servicing
Fee and (C) all accrued Program Costs, in each case for such Accrual
Period, shall not have been transferred to the applicable Series
Collection Subaccount (or subaccount thereof), the Accrued Expense Amount
for such tenth Business Day (and each Business Day thereafter until paid)
shall also include the amount of such shortfall.
"AGED RECEIVABLES RATIO" shall mean, as of the last day of each
Settlement Period, the percentage equivalent of a fraction, (i) the
numerator of which shall be the sum of (A) the aggregate unpaid balance of
Receivables that were 91-120 days past their respective original due dates
as of such last day and (B) the aggregate amount of Receivables of the
Sellers which were charged off as uncollectible prior to the day which is
91 days after their respective original due dates during such Settlement
Period, and (ii) the denominator of which shall be the aggregate Principal
Amount of Receivables originated by the Sellers during the fourth prior
Settlement Period (including the Settlement Period ended on such day).
"CARRYING COST RESERVE RATIO" shall mean, as of any Settlement Report
Date and continuing until (but not including) the next Settlement Report
Date, an amount (expressed as a percentage) equal to the product of (a)
2.00 TIMES Days Sales Outstanding as of such day and (b) (i) 1.50 TIMES a
rate per annum equal to the weighted average Class A Certificate Rate and
Class B Certificate Rate in effect with respect to the outstanding Class A
Certificates and Class B Certificates, respectively, as of the end of the
Settlement Period immediately preceding such earlier Settlement Report
Date, DIVIDED BY (ii) 360.
"CHANGE IN CONTROL" shall mean the occurrence of any event the result
of which causes the Company not to be a direct, wholly-owned Subsidiary of
Core-Mark.
"CLASS A ADDITIONAL INTEREST" shall have the meaning specified in
subsection 3A.4(b)(i).
"CLASS A ADJUSTED INVESTED AMOUNT" shall mean, as of any date of
determination, (i) the Class A Invested Amount on such date, MINUS (ii) the
amount on deposit in the Series 1998-1 Principal Collection Sub-subaccount
on such date (up to a maximum of the Class A Invested Amount).
"CLASS A CERTIFICATE" shall mean a Class A Certificate, Series 1998-1,
executed by the Company and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A.
"CLASS A CERTIFICATEHOLDER" shall mean each holder of a Class A
Certificate.
<PAGE>
3
"CLASS A CERTIFICATE RATE" shall mean, (a) in the case of the initial
Class A Certificates, with respect to (i) the initial Accrual Period, 5.97%
per annum, and (ii) any Accrual Period thereafter, One-Month LIBOR for such
Accrual Period PLUS 0.28% per annum, and (b) in the case of any additional
Class A Certificates issued pursuant to Section 2.7, the rate per annum set
forth in the written direction delivered by the Company to the Trustee
pursuant to subsection 2.7(c).
"CLASS A INITIAL INVESTED AMOUNT" shall mean $50,000,000.
"CLASS A INTEREST SHORTFALL" shall have the meaning specified in
subsection 3A.4(b)(i).
"CLASS A INVESTED AMOUNT" shall mean, with respect to any date of
determination, an amount equal to (i) the Class A Initial Invested Amount
(plus the Initial Invested Amount of any Class A Certificate issued
subsequent to the Issuance Date) MINUS (ii) the aggregate amount of
distributions to the Class A Certificateholders (including the holders of
any such subsequently issued Class A Certificates) made in respect of
principal on or prior to such date MINUS (iii) the aggregate Series 1998-1
Allocable Charged-Off Amount applied to the Class A Certificates on or
prior to such date pursuant to subsection 3A.5(b)(ii) PLUS (iv) (but only
to the extent of any unreimbursed reductions made pursuant to clause (iii)
above) the aggregate Series 1998-1 Allocable Recoveries Amount applied to
the Class A Certificates on or prior to such date pursuant to subsection
3A.5(c)(i).
"CLASS A MONTHLY INTEREST" shall have the meaning specified in
subsection 3A.4(a)(i).
"CLASS A RATIO" shall mean, on any date of determination with respect
to the Class A Certificates, the greatest of (a) the sum of the Loss
Reserve Ratio I and the Dilution Reserve Ratio I, (b) the sum of the Loss
Reserve Ratio II and the Dilution Reserve Ratio II and (c) the Minimum
Ratio, in each case applicable to the Class A Certificates.
"CLASS A REDEMPTION PREMIUM" shall have the meaning specified in
subsection 2.4(a)(i).
"CLASS A REDEMPTION PRICE" shall have the meaning specified in
subsection 2.4(a)(i).
"CLASS B ADDITIONAL INTEREST" shall have the meaning specified in
subsection 3A.4(b)(ii).
"CLASS B ADJUSTED INVESTED AMOUNT" shall mean, as of any date of
determination, (i) the Class B Invested Amount on such date, MINUS (ii) the
excess, if any, on deposit on such date in the Series 1998-1 Principal
Collection Sub-subaccount
<PAGE>
4
over the Class A Invested Amount on such date (up to a maximum of the Class
B Invested Amount).
"CLASS B CERTIFICATE" shall mean a Class B Certificate, Series 1998-1,
executed by the Company and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit B.
"CLASS B CERTIFICATEHOLDER" shall mean each holder of a Class B
Certificate.
"CLASS B CERTIFICATE RATE" shall mean, (a) in the case of the initial
Class B Certificates, with respect to (i) the initial Accrual Period, 6.34%
per annum, and (ii) any Accrual Period thereafter, One-Month LIBOR for such
Accrual Period PLUS 0.65% per annum, and (b) in the case of any additional
Class B Certificates issued pursuant to Section 2.7, the rate per annum set
forth in the written direction delivered by the Company to the Trustee
pursuant to subsection 2.7(c).
"CLASS B INITIAL INVESTED AMOUNT" shall mean $5,000,000.
"CLASS B INTEREST SHORTFALL" shall have the meaning specified in
subsection 3A.4(b)(ii).
"CLASS B INVESTED AMOUNT" shall mean, with respect to any date of
determination, an amount equal to (i) the Class B Initial Invested Amount
(plus the Initial Invested Amount of any Class B Certificate issued
subsequent to the Issuance Date) MINUS (ii) the aggregate amount of
distributions to the Class B Certificateholders (including the holders of
any such subsequently issued Class B Certificates) made in respect of
principal on or prior to such date MINUS (iii) the aggregate Series 1998-1
Allocable Charged-Off Amount applied to the Class B Certificates on or
prior to such date pursuant to subsection 3A.5(b)(ii) PLUS (iv) (but only
to the extent of any unreimbursed reductions made pursuant to clause (iii)
above) the aggregate Series 1998-1 Allocable Recoveries Amount applied to
the Class B Certificates on or prior to such date pursuant to subsection
3A.5(c)(ii).
"CLASS B MONTHLY INTEREST" shall have the meaning specified in
subsection 3A.4(a)(ii).
<PAGE>
5
"CLASS B RATIO" shall mean, on any date of determination with respect
to the Class B Certificates, the greatest of (a) the sum of the Loss
Reserve Ratio I and the Dilution Reserve Ratio I, (b) the sum of the Loss
Reserve Ratio II and the Dilution Reserve Ratio II and (c) the Minimum
Ratio, in each case applicable to the Class B Certificates.
"CLASS B REDEMPTION PREMIUM" shall have the meaning specified in
subsection 2.4(a)(ii).
"CLASS B REDEMPTION PRICE" shall have the meaning specified in
subsection 2.4(a)(ii).
"CLEAN-UP CALL AMOUNT" shall mean the product of (i) the Clean-Up Call
Percentage and (ii) the Series 1998-1 Initial Invested Amount.
"CLEAN-UP CALL PERCENTAGE" shall mean 10%.
"CORE-MARK" shall have the meaning specified in the preamble hereto.
"DAILY REPORT" shall mean a report prepared by the Servicer on each
Business Day for the period specified therein, in substantially the form of
Exhibit C.
"DAYS SALES OUTSTANDING" shall mean, as of any Settlement Report Date
and continuing until (but not including) the next Settlement Report Date,
the number of days equal to the product of (a) 91 and (b) the amount
obtained by dividing (i) the aggregate Principal Amount of Eligible
Receivables as of the last day of the immediately preceding Settlement
Period by (ii) the aggregate Principal Amount of Receivables generated by
the Sellers for the three Settlement Periods immediately preceding such
earlier Settlement Report Date.
"DCR" shall mean Duff & Phelps Credit Rating Co. or any successor
thereto.
"DEFINITIVE CERTIFICATE CONVERSION LETTER" shall mean a Definitive
Certificate Conversion Letter in substantially the form attached hereto as
Exhibit F.
"DEPOSITORY" shall mean The Depository Trust Company, the nominee of
which is Cede & Co., or any successor thereto.
"DEPOSITORY PARTICIPANT" shall mean a broker, dealer, bank, other
financial institution or other Person for whom from time to time the
Depository effects book-entry transfers and pledges of securities deposited
with the Depository.
"DILUTION HORIZON" shall mean, (i) for the period from the Issuance
Date until the sixth Settlement Report Date to occur thereafter, 5.3 days
as representing the time period it takes the Sellers to recognize a
Dilution Adjustment, and (ii) for each
<PAGE>
6
six-month period (beginning and ending on the previous Settlement Report
Date) to occur after such initial period, the number of days (expressed as
a dollar weighted average based upon the Dilution Adjustments for such
period), as determined by the Servicer in accordance with the procedures
utilized to calculate the dilution horizon in clause (i) above; PROVIDED
that in no event shall the Dilution Horizon be less than 2 days.
"DILUTION HORIZON FACTOR" shall mean (a) for the period from the
Issuance Date until the sixth Settlement Report Date to occur thereafter,
0.18 months and (b) for each six-month period (beginning and ending on a
Settlement Report Date) to occur after such initial period, a fraction, (i)
the numerator of which is the Dilution Horizon for such period and (ii) the
denominator of which is 30; PROVIDED, HOWEVER, that if the Dilution Horizon
Factor for any period would be less than the Dilution Horizon Factor for
the immediately preceding period, then the actual Dilution Horizon Factor
for such current period shall be recalculated to equal a fraction, the
numerator of which is equal to the average of the numerators used to
calculate the Dilution Horizon Factor for such immediately preceding period
and such current period and the denominator of which is 30.
"DILUTION PERIOD" shall mean, as of any Settlement Report Date and
continuing until (but not including) the next Settlement Report Date, the
quotient of (i) the product of (A) the aggregate Principal Amount of
Receivables which were originated by the Sellers during the Settlement
Period immediately preceding such earlier Settlement Report Date and (B)
the Dilution Horizon Factor then in effect and (ii) the Aggregate
Receivables Amount as of the last day of the Settlement Period preceding
such earlier Settlement Report Date.
"DILUTION RATIO" shall mean, for each Settlement Period, an amount
(expressed as a percentage) equal to the aggregate amount of Dilution
Adjustments (other than Dilution Adjustments related to rebates given by a
Seller to its customers relating to general price increases by the Tobacco
Companies for which the Tobacco Companies have granted rebates to the
Sellers, so long as the Seller has granted the rebate to its customer prior
to the time that the merchandise giving rise to the Receivable to which
such rebate is applied is shipped by the Seller) made during such
Settlement Period DIVIDED BY the aggregate Principal Amount of Receivables
which were originated by the Sellers during such Settlement Period.
"DILUTION RESERVE RATIO I" shall mean, as of any Settlement Report
Date and continuing until (but not including) the next Settlement Report
Date, an amount (expressed as a percentage) which is calculated for either
the Class A Certificates or the Class B Certificates, as the case may be,
as follows:
<PAGE>
7
DRR = [(c * d) + [(e-d) * (e/d)]] * f
Where:
DRR = Dilution Reserve Ratio I;
c = with respect to the Class A Certificates, 2.5, and with respect
to the Class B Certificates, 2.0;
d = the average of the Dilution Ratio during the period of twelve
consecutive Settlement Periods ending prior to such earlier
Settlement Report Date;
e = the highest Dilution Ratio for any Settlement Period during the
period of twelve consecutive Settlement Periods ending prior to
such earlier Settlement Report Date; and
f = the Dilution Period.
"DILUTION RESERVE RATIO II" shall mean, as of any Settlement Report
Date and continuing until (but not including) the next Settlement Report
Date, an amount (expressed as a percentage) which is calculated for either
the Class A Certificates or the Class B Certificates, as the case may be,
as follows:
DRR = [(c * d) + e] * f
Where:
DRR = Dilution Reserve Ratio II
c = with respect to the Class A Certificates, 2.5, and with respect
to the Class B Certificates, 2.0;
d = the average of the Dilution Ratio during the period of twelve
consecutive Settlement Periods ending prior to such earlier
Settlement Report Date;
e = the product of (i) the twelve-month sample standard deviation of
the Dilution Ratio as of the end of each of the twelve
consecutive Settlement Periods immediately preceding such earlier
Settlement Report Date and (ii) (A) for calculations with respect
to Class A Certificates, 2.58, and (B) for calculations with
respect to Class B Certificates, 1.96; and
f = the Dilution Period.
<PAGE>
8
"EARLY AMORTIZATION EVENT" shall have the meanings assigned in Section
5.1 of this Supplement and Section 7.1 of the Agreement.
"EARLY AMORTIZATION PERIOD" shall have the meaning assigned in Section
5.1 of this Supplement and Section 7.1 of the Agreement.
"ERISA ENTITY" shall mean (i) an "employee benefit plan" within the
meaning of Section 3(3) of ERISA or other retirement arrangement,
individual retirement account or Keogh plan, whether or not it is subject
to the provisions of Title I of ERISA, (ii) any plan described in Section
4975(e)(1) of the Internal Revenue Code or (iii) any other entity that
would be deemed to be a "benefit plan investor" within the meaning of
Department of Labor regulation Section 2510.3-101(f)(2).
"INITIAL PURCHASER" shall mean Chase Securities Inc., who is
purchasing the Term Certificates on the Issuance Date pursuant to the
Purchase Agreement.
"INSTITUTIONAL ACCREDITED INVESTOR" shall mean an "accredited
investor" within the meaning of Rule 501(a)(1),(2),(3) or (7) of Regulation
D under the Securities Act.
"INVESTED PERCENTAGE" shall mean, with respect to any Business Day (i)
during the Series 1998-1 Revolving Period, the percentage equivalent of a
fraction, the numerator of which is the Series 1998-1 Allocated Receivables
Amount as of the end of the immediately preceding Business Day and the
denominator of which is the Aggregate Receivables Amount as of the end of
the immediately preceding Business Day and (ii) during the Series 1998-1
Amortization Period, the percentage equivalent of a fraction, the numerator
of which is the Series 1998-1 Allocated Receivables Amount as of the end of
the last Business Day of the Series 1998-1 Revolving Period (PROVIDED THAT
if during the Series 1998-1 Amortization Period, the amortization periods
of all other Outstanding Series which were outstanding prior to the
commencement of the Series 1998-1 Amortization Period commence, then,
from and after the date the last of such Series commences its
Amortization Period, the numerator shall be the Series 1998-1 Allocated
Receivables Amount as of the end of the Business Day preceding such date)
and the denominator of which is the greater of (A) the Aggregate
Receivables Amount as of the end of the immediately preceding Business
Day and (B) the sum of the numerators used to calculate the Invested
Percentage for all Outstanding Series on the Business Day for which such
percentage is determined.
"ISSUANCE DATE" shall mean April 1, 1998.
"LOSS RESERVE RATIO I" shall mean, as of any Settlement Report Date
and continuing until (but not including) the next Settlement Report Date,
an amount (expressed as a percentage) which is calculated for either the
Class A Certificates or the Class B Certificates, as the case may be, as
follows:
<PAGE>
9
LRR = [(a * b)/c] * d * e
Where:
LRR = Loss Reserve Ratio I;
a = the aggregate Principal Amount of Receivables originated by the
Sellers during the three Settlement Periods immediately preceding
such earlier Settlement Report Date;
b = the highest three-month rolling average of the Aged Receivables
Ratio that occurred during the period of twelve consecutive
Settlement Periods preceding such earlier Settlement Report Date;
c = the Aggregate Receivables Amount as of the last day of the
Settlement Period preceding such earlier Settlement Report Date;
d = with respect to the Class A Certificates, 2.5, and with respect
to the Class B Certificates, 2.0; and
e = Payment Terms Factor.
"LOSS RESERVE RATIO II" shall mean, as of any Settlement Report Date
and continuing until (but not including) the next Settlement Report Date,
an amount (expressed as a percentage) which is calculated for either the
Class A Certificates or the Class B Certificates, as the case may be, as
follows:
LRR = [[(a * b)/c] * d] * e + f
Where:
LRR = Loss Reserve Ratio II;
a = the aggregate Principal Amount of Receivables originated by the
Sellers during the three Settlement Periods immediately preceding
such earlier Settlement Report Date;
b = the highest three-month rolling average of the Aged Receivables
Ratio that occurred during the period of twelve consecutive
Settlement Periods preceding such earlier Settlement Report Date;
c = for the period prior to the first Settlement Report Date, the
difference between (i) the aggregate outstanding Principal Amount
of all Receivables and (ii) the aggregate outstanding Principal
Amount of all Aged Receivables, in each case, originated by the
Sellers as of the last
<PAGE>
10
day of the Settlement Period preceding such earlier Settlement
Report Date; and thereafter, the Aggregate Receivables Amount as
of the last day of the Settlement Period preceding such earlier
Settlement Report Date;
d = with respect to the Class A Certificates, 2.5, and with respect
to the Class B Certificates, 2.0;
e = Payment Terms Factor; and
f = the product of (i) the twelve-month sample standard deviation of
the Aged Receivables Ratio as of the end of each of the twelve
consecutive Settlement Periods preceding such earlier Settlement
Report Date and (ii) (A) for calculations with respect to Class A
Certificates, 2.58, and (B) for calculations with respect to
Class B Certificates, 1.96.
"MAJORITY TERM CERTIFICATEHOLDERS" shall mean, on any day, Term
Certificateholders representing, in the aggregate, more than 50% of the
Series 1998-1 Invested Amount.
"MINIMUM RATIO" shall mean, as of any Settlement Report Date and
continuing until (but not including) the next Settlement Report Date, an
amount (expressed as a percentage) which is calculated for either the Class
A Certificates or the Class B Certificates, as the case may be, as follows:
MR = (a * b) + c
Where:
MR = Minimum Ratio;
a = the average of the Dilution Ratio during the period of the twelve
consecutive Settlement Periods ending prior to such earlier
Settlement Report Date;
b = the Dilution Period; and
c = with respect to the Class A Certificates, 11.25%, and with
respect to the Class B Certificates, 9.0%.
"ONE-MONTH LIBOR" shall mean, for any Accrual Period after the initial
Accrual Period, the rate per annum, as recorded by the Trustee, which is
the arithmetic mean (rounded to the nearest 1/100th of 1%) of the offered
rates for Dollar deposits having a maturity of one month commencing on the
first day of such Accrual Period that appears on the Telerate British
Bankers Assoc. Interest Settlement Rates Page (as
<PAGE>
11
defined below) at approximately 11:00 a.m., London time, on the second
full Business Day prior to such date; PROVIDED, HOWEVER, that if there
shall at any time no longer exist a Telerate British Bankers Assoc.
Interest Settlement Rates Page, "One-Month LIBOR" shall mean with respect
to each day during each Accrual Period, the rate per annum equal to the
rate at which The Chase Manhattan Bank is offered Dollar deposits at or
about 10:00 a.m., New York City time, two Business Days prior to the
beginning of such Accrual Period in the London interbank eurodollar
market for delivery on the first day of such Accrual Period for one month
and in a principal amount equal to an amount of not less than $1,000,000.
"TELERATE BRITISH BANKERS ASSOC. INTEREST SETTLEMENT RATES PAGE" shall
mean the display designated as Page 3750 on the Telerate System
Incorporated Service (or such other page as may replace such page on such
service for the purpose of displaying the rates at which Dollar deposits
are offered by leading banks in the London interbank deposit market).
"OPTIONAL TERMINATION DATE" shall have the meaning assigned in
subsection 2.6(b).
"OPTIONAL TERMINATION NOTICE" shall have the meaning assigned in
subsection 2.6(b).
"PAYMENT TERMS FACTOR" shall mean, (a) for the period from the
Issuance Date until the sixth Settlement Report Date to occur thereafter,
0.82 months and (b) for each six-month period to occur after such initial
period, a fraction, the numerator of which is the sum of (i) the weighted
average payment terms (based upon the principal amount of the Receivables
and expressed as a number of days) for the Receivables originated during
such period and (ii) 60 and the denominator which is 90; PROVIDED, HOWEVER,
that if the Payment Terms Factor for any period is less than the Payment
Terms Factor for the immediately preceding period, then the actual Payment
Terms Factor for such current period shall be recalculated to equal a
fraction, the numerator of which is equal to the average of the numerators
used to calculate the Payment Terms Factor for such current period and the
three immediately preceding periods (without giving effect to this proviso)
and the denominator of which is 90.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"PREPAYMENT PREMIUM" shall have the meaning assigned in subsection
2.6(b).
"PROGRAM COSTS" shall mean, for any Business Day, the sum of (a) the
product of (i) all unpaid fees and expenses due and payable to counsel to,
and independent auditors of, the Company (other than fees and expenses
payable on or in connection with the closing of any issuance of the Term
Certificates) on such Business Day and (ii) a fraction, the numerator of
which is the Series 1998-1 Invested Amount on such Business Day and the
denominator of which is the Aggregate Invested Amount on such Business Day
and (b) all unpaid fees and expenses due and payable to Rating
<PAGE>
12
Agencies rating the Term Certificates; PROVIDED, HOWEVER, that Program
Costs shall not exceed $100,000 in the aggregate in any fiscal year of the
Company.
"PURCHASE AGREEMENT" shall mean the agreement to be entered into on
the Issuance Date among the Company, Core-Mark and the Initial Purchaser
pursuant to which the Company agrees to sell, and the Initial Purchaser
agrees to purchase, the principal amounts and Classes of Term Certificates
set forth therein.
"PURCHASER LETTER" shall mean a Purchaser Letter in substantially the
form attached hereto as Exhibit E.
"QUALIFIED INSTITUTIONAL BUYER" has the meaning ascribed to such term
in Rule 144A(a) under the Securities Act.
"RATING AGENCY" shall mean the collective reference to S&P and DCR.
"RECORD DATE" shall mean, with respect to any Distribution Date, the
last Business Day of the immediately preceding Settlement Period.
"REDUCTION" shall have the meaning specified in subsection 2.6(a).
"REDUCTION AMOUNT" shall have the meaning specified in subsection
2.6(a).
"REDUCTION THRESHOLD" shall mean, at any date of determination,
$10,000,000.
"SCHEDULED REVOLVING TERMINATION DATE" shall mean the last day of the
Settlement Period ending in January, 2003.
"SERIES 1998-1" shall mean Series 1998-1, the Principal Terms of which
are set forth in this Supplement.
"SERIES 1998-1 ACCRUED INTEREST SUB-SUBACCOUNT" shall have the meaning
assigned in subsection 3A.2(a).
"SERIES 1998-1 ADJUSTED INVESTED AMOUNT" shall mean, as of any date of
determination, (i) the Series 1998-1 Invested Amount on such date, MINUS
(ii) the amount on deposit in the Series 1998-1 Principal Collection Sub-
subaccount on such date.
"SERIES 1998-1 ALLOCABLE CHARGED-OFF AMOUNT" shall mean, with respect
to any Special Allocation Settlement Report Date, the "Allocable Charged-
Off Amount", if any, which has been allocated to Series 1998-1.
<PAGE>
13
"SERIES 1998-1 ALLOCABLE RECOVERIES AMOUNT" shall mean, with respect
to any Special Allocation Settlement Report Date, the "Allocable Recoveries
Amount", if any, which has been allocated to Series 1998-1.
"SERIES 1998-1 ALLOCATED RECEIVABLES AMOUNT" shall mean, on any date
of determination, the lower of (i) the Series 1998-1 Target Receivables
Amount on such day and (ii) the product of (x) the Aggregate Receivables
Amount on such day and (y) the percentage equivalent of a fraction the
numerator of which is the Series 1998-1 Target Receivables Amount on such
day and the denominator of which is the Aggregate Target Receivables Amount
on such day.
"SERIES 1998-1 AMORTIZATION PERIOD" shall mean the period commencing
on the Business Day following the earliest to occur of (i) the date on
which an Early Amortization Period is declared to commence or automatically
commences, (ii) the Optional Termination Date and (iii) the Scheduled
Revolving Termination Date and ending on the earlier of (x) the date when
the Series 1998-1 Invested Amount shall have been reduced to zero and all
accrued interest on the Term Certificates shall have been paid in full and
(y) the Series 1998-1 Termination Date.
"SERIES 1998-1 CERTIFICATEHOLDERS' INTEREST" shall have the meaning
assigned in subsection 2.2(a).
"SERIES 1998-1 COLLECTION SUBACCOUNT" shall have the meaning assigned
in subsection 3A.2(a).
"SERIES 1998-1 DAILY INTEREST EXPENSE" shall mean, for each Business
Day during an Accrual Period, the sum (without duplication) of (a) for each
of the first ten of such Business Days, one-tenth of the Series 1998-1
Monthly Interest due and payable on the immediately succeeding Distribution
Date and zero on each Business Day thereafter (until such immediately
succeeding Distribution Date), (b) the aggregate amount of all previously
accrued and unpaid Series 1998-1 Daily Interest Expense (up to but not
exceeding the full amount thereof) and (c) the aggregate amount of all
accrued and unpaid Class A Additional Interest and Class B Additional
Interest for each day since the preceding Business Day (up to but not
exceeding the full amount thereof).
"SERIES 1998-1 INITIAL INVESTED AMOUNT" shall mean, collectively, the
Class A Initial Invested Amount and the Class B Initial Invested Amount.
"SERIES 1998-1 INTERESTS" shall mean, collectively, the Class A
Certificates, the Class B Certificates and the Series 1998-1 Subordinated
Interest.
"SERIES 1998-1 INVESTED AMOUNT" shall mean, collectively, the Class A
Invested Amount and the Class B Invested Amount.
<PAGE>
14
"SERIES 1998-1 MONTHLY INTEREST" shall mean, collectively, the Class A
Monthly Interest and the Class B Monthly Interest.
"SERIES 1998-1 MONTHLY PRINCIPAL PAYMENT" shall have the meaning
assigned in Section 3A.5.
"SERIES 1998-1 MONTHLY SERVICING FEE" shall have the meaning assigned
in Section 6.1.
"SERIES 1998-1 NON-PRINCIPAL COLLECTION SUB-SUBACCOUNT" shall have the
meaning assigned in subsection 3A.2(a).
"SERIES 1998-1 PRINCIPAL COLLECTION SUB-SUBACCOUNT" shall have the
meaning assigned in subsection 3A.2(a).
"SERIES 1998-1 REQUIRED RESERVES" shall mean, subject to Section 8.9,
(x) on any date of determination during the Series 1998-1 Revolving Period,
an amount equal to the sum of:
(a) an amount equal to the greater of (i) the difference between
(A) product of (1) the Class A Adjusted Invested Amount on such day
(after giving effect to any increase or decrease thereof on such day)
and (2) a fraction, the numerator of which is the Class A Ratio, and
the denominator of which is one MINUS the Class A Ratio, and (B) the
Class B Invested Amount and (ii) the product of (A) the Series 1998-1
Adjusted Invested Amount on such day (after giving effect to any
increase or decrease thereof on such day) and (B) a fraction, the
numerator of which is the Class B Ratio, and the denominator of which
is one MINUS the Class B Ratio;
(b) the product of (i) the Series 1998-1 Invested Amount on such
day (after giving effect to any increase or decrease thereof on such
day) and (ii) a fraction, the numerator of which is the Carrying Cost
Reserve Ratio, and the denominator of which is one MINUS the Class A
Ratio; and
(c) the product of (i) the aggregate Principal Amount of
Receivables in the Trust on such day, (ii) a fraction, the numerator
of which is the Series 1998-1 Invested Amount on such day (after
giving effect to any increase or decrease thereof on such day), and
the denominator of which is the Aggregate Invested Amount on such day,
and (iii) a fraction, the numerator of which is the Servicing Reserve
Ratio, and the denominator of which is one MINUS the Class A Ratio;
and (y) on any date of determination during the Series 1998-1 Amortization
Period, an amount equal to the Series 1998-1 Required Reserves on the last
Business Day of the Series 1998-1 Revolving Period; PROVIDED, in the case
of this clause (y), that such
<PAGE>
15
amount shall be adjusted on each Special Allocation Settlement Report Date,
if any, to the extent required as set forth in Section 3A.5(b)(i) and
Section 3A.5(c)(ii).
"SERIES 1998-1 REVOLVING PERIOD" shall mean the period commencing on
the Issuance Date and terminating on the earliest to occur of the close of
business on (i) the date on which an Early Amortization Period is declared
to commence or automatically commences, (ii) the Optional Termination Date
and (iii) the Scheduled Revolving Termination Date.
"SERIES 1998-1 SUBORDINATED INTEREST" shall have the meaning assigned
in subsection 2.2(b).
"SERIES 1998-1 TARGET RECEIVABLES AMOUNT" shall mean, on any date of
determination, the sum of (i) the Series 1998-1 Adjusted Invested Amount on
such day and (ii) the Series 1998-1 Required Reserves for such day.
"SERIES 1998-1 TERMINATION DATE" shall mean the Distribution Date that
occurs in December, 2003.
"SERVICING RESERVE RATIO" shall mean, as of any Settlement Report Date
and continuing until (but not including) the next Settlement Report Date,
an amount (expressed as a percentage) equal to (i) the product of (A) the
Servicing Fee Percentage and (B) 2 TIMES Days Sales Outstanding as of such
earlier Settlement Report Date, DIVIDED BY (ii) 360.
"SPECIAL DISTRIBUTION DATE" shall have the meaning assigned in
subsection 2.6(a).
"SUBSEQUENT ISSUANCE DATE" shall mean each Distribution Date, if any,
on which the Trustee issues additional Class A Certificates and/or Class B
Certificates.
"TERM CERTIFICATES" shall mean, collectively, those Certificates
designated as the Class A Certificates and the Class B Certificates.
"TERM CERTIFICATEHOLDERS" shall mean, collectively, the Class A
Certificateholders and the Class B Certificateholders.
"TRUST ACCOUNTS" shall have the meaning specified in
subsection 3A.2(a).
(b) If any term or provision contained herein conflicts with or is
inconsistent with any term, definition or provision contained in the Agreement,
the terms and provisions of this Supplement shall govern. All capitalized terms
not otherwise defined herein are defined in the Agreement. All Article, Section
or subsection references herein shall mean Article, Section or subsections of
this Supplement, except as otherwise provided herein. Unless otherwise stated
herein, the context otherwise requires or such term is otherwise
<PAGE>
16
defined in the Agreement, each capitalized term used or defined herein shall
relate only to the Term Certificates and no other Series of Investor
Certificates issued by the Trust.
ARTICLE II
DESIGNATION OF CERTIFICATES AND INTERESTS; PURCHASE AND SALE
OF THE TERM CERTIFICATES
SECTION II.1. DESIGNATION. The Certificates and interests created
and authorized pursuant to the Agreement and this Supplement shall be divided
into (i) two classes, which shall be designated as (a) the "Class A
Certificates, Series 1998-1" and (b) the "Class B Certificates, Series
1998-1", respectively, and (ii) an interest designated as the "Series 1998-1
Subordinated Interest".
SECTION II.2. THE TERM CERTIFICATES. (a) The Term Certificates
shall represent fractional undivided interests in the Trust, including the
right to receive distributions from (i) the Invested Percentage (expressed as
a decimal) of Collections received with respect to the Receivables and all
other funds on deposit in the Collection Account (other than the Series
Collection Subaccounts) and (ii) all other funds on deposit in the Series
1998-1 Collection Subaccounts and any subaccounts thereof (collectively, the
"SERIES 1998-1 CERTIFICATEHOLDERS' INTEREST").
(b) The "SERIES 1998-1 SUBORDINATED INTEREST" shall be a fractional
undivided interest in the Trust, consisting of the right to receive Collections
with respect to the Receivables allocated to the Series 1998-1
Certificateholders' Interest and not required to be distributed to or for the
benefit of the Term Certificateholders. The Exchangeable Company Interest and
any Series of Investor Certificates (or any related Series Subordinated
Interest) outstanding shall represent the ownership interest in the remainder of
the Trust not allocated pursuant hereto to the Series 1998-1 Certificateholders'
Interest or the Series 1998-1 Subordinated Interest.
(c) The Class A Certificates and the Class B Certificates shall be
issued in registered form substantially in the forms of Exhibits A and B,
respectively, (provided that in the case of any additional Term Certificates
issued pursuant to Section 2.7, such Certificates may be modified to reflect
that they are being issued on a subsequent Issuance Date, rather than on the
Issuance Date), and shall, upon issue, be executed and delivered by the Company
to the Trustee for authentication and redelivery as provided in Section 2.4
hereof and Section 5.2 of the Agreement.
SECTION II.3. DELIVERY. (a) On the Issuance Date, the Company shall
sign, on behalf of the Trust, and shall direct the Trustee in writing pursuant
to Section 5.2 of the Agreement to duly authenticate, and the Trustee, upon
receiving such direction, shall so authenticate, subject to the provisions set
forth in subsection 2.3(b), the Term Certificates in such names and such
denominations and deliver such Term Certificates to the Initial
<PAGE>
17
Purchaser in accordance with such written directions. The Term Certificates
shall be issued in minimum denominations of $1,000,000 and in integral
multiples of $100,000 in excess thereof.
(b) Except with respect to any Term Certificates purchased on the
Issuance Date or Subsequent Issuance Date by an entity described in
subsection 2.4(a)(ii), which will be issued in the form of Definitive
Certificates, the Term Certificates initially shall be issued in the form of
one or more global Certificates, representing the Book-Entry Certificates, to
be delivered to the Depository. Except as provided in Section 5.13 of the
Agreement or Section 2.4 of this Supplement, such Book-Entry Certificates
shall at all times remain registered in the name of the Depository or its
nominee and at all times: (i) registration of such Book-Entry Certificates
may not be transferred by the Trustee except to a successor to the
Depository; (ii) ownership and transfers of registration of such Book-Entry
Certificates on the books of the Depository shall be governed by applicable
rules established by the Depository and by Section 2.4; (iii) the Depository
may collect its usual and customary fees, charges and expenses from its
Depository Participants; (iv) the Trustee shall deal with the Depository,
Depository Participants and indirect participating firms as representatives
of such Certificate Book-Entry Holders of such Book-Entry Certificates for
purposes of exercising the rights of such Certificate Book-Entry Holders
under the Agreement and this Supplement, and requests and directions for and
votes of such representatives shall not be deemed to be inconsistent if they
are made with respect to different Certificate Book-Entry Holders; and (v)
the Trustee may rely and shall be fully protected in relying upon information
furnished by the Depository with respect to its Depository Participants and
furnished by the Depository Participants with respect to indirect
participating firms and Persons shown on the books of such indirect
participating firms as direct or indirect Certificate Book-Entry Holders.
All transfers by Certificate Book-Entry Holders of interest in Term
Certificates shall be made in accordance with the procedures established by
the Depository Participant or brokerage firm representing such Book-Entry
Certificate Holders and, notwithstanding any other provision herein to the
contrary, the Trustee shall have no responsibility with respect to any such
transfers (except as set forth in subsection 2.4(d) below). Each Depository
Participant shall only transfer Term Certificates of Certificate Book-Entry
Holders it represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures and in accordance with
applicable law.
SECTION II.4. RESTRICTIONS ON TRANSFER. (a) On the Issuance Date,
the Company shall sell the Term Certificates to the Initial Purchaser
pursuant to the Purchase Agreement and deliver the Term Certificates in the
form specified therein. The Term Certificates may not, after the Issuance
Date or Subsequent Issuance Date, as the case may be, be transferred except
in accordance with any applicable state securities laws, in amounts of at
least U.S. $1,000,000 each and otherwise as follows:
(i) with respect to Term Certificates evidenced by Book-Entry
Certificates, to Qualified Institutional Buyers in reliance on the
exemption from the registration
<PAGE>
18
requirements of the Securities Act provided by Rule 144A promulgated
thereunder ("Rule 144A"); and
(ii) with respect to Term Certificates evidenced by Definitive
Certificates, (A) to Qualified Institutional Buyers in reliance on the
exemption from the registration requirements of the Securities Act provided
by Rule 144A thereunder, (B) to other Institutional Accredited Investors
who deliver a Purchaser Letter to the Trustee or (C) to a person who is
taking delivery of such Certificate in definitive form pursuant to a
transaction that is otherwise exempt from the registration requirements of
the Securities Act, as confirmed in an Opinion of Counsel addressed to the
Trustee and the Company, which counsel and opinion are satisfactory to the
Trustee and the Company.
The Trustee shall have no obligations or duties with respect to determining
whether any transfers of the Certificates are made in accordance with the
Securities Act or any other Requirements of Law; PROVIDED that with respect
to Definitive Certificates, the Trustee shall enforce such transfer
restrictions in accordance with the terms set forth on the related
Certificate and the provisions of the Agreement and this Supplement.
(b) Each purchaser (other than the Initial Purchaser) of the Term
Certificates (including, without limitation, any purchaser of an interest in
the Book-Entry Certificates) will be deemed to have represented and agreed as
follows:
(i) It is (A) a Qualified Institutional Buyer as defined in Rule
144A(a) and is acquiring the Term Certificates for its own institutional
account or for the account or accounts of a Qualified Institutional Buyer
or (B) purchasing Term Certificates being delivered in the form of
Definitive Certificates in a transaction exempt from registration under the
Securities Act and in compliance with the provisions of the Agreement and
in compliance with the legend set forth in clause (v) below;
(ii) It is purchasing one or more Term Certificates in an amount of
at least U.S. $1,000,000 and it understands that such Term Certificates may
be resold, pledged or otherwise transferred only in an amount of at least
U.S. $1,000,000;
(iii) It is not an ERISA Entity and it is not acquiring or holding
any Term Certificate, directly or indirectly, for or on behalf of an ERISA
Entity;
(iv) It understands that the Term Certificates are being transferred
to it in a transaction not involving any public offering within the meaning
of the Securities Act, and that, if in the future it decides to resell,
pledge or otherwise transfer any Term Certificates, such Term Certificates
may be resold, pledged or transferred only (A) in a transaction meeting the
requirements of Rule 144A to a person who the seller reasonably believes is
a Qualified Institutional Buyer that purchases for its own account or for
the account or accounts of a Qualified Institutional Buyer to whom
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19
notice is given that the resale, pledge or transfer is being made in
reliance on Rule 144A or (B) to purchasers of Term Certificates being
delivered in the form of Definitive Certificates, pursuant to a
transaction otherwise exempt from registration under the Securities Act
and in compliance with the provisions of the Agreement and in compliance
with the legend set forth in clause (v) below;
(v) It understands that each Term Certificate will bear a legend
substantially to the following effect:
[FOR BOOK-ENTRY CERTIFICATES ONLY: "UNLESS THIS TERM CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY,
A NEW YORK CORPORATION ("DTC"), TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
INTERESTS IN THIS TERM CERTIFICATE MAY ONLY BE HELD BY QUALIFIED
INSTITUTIONAL BUYERS (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT OF
1933, AS AMENDED).]
THIS TERM CERTIFICATE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF
ANY STATE. THE HOLDER HEREOF, BY PURCHASING THIS TERM CERTIFICATE, AGREES
THAT SUCH TERM CERTIFICATE MAY BE RESOLD, PLEDGED OR TRANSFERRED ONLY IN
ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, IN AN AMOUNT OF AT
LEAST U.S. $1,000,000 AND (1) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A UNDER THE ACT ("RULE 144A"), TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (INCLUDING FOREIGN
QUALIFIED INSTITUTIONAL BUYER) THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OR ACCOUNTS OF A QUALIFIED INSTITUTIONAL BUYER (INCLUDING
FOREIGN QUALIFIED INSTITUTIONAL BUYER) TO WHOM NOTICE IS GIVEN THAT THE
RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR
(2) TO A PERSON (A) WHO IS AN INSTITUTIONAL "ACCREDITED INVESTOR", WITHIN
THE MEANING OF RULE 501(a)(1),(2),(3) OR (7) OF REGULATION D UNDER THE ACT,
AND
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20
WHO DELIVERS A PURCHASER LETTER TO THE TRUSTEE IN THE FORM ATTACHED TO
THE SERIES 1998-1 SUPPLEMENT OR (B) WHO IS TAKING DELIVERY OF SUCH
CERTIFICATE PURSUANT TO A TRANSACTION THAT IS OTHERWISE EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE ACT, AS CONFIRMED IN AN OPINION OF COUNSEL
ADDRESSED TO THE TRUSTEE AND THE COMPANY, WHICH SUCH COUNSEL AND OPINION
ARE SATISFACTORY TO THE COMPANY AND THE TRUSTEE.
THIS TERM CERTIFICATE MAY NOT BE ACQUIRED OR HELD BY OR ON BEHALF OF (1) AN
"EMPLOYEE BENEFIT PLAN" WITHIN THE MEANING OF SECTION 3(3) OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR OTHER RETIREMENT
ARRANGEMENT, INDIVIDUAL RETIREMENT ACCOUNT OR KEOGH PLAN, WHETHER OR NOT IT
IS SUBJECT TO THE PROVISIONS OF TITLE I THEREOF, (2) ANY PLAN DESCRIBED IN
SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, OR (3) ANY
OTHER ENTITY THAT WOULD BE DEEMED TO BE A "BENEFIT PLAN INVESTOR" WITHIN
THE MEANING OF DEPARTMENT OF LABOR REGULATION SECTION 2510.3-101(f)(2) (ANY
OF THE FOREGOING, AN "ERISA ENTITY").
THIS TERM CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY GOVERNMENTAL
AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON.
In addition, any Class B Certificate will contain the following
additional legend:
THE CLASS B CERTIFICATES ARE SUBORDINATED IN RIGHT OF PAYMENT TO THE CLASS
A CERTIFICATES AS PROVIDED IN THE POOLING AGREEMENT AND THE SERIES 1998-1
SUPPLEMENT.
(c) The Transfer Agent and Registrar shall not permit the transfer
of any Term Certificates unless such transfer complies with the terms of the
foregoing legend and, in the case of a transfer (i) to an Institutional
Accredited Investor (other than a Qualified Institutional Buyer), the
transferee delivers a completed Purchaser Letter or (ii) to a Person other
than a Qualified Institutional Buyer or an Institutional Accredited Investor,
upon delivery of an opinion of counsel, satisfactory to the Trustee and the
Company, to the effect that the transferee is taking delivery of the Term
Certificates in a transaction that is otherwise exempt from the registration
requirements of the Securities Act.
(d) If a Certificate Book-Entry Holder of Term Certificates wishes
at any time to transfer its interest therein to one or more Institutional
Accredited Investors or persons described in subsection 2.4(a)(ii)(C) above,
such interest may be so transferred only if, in
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21
addition to satisfaction of any other applicable requirements pursuant hereto
and to the Agreement, the transferor has delivered to the Trustee and the
Transfer Agent and Registrar a Definitive Certificate Conversion Letter.
Upon (i) receipt by the Trustee and the Transfer Agent and Registrar of (x)
such Definitive Certificate Conversion Letter and (y) instructions given in
accordance with the Depository's procedures therefor and (ii) satisfaction of
any other applicable requirements pursuant hereto and to the Agreement, the
Transfer Agent and Registrar shall reflect on the Certificate Register the
date and a decrease in the principal amount of the applicable Book-Entry
Certificate in an amount equal to the principal amount of the beneficial
interest in such Book-Entry Certificate to be transferred, and the Company
shall sign, on behalf of the Trust, and shall direct the Trustee in writing
to duly authenticate, and the Trustee, upon receiving such direction, shall
so authenticate and deliver one or more Definitive Certificates of like tenor
and amount to the transferee or transferees indicated in the related
Definitive Certificate Conversion Letter.
SECTION II.5. APPLICATION OF PROCEEDS. On the Issuance Date, the
Trustee shall remit to the Company any cash proceeds received by it upon the
issuance of the Term Certificates.
SECTION II.6. PROCEDURE FOR DECREASING THE SERIES 1998-1 INVESTED
AMOUNT;
OPTIONAL TERMINATION. (a) If as of the last day of any period of three
consecutive Settlement Periods the daily average excess during such period of
the Series 1998-1 Invested Amount over the Series 1998-1 Adjusted Invested
Amount equals or exceeds the Reduction Threshold, as of the last day of any
Settlement Period, the Company shall reduce the Class A Invested Amount and
the Class B Invested Amount (a "REDUCTION"), by causing the Trustee to
distribute to the Term Certificateholders in accordance with this subsection
2.6(a) an amount (the "REDUCTION AMOUNT") at least equal to such Reduction
Threshold, PROVIDED that in no event shall a Reduction be made if it would
cause the Series 1998-1 Invested Amount to be reduced below $25,000,000. The
Company shall direct the Trustee in writing to make such distribution and
shall specify the amount of the Reduction to be distributed as specified
below. The distribution of the Reduction Amount shall be made to the Term
Certificateholders PRO RATA based on the Initial Invested Amount of each
Class, from the funds on deposit in the Series 1998-1 Principal Collection
Sub-subaccount on the immediately succeeding Distribution Date (a "SPECIAL
DISTRIBUTION DATE"); PROVIDED that no Early Amortization Event or Potential
Early Amortization Event has occurred and is continuing and the Servicer on
behalf of the Company shall have given the Trustee written notice of such
Reduction and the related Reduction Amount (which amount shall not exceed the
available funds on deposit in the Series 1998-1 Principal Collection
Sub-subaccount as of the date of such notice) at least five Business Days
prior to the related Special Distribution Date setting forth the amount of
such Reduction and, in the case of such notice to the Trustee, instructions
not to distribute to the Company any amounts pursuant to subsection
3A.3(b)(i) until the condition set forth in the second proviso in such
subsection is satisfied. The Trustee shall send written notice of any
proposed Reduction to the Term Certificateholders and each Rating Agency as
promptly as reasonably practicable.
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22
(b)(i) On any Business Day, the Company shall have the right to
deliver an irrevocable written notice (an "OPTIONAL TERMINATION NOTICE") to
the Trustee and the Servicer in which the Company declares that the Series
1998-1 Revolving Period shall terminate on the date (the "OPTIONAL
TERMINATION DATE") set forth in such notice (which date, in any event, shall
not be less than 10 days from the date on which such notice is delivered);
PROVIDED that if the Optional Termination Date occurs prior to the second
anniversary of the Issuance Date, the Company shall pay to the Term
Certificateholders, in addition to the Invested Amount (and interest accrued
thereon) to which such holders are entitled, an amount calculated by the
Company equal to the present value of a series of payments equal to the
product of (i) the Class A Invested Amount or the Class B Invested Amount, as
the case may be, and (ii) the spread over One-Month LIBOR applicable to the
Class A Certificates and the Class B Certificates, as the case may be, which
would be payable monthly on each Distribution Date in arrears from the
Optional Termination Date through the second anniversary of the Issuance Date
and discounted at a rate equal to One-Month LIBOR being used to calculate the
applicable Certificate Rates on the Optional Termination Date (the
"PREPAYMENT PREMIUM"); PROVIDED FURTHER that the Prepayment Premium shall be
paid in accordance with the following sentence. On the Distribution Date on
which the Series 1998-1 Invested Amount has been repaid in full, the Company
shall pay, FIRST, to the Class A Certificateholders, and SECOND, to the Class
B Certificateholders, solely from funds available to the Company which are
not otherwise needed to be applied to the payment of any amounts by the
Company pursuant to any Pooling and Servicing Agreement, the applicable
Prepayment Premium.
(ii) From and after the Optional Termination Date, the Series 1998-1
Amortization Period shall commence for all purposes under this Agreement and
the other Transaction Documents. The Trustee shall give prompt written
notice of its receipt of an Optional Termination Notice to the Term
Certificateholders and each Rating Agency.
SECTION II.7. SALE OF ADDITIONAL TERM CERTIFICATES. (a) The
Company may, upon written notice to the Trustee, the Servicer and the Term
Certificateholders and upon satisfaction of each of the conditions set forth
in subsection (b) of this Section 2.7 and Section 5.10 of the Agreement,
direct the Trustee in writing to issue on the following Distribution Date
(each such date a "SUBSEQUENT ISSUANCE DATE") additional Class A Certificates
and Class B Certificates, identical to the existing Class A Certificates and
Class B Certificates (except that the Certificate Rate applicable to such
additional Class A Certificates or Class B Certificates, as the case may be,
may differ from the Certificate Rate applicable to such existing Class A
Certificates or Class B Certificates, as the case may be) in an aggregate
principal amount and in such names and denominations as specified by the
Company in accordance with subsection 2.7(c) below; PROVIDED that the Series
1998-1 Target Receivables Amount shall not exceed the Series 1998-1 Allocated
Receivables Amount after giving effect to any increase in the Invested Amount
on such Subsequent Issuance Date; PROVIDED FURTHER that the principal amount
of the Class A Certificates and the Class B Certificates issued in any such
additional issuance shall be issued in such proportion that would cause,
after giving effect to such issuance, the Class B Invested Amount to be no
less than the same percentage of the Series 1998-1 Invested Amount as the
Class B Initial Invested Amount was of the Series 1998-1 Initial Invested
Amount.
<PAGE>
23
The Company may arrange for the sale of such additional Class A
Certificates and Class B Certificates pursuant to a private placement or any
other sale arrangement. On each Subsequent Issuance Date, if any, the Series
1998-1 Invested Amount, the Class A Invested Amount and the Class B Invested
Amount (and each other amount set forth herein, the calculation of which is
based on such amount) shall be recalculated by the Servicer to include the
additional Initial Invested Amounts with respect to the Class A Certificates
and Class B Certificates issued on such date.
(b) On any Subsequent Issuance Date, the Trustee shall only
authenticate and deliver any additional Class A Certificates and Class B
Certificates upon satisfaction of the following conditions on or prior to
such Subsequent Issuance Date:
(i) the Rating Agencies shall have been notified by the Company of
the proposed issuance of additional Class A Certificates and Class B
Certificates at least 10 days prior to the proposed Subsequent Issuance
Date, each Rating Agency shall have issued a rating (as confirmed in a
letter delivered to the Trustee) on the additional Class A Certificates and
Class B Certificates that is equivalent to that rating issued by such
Rating Agency on the Issuance Date and the Rating Agency Condition shall
have been satisfied on or prior to such Subsequent Issuance Date with
respect to such issuance;
(ii) the Trustee shall have received from the Company an Officer's
Certificate certifying that no Early Amortization Event or Potential Early
Amortization Event has occurred and is continuing with respect to Series
1998-1 or would occur as a result of such issuance;
(iii) a Tax Opinion addressed to the Trust and the Trustee shall have
been delivered to the Trustee;
(iv) an Opinion of Counsel addressed to the Trust and the Trustee
shall have been delivered to the Trustee stating that all of the conditions
to the issuance of such additional Class A Certificates and Class B
Certificates shall have been satisfied (which opinion may, to the extent it
concerns questions of fact, rely on an Officer's Certificate with respect
to such questions of fact); and
(v) a General Opinion addressed to the Trust and the Trustee.
(c) On each Subsequent Issuance Date, the Company shall sign, on
behalf of the Trust, and shall direct the Trustee in a written communication
signed by a Responsible Officer to duly authenticate, and the Trustee, upon
receiving such direction, shall so authenticate and deliver the related
additional Term Certificates in such names and such denominations and deliver
such additional Term Certificates in accordance with such written directions.
<PAGE>
24
SECTION II.8. OPTIONAL REDEMPTION. (a) On any Distribution Date
the Company may, at its option, redeem at any time all of the Term
Certificates by delivering an irrevocable written notice (an "OPTIONAL
REDEMPTION NOTICE") to the Trustee and the Servicer on such date (the
"OPTIONAL NOTICE DATE"; which date shall not be less than 10 days prior to
the date fixed for redemption) at a redemption price equal to:
(i) for the Class A Certificateholders, the Class A Invested
Amount PLUS all accrued, unpaid interest thereon (the "CLASS A
REDEMPTION PRICE") to the date fixed for redemption; PROVIDED that if
such Optional Redemption Notice is delivered prior to the second
anniversary of the Issuance Date, the Company shall pay, in addition
to the Redemption Price to which such holders are entitled, an amount
calculated by the Company equal to the present value of a series of
payments equal to the product of (i) the Class A Invested Amount and
(ii) the spread over One-Month LIBOR applicable to the Class A
Certificate Rate which would be payable monthly on each Distribution
Date in arrears from the Optional Notice Date through the second
anniversary of the Issuance Date, discounted at a rate equal to
One-Month LIBOR being used to calculate the Class A Certificate Rate on
the Optional Notice Date (the "CLASS A REDEMPTION PREMIUM"); and
(ii) for the Class B Certificateholders, the Class B Invested Amount
PLUS all accrued, unpaid interest thereon (the "CLASS B REDEMPTION PRICE")
to the date fixed for redemption; PROVIDED that if such Optional Redemption
Notice is delivered prior to the second anniversary of the Issuance Date,
the Company shall pay, in addition to the Redemption Price to which such
holders are entitled, an amount calculated by the Company equal to the
present value of a series of payments equal to the product of (i) the Class
B Invested Amount and (ii) the spread over One-Month LIBOR applicable to
the Class B Certificate Rate which would be payable monthly on each
Distribution Date in arrears from the Optional Notice Date through the
second anniversary of the Issuance Date, discounted at a rate equal to
One-Month LIBOR being used to calculate the Class B Certificate Rate on the
Optional Notice Date (the "CLASS B REDEMPTION PREMIUM").
(b) Each Optional Redemption Notice shall specify the total
principal amount to be redeemed, the date fixed for redemption and the
Redemption Price at which the Class A Certificates and the Class B
Certificates, as the case may be, are to be redeemed. On or prior to the
Optional Notice Date, the Company shall deposit with the Trustee immediately
available funds (or Eligible Investments which shall mature prior to the date
fixed for redemption) sufficient to redeem on the date fixed for redemption
all the Class A Certificates and the Class B Certificates, so called for
redemption at the appropriate Redemption Price, together with the applicable
Redemption Premium, if any.
(c) If the giving of the Optional Redemption Notice shall have
been completed as above provided, the Class A Certificates and/or the Class B
Certificates, as the case may be, shall become due and payable on the date
and at the place stated in such notice at the applicable Redemption Price,
together with the applicable Redemption Premium, if any,
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25
and on and after such date fixed for redemption (unless the Company shall
default in the payment of such Class A Certificates and/or the Class B
Certificates, as the case may be, at the Redemption Price, together with the
applicable Redemption Premium, if any) interest on the Class A Certificates
and/or the Class B Certificates, as the case may be, so called for redemption
shall cease to accrue. On presentation and surrender of such Class A
Certificates and/or Class B Certificates, as the case may be, at said place
of payment in said notice specified, on or after the date fixed for
redemption the said Term Certificates shall be paid and redeemed by the
Company at the applicable Redemption Price, together with the applicable
Redemption Premium to the date fixed for redemption, if any. All Term
Certificates surrendered to the Trustee, upon redemption pursuant to the
provisions of this Article II, shall be forthwith cancelled by it.
ARTICLE III
ARTICLE III OF THE AGREEMENT
Section 3.1 of the Agreement and each other section of Article III
of the Agreement relating to another Series shall read in their entirety as
provided in the Agreement. Article III of the Agreement (except for Section
3.1 thereof and any portion thereof relating to another Series) shall read in
its entirety as follows and shall be exclusively applicable to the Term
Certificates:
SECTION 3A.2. ESTABLISHMENT OF TRUST ACCOUNTS. (a) The Trustee
shall cause to be established and maintained in the name of the Trustee, on
behalf of the Trust, (i) for the benefit of the Class A Certificateholders,
(ii) for the benefit, subject to the prior and senior interest of the Class A
Certificateholders, of the Class B Certificateholders and (iii) in the case
of clauses (A), (B) and (C) below, for the benefit, subject to the prior and
senior interest of the Term Certificateholders, of the owner of the Series
1998-1 Subordinated Interest, (A) a subaccount of the Collection Account (the
"SERIES 1998-1 COLLECTION SUBACCOUNT"), which subaccount is the Series
Collection Subaccount with respect to Series 1998-1; (B) two subaccounts of
the Series 1998-1 Collection Subaccount: (1) the Series 1998-1 Principal
Collection Sub-subaccount and (2) the Series 1998-1 Non-Principal Collection
Sub-subaccount (respectively, the "SERIES 1998-1 PRINCIPAL COLLECTION
SUB-SUBACCOUNT" and the "SERIES 1998-1 NON-PRINCIPAL COLLECTION
SUB-SUBACCOUNT"); and (C) a subaccount of the Series 1998-1 Non-Principal
Collection Sub-subaccount (the "SERIES 1998-1 ACCRUED INTEREST
SUB-SUBACCOUNT"; all accounts established pursuant to this subsection 3A.2(a)
and listed on Schedule 1, collectively, the "TRUST ACCOUNTS"), each Trust
Account to bear a designation indicating that the funds deposited therein are
held for the benefit of the Persons (and, for each such Person, to the
extent) set forth in clauses (i), (ii) and (iii) above. The Trustee, on
behalf of the Holders, shall possess all right, title and interest in all
funds from time to time on deposit in, and all Eligible Investments credited
to, the Trust Accounts and in all proceeds thereof. The Trust Accounts shall
be under the sole dominion and control of the Trustee for the exclusive
benefit of the Persons (and, for each such Person, to the extent) set forth
in clauses (i), (ii) and (iii) above.
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26
(b) All Eligible Investments in the Trust Accounts shall be held
by the Trustee, on behalf of the Holders, for the exclusive benefit of the
Persons (and, for each such Person, to the extent) set forth in clauses (A),
(B) and (C) of subsection 3A.2(a) and, subject to the prior interest of such
Persons, the owner of the Series 1998-1 Subordinated Interest; PROVIDED,
HOWEVER, that funds on deposit in a Trust Account which is a Sub-subaccount
of a Collection Account may, at the direction of the Company, be invested
together with funds held in other Sub-subaccounts of the Collection Account.
After giving effect to any distribution to the Company pursuant to subsection
3A.3(b), amounts on deposit and available for investment in the Series 1998-1
Principal Collection Sub-subaccount shall be invested by the Trustee at the
written direction of the Company in Eligible Investments that mature, or that
are payable or redeemable upon demand of the holder thereof, (i) in the case
of any such investment made during the Series 1998-1 Revolving Period, on or
prior to the next Business Day and (ii) in the case of any such investment
made during the Series 1998-1 Amortization Period, on or prior to the
Business Day immediately preceding the next Distribution Date. Amounts on
deposit and available for investment in the Series 1998-1 Non-Principal
Collection Sub-subaccount and the Series 1998-1 Accrued Interest
Sub-subaccount shall be invested by the Trustee at the written direction of
the Company in Eligible Investments that mature, or that are payable or
redeemable upon demand of the holder thereof, on or prior to the Business Day
immediately preceding the next Distribution Date. As of the Business Day
immediately preceding such next Distribution Date, (x) all interest and other
investment earnings (net of losses and investment expenses) on funds
deposited in the Series 1998-1 Accrued Interest Sub-subaccount shall be
deposited in the Series 1998-1 Non-Principal Collection Sub-subaccount and
(y) all interest and investment earnings (net of losses and investment
expenses) on funds deposited in the Series 1998-1 Principal Collection
Sub-subaccount shall be deposited in the Series 1998-1 Non-Principal
Collection Sub-subaccount.
SECTION 3A.3. DAILY ALLOCATIONS. In accordance with the written
direction of the Servicer, upon which the Trustee may conclusively rely:
(a) The portion of the Aggregate Daily Collections allocated to the
Term Certificates pursuant to Article III of the Agreement shall be allocated
and distributed on each Business Day as set forth in this Article III by the
Trustee as follows:
(i) an amount equal to the Accrued Expense Amount for such day
(or, during the Series 1998-1 Revolving Period, such greater amount as the
Company may request in writing) shall be transferred from the Series 1998-1
Collection Subaccount to the Series 1998-1 Non-Principal Collection Sub-
subaccount;
(ii) any remaining funds on deposit in the Series 1998-1
Collection Subaccount shall be transferred by the Trustee to the Series
1998-1 Principal Collection Sub-subaccount.
(b)(i) On each Business Day during the Series 1998-1 Revolving
Period (including Distribution Dates), after giving effect to all allocations
of Aggregate Daily Collections on such Business Day, amounts on deposit in
the Series 1998-1 Principal
<PAGE>
27
Collection Sub-subaccount shall be distributed by the Trustee to the Company
(but only to the extent that the Trustee has received a Daily Report which
reflects the receipt of the Collections on deposit therein) not later than
2:00 p.m., New York City time, in accordance with directions contained in
such Daily Report; PROVIDED that such distribution shall be made only if no
Potential Early Amortization Event or Early Amortization Event, in each case
pursuant to Section 7.1 of the Agreement or subsections (a), (d) (but only
with respect to a Servicer Default set forth in subsection 6.1(e) of the
Servicing Agreement), (g), (i) or (j) of Section 5.1 of this Supplement, has
occurred and is continuing and only to the extent that, after giving effect
to such distribution, the Series 1998-1 Target Receivables Amount would not
exceed the Series 1998-1 Allocated Receivables Amount; PROVIDED FURTHER that
if the Company or the Servicer, on behalf of the Company, shall have given a
notice of a Reduction and the related Reduction Amount to the Trustee and the
Servicer pursuant to subsection 2.6(a) (and the Trustee shall have received
such notice), the Trustee shall retain, until the related Special
Distribution Date, aggregate amounts on deposit in the Series 1998-1
Principal Collection Sub-subaccount equal to the sum of the Reduction Amount
in respect thereof; PROVIDED STILL FURTHER that in the event that an amount
less than the Accrued Expense Amount for such day was transferred from the
Series 1998-1 Collection Subaccount to the Series 1998-1 Non-Principal
Collection Sub-subaccount on such day pursuant to subsection 3A.3(a)(i), the
amount on deposit in the Series 1998-1 Principal Collection Sub-subaccount,
up to the amount of such deficiency, shall be transferred to the Series
1998-1 Non-Principal Collection Sub-subaccount. Amounts distributed to the
Company hereunder shall be deemed to be paid first from Collections received
directly by the Servicer and second from Collections received in the
Lockboxes.
(ii) On each Business Day during the Series 1998-1
Amortization Period (including Distribution Dates), funds deposited in the
Series 1998-1 Principal Collection Sub-subaccount shall be invested in
Eligible Investments that mature on or prior to the Business Day immediately
preceding the next Distribution Date and shall be distributed on such
Distribution Date in accordance with subsection 3A.6(c). No amounts on
deposit in the Series 1998-1 Principal Collection Sub-subaccount shall be
distributed by the Trustee to the Company or the owner of the Series 1998-1
Subordinated Interest during the Series 1998-1 Amortization Period.
(c) On each Business Day, an amount equal to the Series 1998-1
Daily Interest Expense for such day shall be transferred by the Trustee from
the Series 1998-1 Non-Principal Collection Sub-subaccount to the Series
1998-1 Accrued Interest Sub-subaccount.
(d) The allocations to be made pursuant to this Section 3A.3 are
subject to the provisions of Sections 2.5, 2.6, 7.2 and 9.1 of the Agreement.
SECTION 3A.4. DETERMINATION OF INTEREST. (a) The amount of interest
distributable with respect to the Term Certificates on each Distribution Date
for the Accrual Period ending on such Distribution Date shall be determined as
follows:
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28
(i) for the Class A Certificates, an amount (the "CLASS A MONTHLY
INTEREST") equal to the product of (A) the Class A Certificate Rate for
such Accrual Period, (B) the Class A Invested Amount on the first day of
such Accrual Period (after giving effect to any distributions of principal
on such date) and (C) the actual number of days in such Accrual Period
DIVIDED BY 360; PROVIDED that if any additional Class A Certificates have
been issued on any Subsequent Issuance Date, the Class A Monthly Interest
shall equal the sum of the monthly interest amount for each outstanding
tranche of Class A Certificates (based on the outstanding Invested Amount
and the applicable Class A Certificate Rate in respect of such tranche);
(ii) for the Class B Certificates, an amount (the "CLASS B MONTHLY
INTEREST") equal to the product of (A) the Class B Certificate Rate for
such Accrual Period, (B) the Class B Invested Amount on the first day of
such Accrual Period (after giving effect to any distributions of principal
on such date) and (C) the actual number of days in such Accrual Period
DIVIDED BY 360; PROVIDED that if any additional Class B Certificates have
been issued on any Subsequent Issuance Date, the Class B Monthly Interest
shall equal the sum of the monthly interest amount for each outstanding
tranche of Class B Certificates (based on the outstanding Invested Amount
and the applicable Class B Certificate Rate in respect of such tranche);
and
(iii) The Servicer shall notify the Trustee in writing (upon which
the Trustee may conclusively rely) on each Settlement Report Date of the
amount calculated pursuant to clauses (i) and (ii) above.
(b)(i) On each Distribution Date, the Servicer shall determine
the excess, if any (the "CLASS A INTEREST SHORTFALL"), of (A) the Class A
Monthly Interest for the Accrual Period ending on such Distribution Date OVER
(B) the amount which is available to be distributed to the Class A
Certificateholders on such Distribution Date in respect thereof pursuant to
this Supplement. If the Class A Interest Shortfall with respect to any
Distribution Date is greater than zero, an additional amount ("CLASS A
ADDITIONAL INTEREST") equal to the product, for the next Accrual Period (or
portion thereof) until such Class A Interest Shortfall is repaid, of (A) a
rate per annum equal to the sum of (x) the Class A Certificate Rate for the
next Accrual Period and (y) 1%, (B) such Class A Interest Shortfall (or the
portion thereof which has not been paid to the Class A Certificateholders)
and (C) the actual number of days in such Accrual Period (or portion thereof)
DIVIDED BY 360, shall be payable as provided herein with respect to the Class
A Certificates on each Distribution Date following such Distribution Date, to
but excluding the Distribution Date on which such Class A Interest Shortfall
is paid in full to the Class A Certificateholders.
(ii) On each Distribution Date, the Servicer shall determine
the excess, if any (the "CLASS B INTEREST SHORTFALL"), of (A) the Class B
Monthly Interest for the Accrual Period ending on such Distribution Date OVER
(B) the amount which will be available to be distributed to the Class B
Certificateholders on such Distribution Date in respect thereof pursuant to
this Supplement. If the Class B Interest Shortfall with respect to any
Distribution Date is greater than zero, an additional amount ("CLASS B
ADDITIONAL INTEREST") equal to the
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product, for the next Accrual Period (or portion thereof) until such Class B
Interest Shortfall is repaid, of (A) a rate per annum equal to the sum of (x)
the Class B Certificate Rate for the next Accrual Period and (y) 1%, (B) such
Class B Interest Shortfall (or the portion thereof which has not been paid to
the Class B Certificateholders) and (C) the actual number of days in the next
Accrual Period (or portion thereof) DIVIDED BY 360, shall be payable as
provided herein with respect to the Class B Certificates on each Distribution
Date following such Distribution Date, to but excluding the Distribution Date
on which such Class B Interest Shortfall is paid in full to the Class B
Certificateholders.
SECTION 3A.5. DETERMINATION OF SERIES 1998-1 MONTHLY PRINCIPAL.
(a) PAYMENTS OF SERIES 1998-1 PRINCIPAL. The amount (the "SERIES 1998-1
MONTHLY PRINCIPAL PAYMENT") distributable from the Series 1998-1 Principal
Collection Sub-subaccount on each Distribution Date during the Series 1998-1
Amortization Period shall be equal to the amount on deposit in such account
on the immediately preceding Settlement Report Date; PROVIDED, HOWEVER, that
the Series 1998-1 Monthly Principal Payment on any Distribution Date shall
not exceed the Series 1998-1 Invested Amount on such Distribution Date after
giving effect to the reductions and increases pursuant to paragraphs (b) and
(c) below.
(b) REDUCTIONS TO SERIES 1998-1 PRINCIPAL. If, on any Special
Allocation Settlement Report Date, the Series 1998-1 Allocable Charged-Off
Amount is greater than zero for the related Settlement Period, the Trustee shall
(in accordance with written directions from the Servicer, upon which the Trustee
may conclusively rely) make the following applications of such amounts in the
following order of priority:
(i) the Series 1998-1 Required Reserves shall be reduced (but
not below zero) by an amount equal to the Series 1998-1 Allocable Charged-
Off Amount (which shall also be reduced by the amount so applied);
(ii) then, to the extent that the Series 1998-1 Allocable
Charged-Off Amount is greater than zero following the application in
clause (i) above, the Class B Invested Amount shall be reduced (but not
below zero) by an amount equal to such remaining Series 1998-1 Allocable
Charged-Off Amount (which shall also be reduced by the amount so applied);
and
(iii) then, to the extent that the Series 1998-1 Allocable
Charged-Off Amount is greater than zero following the applications in
clauses (i) and (ii) above, the Class A Invested Amount shall be reduced
(but not below zero) by an amount equal to such remaining Series 1998-1
Allocable Charged-Off Amount (which shall also be reduced by the amount
so applied).
(c) INCREASES TO SERIES 1998-1 PRINCIPAL. If, on any Special
Allocation Settlement Report Date, the Series 1998-1 Allocable Recoveries
Amount is greater than zero for the related Settlement Period, the Trustee
shall (in accordance with written directions from the Servicer upon which the
Trustee may conclusively rely) make the following applications
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30
(after giving effect to the applications in paragraph (b) of such amount in the
following order of priority):
(i) the Class A Invested Amount shall be increased (but only to
the extent of any previous reductions of the Class A Invested Amount
pursuant to subsection 3A.5(b)(iii)) by the amount of the Series 1998-1
Allocable Recoveries Amount (which shall also be reduced by the amount so
applied); and
(ii) then, to the extent that the Series 1998-1 Allocable
Recoveries Amount is greater than zero following the application in clause
(i) above, the Class B Invested Amount shall be increased (but only to the
extent of any previous reductions of the Class B Invested Amount pursuant
to subsection 3A.5(b)(ii)) by such remaining Series 1998-1 Allocable
Recoveries Amount (which shall also be reduced by the amount so applied);
and
(iii) then, to the extent that the Series 1998-1 Allocable
Recoveries Amount is greater than zero following the applications in
clauses (i) and (ii) above, the Series 1998-1 Required Reserves shall be
increased (but only to the extent of any previous reductions of the Series
1998-1 Required Reserves pursuant to subsection 3A.5(b)(i)) by such
remaining Series 1998-1 Allocable Recoveries Amount (which shall also be
reduced by the amount so applied).
SECTION 3A.6. APPLICATIONS. (a) On each Distribution Date, the
Trustee shall distribute from amounts on deposit in the Series 1998-1 Accrued
Interest Sub-subaccount in the following order of priority to the extent
funds are available:
(i) to the Class A Certificateholders, an amount equal to the Class
A Monthly Interest payable on such Distribution Date, PLUS the amount of
any Class A Monthly Interest previously due but not distributed to the
Class A Certificateholders on a prior Distribution Date, PLUS the amount of
any Class A Additional Interest for such Distribution Date and any Class A
Additional Interest previously due but not distributed to the Class A
Certificateholders on a prior Distribution Date; PROVIDED, HOWEVER, that
during the Series 1998-1 Amortization Period, no Class A Additional
Interest will be paid until repayment in full of the Series 1998-1 Invested
Amount and payment in full of all Class A Monthly Interest and Class B
Monthly Interest.
(ii) to the Class B Certificateholders, an amount equal to the Class
B Monthly Interest payable on such Distribution Date, PLUS the amount of
any Class B Monthly Interest previously due but not distributed to the
Class B Certificateholders on a prior Distribution Date, PLUS the amount of
any Class B Additional Interest for such Distribution Date and any Class B
Additional Interest previously due but not distributed to the Class B
Certificateholders on a prior Distribution Date; PROVIDED, HOWEVER, that
during the Series 1998-1 Amortization Period, no Class B Additional
Interest will be paid until repayment in full of the Series 1998-1 Invested
Amount and payment in full of all Class A Monthly Interest and Class B
Monthly Interest.
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31
(b) On each Distribution Date, the Trustee shall apply funds on
deposit in the Series 1998-1 Non-Principal Collection Sub-subaccount in the
following order of priority to the extent funds are available:
(i) an amount equal to the Series 1998-1 Monthly Servicing Fee
for the Accrual Period ending on such Distribution Date shall be withdrawn
from the Series 1998-1 Non-Principal Collection Sub-subaccount by the
Trustee and paid to the Servicer or the Successor Servicer, as the case may
be (less any amounts payable to the Trustee pursuant to Section 8.5 of the
Agreement, which shall be paid to the Trustee); and
(ii) an amount equal to any unpaid Program Costs due and payable
shall be withdrawn from the Series 1998-1 Non-Principal Collection Sub-
subaccount by the Trustee and paid to the Persons owed such amounts.
Any remaining amounts on deposit in the Series 1998-1 Non-Principal
Collection Sub-subaccount on any Distribution Date (in excess of the Accrued
Expense Amount as of such day) not allocated pursuant to clauses (i) and (ii)
above shall be paid to the owner of the Series 1998-1 Subordinated Interest;
PROVIDED, HOWEVER, that during the Series 1998-1 Amortization Period, such
remaining amounts shall be deposited in the Series 1998-1 Principal
Collection Sub-subaccount for distribution in accordance with subsection
3A.6(c).
(c) During the Series 1998-1 Amortization Period, the Trustee
shall apply, on each Distribution Date, amounts on deposit in the Series
1998-1 Principal Collection Sub-subaccount in the following order of priority:
(i) an amount equal to the Series 1998-1 Monthly Principal
Payment for such Distribution Date shall be distributed from the Series
1998-1 Principal Collection Sub-subaccount:
(A) first, pro rata, to the Class A Certificateholders until the
repayment in full of the Class A Invested Amount; and
(B) second, pro rata, to the Class B Certificateholders until
the repayment in full of the Class B Invested Amount; and
(ii) following the repayment in full of the Series 1998-1
Invested Amount, (x) if any amounts are owed to the Trustee or any other
Person, on account of its expenses, advances and disbursements incurred
in respect of the performance of its responsibilities hereunder or as
Successor Servicer, such amounts shall be transferred from the Series
1998-1 Principal Collection Sub-subaccount and paid to the Trustee or
such other Person and (y) if the Optional Termination Date has occurred
and any portion of the Prepayment Premium payable to the Term
Certificateholders pursuant to subsection 2.6(b) has not been paid, then
funds in an amount equal to the unpaid portion of such Prepayment
Premium shall be transferred from the Series 1998-1
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32
Principal Collection Sub-subaccount and paid, FIRST, to the Class A
Certificateholders and, SECOND, to the Class B Certificateholders; and
(iii) following the repayment in full of the Series 1998-1
Invested Amount and of all of the amounts set forth in clause (ii), the
remaining amount on deposit in the Series 1998-1 Principal Collection
Sub-subaccount on such Distribution Date, if any, shall be distributed
to the owner of the Series 1998-1 Subordinated Interest.
(d) On each Special Distribution Date occurring in respect of a
Reduction hereunder, the Trustee shall distribute to the Term Certificateholders
on such Special Distribution Date (PRO RATA based on the then outstanding
Invested Amount of each Class and PRO RATA within each Class), from amounts on
deposit in the Series 1998-1 Principal Collection Sub-subaccount an amount equal
to the Reduction Amount to be made on such Special Distribution Date.
ARTICLE IV
DISTRIBUTIONS AND REPORTS
Article IV of the Agreement (except for any portion thereof relating
to another Series) shall read in its entirety as follows and the following shall
be exclusively applicable to the Term Certificates:
SECTION 4A.1. DISTRIBUTIONS. (a) The final distribution of principal
in respect of the Term Certificates will be made after due notice by the Trustee
of the pendency of such distribution (subject to at least five Business Days'
prior written notice from the Servicer to the Trustee containing all information
required for the Trustee's notice, upon which the Trustee may conclusively rely)
and only upon presentation and surrender of such Term Certificates at the office
of the Paying Agent or at the Corporate Trust Office of the Trustee, by check
drawn on, or by transfer to an account maintained by the holder with, a bank in
New York City. Any other distribution of principal in respect of the Term
Certificates or on account of interest or fees on the Term Certificates on each
Distribution Date will be made or caused to be made by the Paying Agent or the
Trustee to the persons in whose name the Term Certificates are registered at the
close of business on the related Record Date. Such payment will be made by a
check mailed to the Term Certificateholders at such Term Certificateholders'
registered addresses or, upon application by any Term Certificateholder of at
least $5,000,000 in original principal amount thereof to the Trustee not later
than five Business Days prior to the related Distribution Date, by transfer to
an account maintained by the Term Certificateholder with a bank in New York
City.
(b) All allocations and distributions hereunder shall be in accordance
with the Daily Report and the Monthly Settlement Statement and subject to
subsection 3.1(h) of the Agreement.
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33
SECTION 4A.2. STATEMENTS AND NOTICES. (a) MONTHLY SETTLEMENT
STATEMENTS. On each Settlement Report Date, the Servicer shall deliver to the
Trustee and each Rating Agency (commencing with the Settlement Report Date
occurring on May 15, 1998) a Monthly Settlement Statement in the Form of Exhibit
D setting forth, among other things, the Loss Reserve Ratio I, the Loss Reserve
Ratio II, the Dilution Reserve Ratio I, the Dilution Reserve Ratio II, the
Minimum Ratio, in each case, where applicable, with respect to the Class A
Certificates and the Class B Certificates, the Carrying Cost Reserve Ratio and
the Servicing Reserve Ratio and the components of the calculation thereof, each
as recalculated for the period until the next succeeding Settlement Report Date.
The Trustee shall forward a copy of each Monthly Settlement Statement to any
Term Certificateholder upon request by such Term Certificateholder. The
Company and the Servicer will deliver copies of all notices, reports,
statements and other documents delivered by it pursuant to the Pooling and
Servicing Agreements to each Rating Agency. A copy of any such items may be
obtained by any Certificateholder upon a written request delivered to the
Trustee at the Corporate Trust Office.
(b) ANNUAL HOLDERS' TAX STATEMENT. On or before January 31 of each
calendar year (or such earlier date as required by applicable law), beginning
with calendar year 1999, the Trustee shall furnish, or cause to be furnished, to
each Person who at any time during the preceding calendar year was a Term
Certificateholder, a statement prepared by the Company containing the aggregate
amount distributed to such Person for such calendar year or the applicable
portion thereof during which such Person was a Term Certificateholder, together
with such other information as is required to be provided by an issuer of
indebtedness under the Internal Revenue Code and such other customary
information as the Company deems necessary or desirable to enable the Term
Certificateholders to prepare their tax returns; PROVIDED, that such statement
or such other information is delivered to the Trustee by the Company in a
reasonably timely fashion to allow the Trustee to fulfill its obligation
hereunder. Such obligation of the Trustee shall be deemed to have been
satisfied to the extent that substantially comparable information shall have
been prepared by the Servicer and provided to the Trustee and to the Term
Certificateholders, in each case pursuant to any requirements of the Internal
Revenue Code as from time to time in effect.
(c) EARLY AMORTIZATION EVENT/DISTRIBUTION OF PRINCIPAL NOTICES. Upon
the occurrence of an Early Amortization Event or Potential Early Amortization
Event with respect to Series 1998-1, the Company or the Servicer, as the case
may be, shall give prompt written notice thereof to the Trustee. As promptly as
reasonably practicable after its receipt of notice of the occurrence of an Early
Amortization Event with respect to Series 1998-1, the Trustee shall give notice
thereof (i) to each Rating Agency (which notice shall be given in writing not
later than the second Business Day after such receipt) and (ii) each Term
Certificateholder.
SECTION 4A.3. NOTICE PROCEDURES. Notices required to be given to the
Term Certificateholders hereunder will be delivered by first class mail to the
addresses of such holders as they appear in the Certificate Register. Each of
the Company and the Servicer will deliver copies of all notices, reports,
statements and other documents delivered by it pursuant to the Pooling and
Servicing Agreements to each Rating Agency.
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34
ARTICLE V
ADDITIONAL EARLY AMORTIZATION EVENTS
SECTION V.1. ADDITIONAL EARLY AMORTIZATION EVENTS. If any one of
the events specified in Section 7.1 of the Agreement (after any grace periods
or consents applicable thereto) or any one of the following events (each, an
"EARLY AMORTIZATION EVENT") shall occur during the Series 1998-1 Revolving
Period with respect to the Term Certificates:
(a) (i) failure on the part of the Servicer to direct any payment or
deposit to be made or failure of any payment or deposit to be made in
respect of interest owing on any Term Certificates within two Business
Days of the date such interest is due, (ii) failure on the part of the
Servicer to direct any payment or deposit to be made or failure of any
payment or deposit to be made in respect of principal owing on any Term
Certificates on the date such principal is due or (iii) failure on the
part of the Servicer to direct any payment or deposit to be made, or of
the Company to make any payment or deposit in respect of any other
amounts owing by the Company, under any Pooling and Servicing Agreement
within five Business Days of the date such other amount is due or such
deposit is required to be made;
(b) (i) failure on the part of the Company duly to observe or perform
in any material respect any of the covenants or agreements of the Company
set forth in Section 2.7(b) or (l) or 2.8 of the Agreement or (ii) failure
on the part of the Company duly to observe or perform in any material
respect any other covenants or agreements of the Company set forth in any
Pooling and Servicing Agreement, which failure continues unremedied 30 days
after the earlier of the date on which a Responsible Officer of the Company
or the Servicer has knowledge thereof and the date on which written notice
of such failure, requiring the same to be remedied, shall have been given
to the Company by the Trustee, or to the Company and the Trustee by Term
Certificateholders representing 25% or more of the Series 1998-1 Invested
Amount;
(c) any representation or warranty made or deemed made by the Company
in any Pooling and Servicing Agreement to or for the benefit of the Term
Certificateholders (i) proves to have been incorrect in any material
respect when made or when deemed made and (ii) continues to be incorrect 30
days after the earlier of the date on which a Responsible Officer of the
Company or the Servicer has knowledge thereof and the date on which notice
of such failure, requiring the same to be remedied, has been given by the
Trustee to the Company or by Term Certificateholders representing 25% or
more of the Series 1998-1 Invested Amount to the Company and the Trustee;
PROVIDED, HOWEVER, that an Early Amortization Event with respect to the
Term Certificates shall not be deemed to have occurred under this paragraph
if the incorrectness of such representation or warranty gives rise to an
obligation to repurchase the related Receivables and the Company has
repurchased the related Receivable or all such Receivables, if applicable,
in accordance with the
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35
provisions of any Pooling and Servicing Agreement within ten Business Days
of the day on which the Company was obligated to do so;
(d) a Servicer Default with respect to the Servicer shall have
occurred and be continuing;
(e) a Purchase Termination Event (as defined in the Receivables Sale
Agreement) with respect to Core-Mark shall have occurred and be continuing
under the Receivables Sale Agreement;
(f) a Change in Control shall have occurred;
(g) the Series 1998-1 Allocated Receivables Amount shall be less than
the Series 1998-1 Target Receivables Amount for a period of five
consecutive Business Days;
(h) any of the Agreement, the Servicing Agreement, this Supplement or
the Receivables Sale Agreement shall cease, for any reason, to be in full
force and effect in any material respect, or the Company, any Seller, the
Servicer, any Sub-Servicer or any Affiliate of any thereof shall so assert
in writing;
(i) the Trust shall for any reason cease to have a valid and perfected
first priority undivided ownership or security interest in substantially
all of the Trust Assets (subject to no other Liens other than Permitted
Liens described in clauses (i) and (iv) of the definition thereof), or any
of Core-Mark, the Company or any Affiliate of any thereof shall so assert;
(j) 15 days shall have elapsed after there shall have been filed
against Core-Mark, the Company or the Trust (i) a notice of federal tax
Lien with respect to taxes exceeding $100,000 in the aggregate from the
Internal Revenue Service, (ii) a notice of Lien with respect to amounts
exceeding $100,000 in the aggregate from the PBGC under Section 412(n) of
the Internal Revenue Code or Section 302(f) of ERISA for a failure to make
a required installment or other payment to a plan to which either of such
sections applies, (iii) a notice of state tobacco excise tax Lien with
respect to taxes exceeding $100,000 in the aggregate from any state
Governmental Authority or (iv) a notice of any other Lien the existence of
which could reasonably be expected to have a material adverse effect on the
business, operations or financial condition of such Person, unless in each
case there shall have been delivered to the Trustee and each Rating Agency
proof of the release of, or payment of amounts secured by, such Lien;
(k) a Reduction shall have occurred and, as a result thereof, the
Series 1998-1 Invested Amount shall have been reduced to an amount below
$25,000,000; or
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36
(l) any action, suit, investigation or proceeding at law or in equity
(including, without limitation, injunctions, writs or restraining orders)
shall be brought or commenced or filed by or before any arbitrator, court
or Governmental Authority against the Company or the Servicer or any
properties, revenues or rights of either thereof which could reasonably be
expected to have a Material Adverse Effect;
then, in the case of (x) any event described in Section 7.1 of the Agreement,
after the applicable grace period (if any) set forth in such Section,
automatically without any notice or action on the part of the Trustee or the
Term Certificateholders, an early amortization period shall immediately commence
or (y) any other event described above, after the applicable grace period (if
any) set forth in such subsections, the Trustee may, and at the written
direction of the Majority Term Certificateholders voting as a single class
shall, by written notice then given to the Company and the Servicer, declare
that an early amortization period has commenced as of the date of such notice
with respect to Series 1998-1 (any such period under clause (x) or (y) above, an
"EARLY AMORTIZATION PERIOD"); PROVIDED, HOWEVER, that in the case of the event
described in clause (g) above, if an Early Amortization Period has not been
declared within ten Business Days after the occurrence of such event, then an
Early Amortization Period shall occur automatically unless, (i) prior to the end
of such ten Business Day period, the Series 1998-1 Allocated Receivables Amount
shall no longer be less than the Series 1998-1 Target Receivables Amount and
(ii) so long as the Series 1998-1 Allocated Receivables Amount continues to be
equal to or greater than the Series 1998-1 Target Receivables Amount, Term
Certificateholders representing 66-2/3% or more of the Series 1998-1 Invested
Amount voting as a single class shall have waived the occurrence of such
event.
Notwithstanding the foregoing, a delay or failure in performance
referred to in clause (a) or (b)(i) above for a period of up to five Business
Days after the applicable grace period, or in clause (b)(ii) above for a period
of up to 30 Business Days after the applicable grace period, will not constitute
an Early Amortization Event if such delay or failure could not have been
prevented by the exercise of reasonable diligence by the Company and such delay
or failure was caused by a Force Majeure Delay. The Company nevertheless will
be required to use its best efforts to perform its obligations in a timely
manner in accordance with the terms of the Transaction Documents, and the
Company shall promptly give the Trustee an Officer's Certificate notifying it of
any such failure or delay by the Company.
ARTICLE VI
SERVICING FEE
SECTION VI.1. SERVICING COMPENSATION. A monthly servicing fee (the
"SERIES 1998-1 MONTHLY SERVICING FEE") shall be payable to the Servicer on each
Distribution Date for the immediately preceding Settlement Period in an amount
equal to the product of (a) the Servicing Fee and (b) a fraction the numerator
of which is the Series 1998-1 Invested Amount as of the end of such Settlement
Period and the denominator of which is the Aggregate Invested Amount as of the
end of such Settlement Period.
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37
ARTICLE VII
REPRESENTATIONS AND WARRANTIES, COVENANTS
SECTION VII.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SERVICER. The Company and the Servicer each hereby represents and warrants to
the Trustee and each of the Term Certificateholders that each and every of their
respective representations and warranties contained in the Agreement is true and
correct in all material respects as of the Issuance Date and any Subsequent
Issuance Date (except if made as of a specific date).
SECTION VII.2. COVENANTS OF THE COMPANY AND THE SERVICER. The
Company and the Servicer hereby agree, in addition to observing all their
obligations under the Agreement and the Servicing Agreement, that:
(a) they shall not terminate the Agreement unless in compliance with
the terms of the Agreement and each Supplement relating to an Outstanding
Series;
(b) no later than 60 days after the date hereof, they will (i) deliver
to the Trustee executed copies of software licenses or sublicenses, in a
form reasonably acceptable to the Trustee, which grant to the Trustee the
right to utilize any of the software owned or licensed by the Servicer that
is necessary to perform the collection and administrative functions to be
performed by the Trustee under the Transaction Documents, (ii) deliver to
the Trustee executed copies of any landlord waivers, in a form reasonably
acceptable to the Trustee, that may be necessary to grant to the Trustee
access to the leased premises of the Servicer for which the Trustee may
require access to perform the collection and administrative functions to
be performed by the Trustee under the Transaction Documents, except to
the extent the Company or the Servicer, as the case may be, owns such
property and (iii) have taken all actions reasonably requested by the
Trustee in connection with, and to ensure completion of, each of the
Servicer Site Review and the Standby Liquidation System;
(c) for so long as any Term Certificates are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, the Company will cause to be provided to any holder of Term
Certificates or an interest therein and any prospective purchaser of Term
Certificates or an interest therein (which prospective purchaser is
designated by any holder of Term Certificates), upon the request of such
holder or prospective purchaser, the information required to be provided to
such holder or prospective purchaser by Rule 144A(d)(4) under the
Securities Act; and
(d) they shall cooperate in good faith to allow the Trustee to use the
Servicer's available facilities and expertise upon the Servicer's
termination or default.
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38
ARTICLE VIII
MISCELLANEOUS
SECTION VIII.1. RATIFICATION OF AGREEMENT. As supplemented by this
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Supplement shall be read, taken and
construed as one and the same instrument.
SECTION VIII.2. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
SECTION VIII.3. FURTHER ASSURANCES. Each of the Company, the
Servicer and the Trustee agrees, from time to time, to do and perform any and
all acts and to execute any and all further instruments required or reasonably
requested by the other more fully to effect the purposes of this Supplement and
the sale of the Term Certificates hereunder, including, without limitation, in
the case of the Company and the Servicer, the execution of any financing
statements or similar documents or notices or continuation statements relating
to the Receivables and the other Trust Assets for filing under the provisions of
the UCC or similar legislation of any applicable jurisdiction.
SECTION VIII.4. NO WAIVER; CUMULATIVE REMEDIES. No failure to
exercise and no delay in exercising, on the part of the Trustee or any Term
Certificateholder, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exhaustive of any rights, remedies, powers and privileges
provided by law.
SECTION VIII.5. AMENDMENTS. (a) This Supplement may be amended,
supplemented or otherwise modified in writing from time to time only if such
amendment, supplement or modification is effected in accordance with the
provisions of Section 10.1 of the Agreement.
SECTION VIII.6. SEVERABILITY. If any provision hereof is void or
unenforceable in any jurisdiction, such voidness or unenforceability shall not
affect the validity or enforceability of (i) such provision in any other
jurisdiction or (ii) any other provision hereof in such or any other
jurisdiction.
SECTION VIII.7. NOTICES. All notices, requests and demands to or
upon any party hereto to be effective shall be given (i) in the case of the
Company, the Servicer and the Trustee, in the manner set forth in Section 10.5
of the Agreement and (ii) in the case of
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39
any other party, in writing (including a confirmed transmission by telecopy),
and, unless otherwise expressly provided herein, shall be deemed to have been
duly given or made when delivered by hand or three days after being deposited
in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of the Rating Agencies or to such
other address as may be hereafter notified by the respective parties hereto:
DCR: Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, Illinois 60603
Attention: Asset-Backed Research and
Monitoring Group
Telecopier: (312) 368-2069
S&P: Standard & Poor's Ratings Services
25 Broadway
New York, New York 10004
Attention: Asset-Backed Surveillance
Group
Telecopier: (212) 412-0225
Any notice required or permitted to be mailed to a Term Certificateholder shall
be given as provided in Section 4A.3.
SECTION VIII.8. COUNTERPARTS. This Supplement may be executed in any
number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
and all of which taken together shall constitute one and the same agreement.
SECTION VIII.9. LIMITATION ON ADDITION AND TERMINATION OF SELLERS.
(a) Notwithstanding anything to the contrary contained in the Receivables Sale
Agreement, no Seller or Seller Division shall be added thereunder unless
(subject to the proviso contained in clause (iv) below) each of the following
conditions shall have been satisfied:
(i) (x) in the case of a proposed addition of a Seller, each of the
conditions set forth in Section 3.02 of the Receivables Sale Agreement, and
(y) in the case of a proposed addition of a Seller Division, the conditions
set forth in subsections 3.02(a)(ii), (e), (f), (g), (h), (j) and (k) (in
each case, applied to the applicable New Division as if it were a proposed
additional Seller) of the Receivables Sale Agreement, shall have been
satisfied.
(ii) The Company shall have received copies of the Policies of such
additional Seller (or such Seller Division, as the case may be, if
different from the
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40
Policies of the Seller of which it is a New Division), which Policies shall
be in form and substance satisfactory to the Company.
(iii) The Company shall have received confirmation (A) that there
is no pending or, to its knowledge after due inquiry, threatened action or
proceeding affecting such additional Seller (or such Seller Division, as
the case may be) before any Governmental Authority (I) that could
reasonably be expected to have a Material Adverse Effect or (II) that
purports to affect the legality, validity or enforceability of this
Supplement, the Agreement or any other Transaction Document or any of the
transactions contemplated hereby or thereby.
(iv) The Company and the Trustee shall have received evidence that the
Rating Agency Condition shall have been satisfied with respect to the
addition of such Seller (or addition of such Seller Division, as the case
may be); PROVIDED that such satisfaction of the Rating Agency Condition
(and such receipt of evidence thereof) shall not be required with respect
to the addition of up to two Subsidiaries of Core-Mark (and/or New
Divisions) as Sellers (or Seller Divisions) during any calendar year, each
of which Subsidiaries (or New Divisions) meets the following criteria: (x)
such Subsidiary (or New Division) is in the same line of business as the
existing Sellers as of the related Seller Addition Date (as defined in the
Receivables Sale Agreement) and (y) as of such date, immediately prior to
giving effect to such addition (the "MEASUREMENT DATE"), the ratio
(expressed as a percentage) of (A) the aggregate Principal Amount of what
would constitute all Eligible Receivables of such Subsidiary (or New
Division) at the end of the Business Day immediately preceding the
Measurement Date if it were a Seller (or Seller Division) MINUS the amount
which would constitute the Overconcentration Amount applicable to such
Receivables on the Measurement Date if such Subsidiary (or New Division)
were a Seller (or Seller Division) to (B) the sum of the Aggregate
Receivables Amount as of the end of such day plus the amount described
pursuant to clause (A) is less than 10 percent, provided further, that if
such ratio is greater than 5%, the Rating Agencies shall receive
notification of such addition and delivery of a pro forma Monthly
Settlement Statement.
(v) The Trustee shall have received Opinions of Counsel of outside
counsel addressed to the Trustee covering matters with respect to such
Seller as were covered in the opinions delivered on the Issuance Date with
respect to the original Sellers, including "true-sale" and non-substantive
consolidation opinions.
(vi) The Company and the Trustee shall have received a certificate
prepared by a Responsible Officer of the Servicer certifying that after
giving effect to the addition of such Seller (or such Seller Division, as
the case may be), the Aggregate Target Receivables Amount shall equal the
Aggregate Allocated Receivables Amount on the related Seller Addition Date.
<PAGE>
41
(b) Notwithstanding anything to the contrary contained in the
Receivables Sale Agreement, no Seller shall be terminated under Section 9.13 of
the Receivables Sale Agreement, in each case unless (i) no Early Amortization
Event, Potential Early Amortization Event or Potential Purchase Termination
Event (as defined in the Receivables Sale Agreement) (other than with respect to
the Seller to be so terminated) will have occurred and be continuing after
giving effect to such termination and (ii) the Trustee shall have received prior
notice of such termination (which notice shall be accompanied by a PRO FORMA
Daily Report confirming that the Aggregate Target Receivables Amount equals the
Aggregate Allocated Receivables Amount, each calculated after giving effect to
such termination and excluding all Receivables originated by the Seller to be
terminated); PROVIDED, that in no event shall Core-Mark be terminated as a
Seller under Section 9.13 of the Receivables Sale Agreement.
(c) Upon the termination of a Seller pursuant to Section 9.13 of the
Receivables Sale Agreement and the foregoing paragraph (b), the calculation
(including, without limitation, for purposes of the PRO FORMA calculations
pursuant to paragraph (b) above) of the Aggregate Target Receivables Amount, the
Aggregate Allocated Receivables Amount, the Series 1998-1 Required Reserves and
all other amounts from which each such amount is directly or indirectly derived
shall exclude in each case the Receivables originated by such terminated Seller.
ARTICLE IX
FINAL DISTRIBUTIONS
SECTION IX.1. CERTAIN DISTRIBUTIONS. (a) Not later than 2:00 p.m.,
New York City time, on the Distribution Date following the date on which the
proceeds from the disposition of the Receivables pursuant to subsection 7.2(b)
of the Agreement are deposited into the Series 1998-1 Non-Principal Collection
Sub-subaccount and the Series 1998-1 Principal Collection Sub-subaccount, the
Trustee shall distribute such amounts pursuant to Article III of this
Supplement.
(b) Notwithstanding anything to the contrary in this Supplement or the
Agreement, any distribution made pursuant to this Section 9.1 shall be deemed to
be a final distribution pursuant to Section 9.3 of the Agreement with respect to
the Term Certificates.
<PAGE>
42
IN WITNESS WHEREOF, the Company, the Servicer and the Trustee have
caused this Series 1998-1 Supplement to be duly executed by their respective
officers as of the day and year first above written.
CM CAPITAL CORPORATION
By: /s/ ROBERT A. ALLEN
-------------------------------
Name: Robert A. Allen
Title: President and CEO
CORE-MARK INTERNATIONAL, INC., in its
individual capacity and as Servicer
By: /s/ LEO F. KORMAN
-------------------------------
Name: Leo F. Korman
Title: Senior Vice President & CFO
THE CHASE MANHATTAN BANK, not in its
individual capacity but solely as
Trustee
By: /s/ KIMBERLY K. COSTA
-------------------------------
Name: Kimberly K. Costa
Title: Second Vice President
<PAGE>
EXECUTION COPY
Exhibit 10.20
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CM CAPITAL CORPORATION
as Company,
CORE-MARK INTERNATIONAL, INC.
as Servicer,
THE CHASE MANHATTAN BANK,
as Funding Agent,
PARK AVENUE RECEIVABLES CORPORATION,
as Initial Purchaser
THE CHASE MANHATTAN BANK,
as an APA Bank
and
THE CHASE MANHATTAN BANK,
as Trustee
------------------------
SERIES 1998-2 SUPPLEMENT
Dated as of April 1, 1998
to
POOLING AGREEMENT
Dated as of April 1, 1998
------------------------
CORE-MARK RECEIVABLES MASTER TRUST
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Definitions. . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II
DESIGNATION OF CERTIFICATES; PURCHASE AND SALE
OF THE VFC CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.1. Designation . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 2.2. The Series 1998-2 Interests . . . . . . . . . . . . . . 23
SECTION 2.3. Purchases of Interests in the VFC Certificates. . . . . 24
SECTION 2.4. Delivery. . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.5. Procedure for Initial Issuance and for Increasing the
Series 1998-2 Invested Amount . . . . . . . . . . . . 25
SECTION 2.6. Sale by the Initial Purchaser of its Series 1998-2
Purchaser Invested Amount to the APA Banks. . . . . . 27
SECTION 2.7. Procedure for Decreasing the Series 1998-2 Invested
Amount; Optional Termination. . . . . . . . . . . . . 29
SECTION 2.8. Reductions of the Commitments . . . . . . . . . . . . . 31
SECTION 2.9. Interest; Fees. . . . . . . . . . . . . . . . . . . . . 31
SECTION 2.10. Indemnification by the Company and the Servicer . . . . 32
ARTICLE III
ARTICLE III OF THE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 3A.2. Establishment of Trust Accounts. . . . . . . . . . . . 33
SECTION 3A.3. Daily Allocations. . . . . . . . . . . . . . . . . . . 35
SECTION 3A.4. Determination of Interest. . . . . . . . . . . . . . . 36
SECTION 3A.5. Determination of Series 1998-2 Monthly Principal . . . 38
SECTION 3A.6. Applications . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE IV
DISTRIBUTIONS AND REPORTS. . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4A.1. Distributions. . . . . . . . . . . . . . . . . . . . . 41
SECTION 4A.2. Daily Reports. . . . . . . . . . . . . . . . . . . . . 41
SECTION 4A.3. Statements and Notices . . . . . . . . . . . . . . . . 41
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE V
ADDITIONAL EARLY AMORTIZATION EVENTS . . . . . . . . . . . . . . . . . . . 42
SECTION 5.1. Additional Early Amortization Events. . . . . . . . . . 42
ARTICLE VI
SERVICING FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 6.1. Servicing Compensation. . . . . . . . . . . . . . . . . 45
ARTICLE VII
CHANGE IN CIRCUMSTANCES. . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.1. Illegality. . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 7.2. Increased Costs . . . . . . . . . . . . . . . . . . . . 46
SECTION 7.3. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 7.4. Break Funding Payments. . . . . . . . . . . . . . . . . 48
SECTION 7.5. Alternate Rate of Interest. . . . . . . . . . . . . . . 49
SECTION 7.6. Mitigation Obligations. . . . . . . . . . . . . . . . . 49
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES, COVENANTS. . . . . . . . . . . . . . . . . 50
SECTION 8.1. Representations and Warranties of the Company and the
Servicer . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 8.2. Covenants of the Company and the Servicer . . . . . . . 51
SECTION 8.3. Covenants of the Servicer . . . . . . . . . . . . . . . 52
SECTION 8.4. Obligations Unaffected. . . . . . . . . . . . . . . . . 52
ARTICLE IX
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 9.1. Conditions Precedent to Effectiveness of Supplement . . 52
ARTICLE X
THE FUNDING AGENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.1. Appointment . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 10.2. Delegation of Duties . . . . . . . . . . . . . . . . . 56
SECTION 10.3. Exculpatory Provisions . . . . . . . . . . . . . . . . 56
SECTION 10.4. Reliance by Funding Agent. . . . . . . . . . . . . . . 57
SECTION 10.5. Notice of Servicer Default or Early Amortization Event
or Potential Early Amortization Event. . . . . . . . 57
SECTION 10.6. Non-Reliance on the Funding Agent and Other
Purchasers . . . . . . . . . . . . . . . . . . . . . 58
SECTION 10.7. Indemnification. . . . . . . . . . . . . . . . . . . . 58
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 10.8. The Funding Agent in Its Individual Capacity . . . . . 59
SECTION 10.9. Successor Funding Agent. . . . . . . . . . . . . . . . 59
ARTICLE XI
MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 11.1. Ratification of Agreement. . . . . . . . . . . . . . . 59
SECTION 11.2. Governing Law. . . . . . . . . . . . . . . . . . . . . 59
SECTION 11.3. Further Assurances . . . . . . . . . . . . . . . . . . 60
SECTION 11.4. Payments . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 11.5. Costs and Expenses . . . . . . . . . . . . . . . . . . 60
SECTION 11.6. No Waiver; Cumulative Remedies . . . . . . . . . . . . 60
SECTION 11.7. Amendments . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 11.8. Severability . . . . . . . . . . . . . . . . . . . . . 61
SECTION 11.9. Notices. . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 11.10. Successors and Assigns. . . . . . . . . . . . . . . . 62
SECTION 11.11. Participations; Assignments . . . . . . . . . . . . . 63
SECTION 11.12. Adjustments; Set-off. . . . . . . . . . . . . . . . . 65
SECTION 11.13. Counterparts. . . . . . . . . . . . . . . . . . . . . 65
SECTION 11.14. No Bankruptcy Petition. . . . . . . . . . . . . . . . 65
SECTION 11.15. Limitation on Addition and Termination of Sellers . . 67
ARTICLE XII
FINAL DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 12.1. Certain Distributions. . . . . . . . . . . . . . . . . 68
EXHIBITS
Exhibit A Form of VFC Certificate, Series 1998-2
Exhibit B [Reserved]
Exhibit C Form of Commitment Transfer Supplement
Exhibit D Form of Daily Report
Exhibit E Form of Monthly Settlement Statement
Exhibit F Form of Notice of Increase
Exhibit G Form of Participation Certification
Exhibit H Form of UCC Certificate
SCHEDULES
Schedule 1 Commitments
Schedule 2 Trust Accounts
</TABLE>
<PAGE>
SERIES 1998-2 SUPPLEMENT, dated as of April 1, 1998 (as amended,
supplemented or otherwise modified from time to time, this "SUPPLEMENT"),
among CM Capital Corporation, a Delaware corporation (the "COMPANY"),
Core-Mark International, Inc., a Delaware corporation ("CORE-MARK"), as
servicer (except where otherwise noted) (in such capacity, the "SERVICER"),
Park Avenue Receivables Corporation, a Delaware corporation (including its
successors and assigns and excluding, however, the APA Banks as assignees
pursuant to Section 2.6, the "INITIAL PURCHASERS"), the several banks or
financial institutions parties to this Supplement as of the Issuance Date and
the other banks or financial institutions from time to time parties hereto
pursuant to Section 11.11(b) (collectively, the "APA BANKS"; each,
individually, an "APA BANK"), The Chase Manhattan Bank, a New York banking
corporation ("CHASE"), in its capacity as Funding Agent (the "FUNDING
AGENT"), and The Chase Manhattan Bank, in its capacity as Trustee (the
"TRUSTEE") under the Agreement (as defined below).
W I T N E S S E T H :
WHEREAS, the Company, the Servicer and the Trustee have entered
into a Pooling Agreement, dated as of April 1, 1998 (as amended, supplemented
or otherwise modified from time to time, the "AGREEMENT");
WHEREAS, the Agreement provides, among other things, that the
Company, the Servicer and the Trustee may at any time and from time to time
enter into supplements to the Agreement for the purpose of authorizing the
issuance on behalf of the Trust by the Company for execution and redelivery
to the Trustee for authentication of one or more Series of Investor
Certificates; and
WHEREAS, the Company, the Servicer, the Trustee, the Funding Agent,
the Initial Purchaser and the APA Banks wish to supplement the Agreement as
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, and other good and valuable consideration, the
receipt and sufficiency of which are hereby expressly acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION I.1. DEFINITIONS. (a) The following words and phrases
shall have the following meanings with respect to Series 1998-2 and the
definitions of such terms are applicable to the singular as well as the
plural form of such terms and to the masculine as well as the feminine and
neuter genders of such terms:
<PAGE>
2
"ABR": shall mean, for any day, a rate per annum (rounded upwards,
if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Reference Rate in effect on such day, (b) the Base CD Rate in effect on
such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. For purposes hereof: "REFERENCE RATE" shall
mean the rate of interest per annum publicly announced (or, if not
announced publicly, quoted internally) from time to time by the Funding
Agent as its reference rate in effect at its principal office in New
York, New York; "BASE CD RATE" shall mean the sum of (a) the product of
(i) the Three-Month Secondary CD Rate and (ii) a fraction, the numerator
of which is one and the denominator of which is one minus the C/D Reserve
Percentage and (b) the C/D Assessment Rate; "THREE-MONTH SECONDARY CD
RATE" shall mean, for any day, the secondary market rate for three-month
certificates of deposit reported as being in effect on such day (or, if
such day shall not be a Business Day, the next preceding Business Day) by
the Board through the public information telephone line of the Federal
Reserve Bank of New York (which rate will, under the current practices of
the Board, be published in Federal Reserve Statistical Release H.15(519)
during the week following such day), or, if such rate shall not be so
reported on such day or such next preceding Business Day, the average of
the secondary market quotations for three-month certificates of deposit
of major money center banks in New York City received at approximately
10:00 A.M., New York City time, on such day (or, if such day shall not be
a Business Day, on the next preceding Business Day) by the Funding Agent
from three New York City negotiable certificate of deposit dealers of
recognized standing selected by it; and "FEDERAL FUNDS EFFECTIVE RATE"
shall mean, for any day, the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Funding Agent
from three federal funds brokers of recognized standing selected by it.
Any change in the ABR due to a change in the Reference Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall
be effective as of the opening of business on the effective day of such
change in the Reference Rate, the Three-Month Secondary CD Rate or the
Federal Funds Effective Rate, respectively.
"ACCRUAL PERIOD" shall mean the period from and including a
Distribution Date, or, in the case of the initial Accrual Period, the
Issuance Date, to but excluding the succeeding Distribution Date.
"ACCRUED EXPENSE AMOUNT" shall mean, for each Business Day during an
Accrual Period, the sum of (i) the Daily Interest Deposit for such Business
Day, (ii) the Daily Commitment Fee Deposit for such Business Day, (iii) the
Daily Facility Fee Deposit for such Business Day, (iv) the Daily Servicing
Fee Deposit for such Business Day and (v) all Program Costs which have
accrued since the preceding Business Day.
<PAGE>
3
"ACQUIRING APA BANK" shall have the meaning assigned in subsection
11.11(b).
"ADDITIONAL INTEREST" shall have the meaning assigned in subsection
3A.4(b).
"ADJUSTED LIQUIDITY PRICE" shall mean, in determining the Purchase
Price of the Initial Purchaser's Series 1998-2 Purchaser Invested Amount on
the APA Bank Purchase Date, an amount equal to:
PI [OC + (NDR/1.04)]
where:
PI = the Invested Percentage on the APA Bank Purchase
Date;
OC = the sum of (i) any and all amounts due and owing
to the Company in respect of Seller Repurchase
Payments and Seller Adjustment Payments pursuant
to the Transaction Documents and (ii) (without
duplication) any and all amounts due and owing to
the Trust as Transfer Deposit Amounts pursuant to
Section 2.5(b) of the Pooling Agreement on the APA
Bank Purchase Date; and
NDR = the aggregate outstanding Principal Amount of all
Receivables that are not aged more than 91 days
past due PLUS any Receivable which becomes a
Charged-Off Receivable prior to 91 days past due
as of the APA Bank Purchase Date PLUS the
Aggregate Uncleared Funds Amount.
Each of the foregoing shall be determined from the most recent Daily Report
received from the Servicer.
"AGED RECEIVABLES RATIO" shall mean, as of the last day of each
Settlement Period, the percentage equivalent of a fraction, (i) the
numerator of which shall be the sum of (A) the aggregate unpaid balance of
Receivables that were 91-120 days past their respective original due dates
as of such last day and (B) the aggregate amount of Receivables of the
Sellers which were charged off as uncollectible prior to the day which is
91 days after their respective original due dates during such Settlement
Period, and (ii) the denominator of which shall be the aggregate Principal
Amount of Receivables originated by the Sellers during the third prior
Settlement Period (excluding the Settlement Period ended on such day).
<PAGE>
4
"AGGREGATE COMMITMENT AMOUNT" shall mean, with respect to any day, the
aggregate amount of the Commitments of all APA Banks on such day, as
reduced from time to time pursuant to Section 2.8.
"APA BANKS" shall have the meaning specified in the recitals hereto.
"APA BANK PURCHASE DATE" shall mean either the date of the Purchase
or, if the APA Banks fund the Series 1998-2 Invested Amount on the Issuance
Date pursuant to Section 2.3, the Issuance Date.
"APPLICABLE MARGIN" shall mean on any date of determination (i) for
each Eurodollar Tranche, 2.00% per annum and (ii) for each Floating
Tranche, 1.00% per annum; PROVIDED, HOWEVER that, after the occurrence of a
PARCO Wind-Down Event described in clause (i) of the definition thereof or
an Early Amortization Event, the Applicable Margin shall mean on any date
of determination for each Eurodollar Tranche or the Floating Tranche, the
applicable rate per annum set forth below under the caption "Eurodollar
Spread" or "Floating Rate Spread," as the case may be, based upon the
"Leverage Ratio" (as determined in accordance with, the Credit Agreement,
as in effect on the date hereof) as of the most recent determination date
(it being understood and agreed for purposes of this proviso that until the
delivery of the financial statements of Core-Mark pursuant to Section 6.1
of the Credit Agreement for the first full fiscal quarter commencing after
March 31, 1998, the Applicable Margin shall be the applicable rate per
annum set forth below in Category 1):
<TABLE>
<CAPTION>
Leverage Eurodollar Floating Rate
CATEGORY RATIO SPREAD SPREAD
-------- -------- ---------- --------
<S> <C> <C> <C>
Category 1 greater than 5.00 to 1.00 2.50% 1.50%
Category 2 greater than 4.25 to 1.00
and less than or equal to
5.00 to 1.00 2.00% 1.00%
Category 3 greater than 3.50 to 1.00
and less than or equal to
4.25 to 1.00 1.75% 0.75%
Category 4 greater than 3.00 to 1.00
and less than or equal to
3.50 to 1.00 1.50% 0.50%
Category 5 less than or equal to
3.00 to 1.00 1.25% 0.25%
</TABLE>
"ARTICLE VII COSTS" shall mean any amounts due pursuant to Article
VII.
<PAGE>
5
"ASSIGNMENT/PARTICIPATION CERTIFICATION" shall mean an assignment or
participation certification, as the case may be, in substantially the form
of Exhibit G hereto.
"AVAILABLE PRICING AMOUNT" shall mean, on any Business Day, the sum of
(i) the Unallocated Balance PLUS (ii) the Increase, if any, on such date.
"BASE DAILY INTEREST EXPENSE" shall mean (i) for any day prior to the
APA Bank Purchase Date in any Accrual Period, the product of (A) the Series
1998-2 Invested Amount divided by 360 and (B) the CP Rate for such day and
(ii) for the APA Bank Purchase Date and any day thereafter in any Accrual
Period, the sum of (A) the product of (x) the sum of (a) the portion of the
Series 1998-2 Invested Amount (calculated with respect to all APA Banks
without regard to clauses (d) and (e) of the definition of Series 1998-2
Purchaser Invested Amount) allocable to the Floating Tranche on such day
and (b) for any day during the period from and including the APA Bank
Purchase Date to but excluding the Distribution Date immediately succeeding
the APA Bank Purchase Date, divided by 365 (or 366, as the case may be) and
(y) the ABR plus the Applicable Margin in effect on such day, (B) the
product of (x) the portion of the Series 1998-2 Invested Amount (calculated
with respect to all Purchasers without regard to clauses (d) and (e) of the
definition of Series 1998-2 Purchaser Invested Amount) allocable to
Eurodollar Tranches on such day divided by 360 and (y) the weighted average
Eurodollar Rate plus the Applicable Margin on such day in effect with
respect thereto and (C) on the APA Bank Purchase Date, the Unaccrued
Discount Payment Amount; PROVIDED, HOWEVER, that for any such day during
the continuance of an Early Amortization Period, the "Base Daily Interest
Expense" for such day shall be equal to the greater of (i) the sum of the
amounts calculated pursuant to clause (ii) above and (ii) the product of
(x) the Series 1998-2 Invested Amount on such day divided by 365 (or 366,
as the case may be) and (y) the ABR plus the Applicable Margin in effect on
such day plus 2.0%.
"BENEFITTED PURCHASER" shall have the meaning assigned in Section
11.12.
"BOARD" shall mean the Board of Governors of the Federal Reserve
System of the United States or any successor thereto.
"CARRYING COST RESERVE RATIO" shall mean, as of any Settlement Report
Date and continuing until (but not including) the next Settlement Report
Date, an amount (expressed as a percentage) equal to (a) the product of (i)
2.00 TIMES Days Sales Outstanding as of such day and (ii) 1.3 TIMES a rate
per annum equal to the ABR plus the Applicable Margin as of such earlier
Settlement Report Date, DIVIDED BY (b) 365 (or 366, as the case may be).
<PAGE>
6
"C/D ASSESSMENT RATE" shall mean for any day pertaining to a Floating
Tranche, the net annual assessment rate (rounded upwards, if necessary, to
the next 1/100 of 1%) in effect on such day that is payable by a member of
the Bank Insurance Fund classified as "well-capitalized" and within
supervisory subgroup "B" (or a comparable successor risk classification)
within the meaning of 12 C.F.R. Part 327 (or any successor provision) to
the Federal Deposit Insurance Corporation for insurance by such Corporation
of time deposits made in dollars at the offices of such member in the
United States; PROVIDED that if, as a result of any change in any law, rule
or regulation, it is no longer possible to determine the Assessment Rate as
aforesaid, then the Assessment Rate shall be such annual rate as shall be
determined by the Funding Agent to be representative of the cost of such
insurance to the APA Banks.
"C/D RESERVE PERCENTAGE" for any day pertaining to a Floating Tranche,
that percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board, for determining the maximum reserve requirement
for a Depositary Institution (as defined in Regulation D of the Board) in
respect of new negotiable non-personal time deposits in Dollars of over
$100,000 having a maturity of 30 days or more.
"CERTIFICATE RATE" shall mean, on any date of determination, the
weighted average (weighted based on the respective outstanding amounts of
the Floating Tranche and each Eurodollar Tranche) of the ABR in effect on
such day and the Eurodollar Rates in effect on such day PLUS, in each case,
the respective Applicable Margins.
"CHANGE IN CONTROL" shall mean the occurrence of any event the result
of which causes the Company not to be a direct, wholly-owned Subsidiary of
Core-Mark.
"CHANGE IN LAW" shall mean (a) the adoption of any law, rule or
regulation after the Issuance Date , (b) any change in law, rule or
regulation or in the interpretation or application thereof by any
Governmental Authority after the Issuance Date or (c) compliance by any
Purchaser with any request, guideline or directive (whether or not having
the force of law) of any Governmental Authority made or issued after the
Issuance Date.
"CHASE" shall have the meaning specified in the preamble hereto.
"CLEAN-UP CALL AMOUNT" shall mean the Clean-Up Call Percentage of the
maximum Series 1998-2 Invested Amount at any time during the Series 1998-2
Revolving Period.
"CLEAN-UP CALL PERCENTAGE" shall mean 10%.
<PAGE>
7
"COMMERCIAL PAPER" shall mean the short-term promissory notes of the
Initial Purchaser issued in the United States commercial paper market.
"COMMITMENT" shall mean, as to any APA Bank, its obligation to
purchase a VFC Certificate on the Issuance Date, to acquire the Initial
Purchaser's VFC Certificate and to maintain and, subject to certain
conditions, increase, its Series 1998-2 Purchaser Invested Amount, in each
case, in an aggregate amount not to exceed at any one time outstanding the
amount set forth opposite such APA Bank's name on Schedule 1 under the
caption "Commitment", as such amount may be reduced from time to time as
provided herein; collectively, as to all APA Banks, the "COMMITMENTS".
"COMMITMENT FEE" shall have the meaning assigned in subsection 2.9(b).
"COMMITMENT FEE RATE" shall have the meaning assigned in the Fee
Letter.
"COMMITMENT PERCENTAGE" shall mean, as to any APA Bank and as of any
date, the percentage equivalent of a fraction, the numerator of which is
such APA Bank's Commitment as set forth on Schedule 1 and the denominator
of which is the Aggregate Commitment Amount as of such date.
"COMMITMENT PERIOD" shall mean the period commencing on the Issuance
Date and terminating on the Commitment Termination Date.
"COMMITMENT REDUCTION" shall have the meaning assigned in
subsection 2.8(a).
"COMMITMENT TERMINATION DATE" shall mean the earliest to occur of (i)
the date on which all amounts due and owing to PARCO in respect of the VFC
have been indefeasibly paid in full, (ii) the date on which the Aggregate
Commitment Amount has been reduced to zero pursuant to Section 2.8 of this
Supplement, (iii) the next Business Day following the commencement of an
Early Amortization Period and (iv) April 1, 2003 (as may be extended for an
additional 364 days from time to time in writing by PARCO, the Funding
Agent and the APA Banks).
"COMMITMENT TRANSFER SUPPLEMENT" shall have the meaning assigned in
subsection 11.11(b).
"CORE-MARK" shall have the meaning specified in the preamble hereto.
"CP RATE" shall mean for any day the weighted average of the interest
rates (or if issued at a discount, the weighted average of the rates, after
converting to interest-bearing equivalents) on all outstanding Commercial
Paper issued by the Initial Purchaser to fund the Initial Purchaser's
Series 1998-2 Purchaser Invested Amount.
<PAGE>
8
"CP RATE PERIOD" shall mean, with respect to any CP Tranche, a period
of days not to exceed 90 days commencing on a Business Day selected in
accordance with subsection 3A.4(c); provided that if a CP Rate Period would
end on a day that is not a Business Day, such CP Rate Period shall end on
the next succeeding Business Day.
"CP TRANCHE" shall mean a portion of the Series 1998-2 Invested Amount
for which the Series 1998-2 Monthly Interest is calculated by reference to
a particular Discount and a particular CP Rate Period.
"CREDIT AGREEMENT" shall mean the Amended and Restated Credit
Agreement, dated as of April 1, 1998, among Core-Mark, the several lenders
from time to time parties thereto, and The Chase Manhattan Bank, as
Administrative Agent, as the same may be amended, supplemented or otherwise
modified from time to time.
"DAILY COMMITMENT FEE DEPOSIT" shall mean, for any Business Day, an
amount equal to (i) the amount of Daily Commitment Fee Expense for each day
since the preceding Business Day PLUS (ii) the aggregate amount of all
previously accrued Daily Commitment Fee Expense that has not yet been
deposited in the Series 1998-2 Non-Principal Collection Sub-subaccount.
"DAILY COMMITMENT FEE EXPENSE" shall mean, (i) during the Series
1998-2 Revolving Period, for any day in any Accrual Period, the product
of (A) the excess of the Aggregate Commitment Amount over the aggregate
Series 1998-2 Purchaser Invested Amounts of the APA Banks on such day
multiplied by (B) the Commitment Fee Rate divided by 360, (ii) during
the Series 1998-2 Amortization Period, for any day prior to the APA Bank
Purchase Date in any Accrual Period, the product of (A) the Series
1998-2 Invested Amount on such day multiplied by (B) the Commitment Fee
Rate divided by 360 and (iii) during the Series 1998-2 Amortization
Period, for the APA Bank Purchase Date or any day thereafter in any
Accrual Period, zero.
"DAILY FACILITY FEE DEPOSIT" shall mean, for any Business Day, an
amount equal to (i) the amount of Daily Facility Fee Expense for each day
since the preceding Business Day PLUS (ii) the aggregate amount of all
previously accrued Daily Facility Fee Expense that has not yet been
deposited in the Series 1998-2 Non-Principal Collection Sub-subaccount.
"DAILY FACILITY FEE EXPENSE" shall mean, (i) for any day in any
Accrual Period prior to the APA Bank Purchase Date, the product of (A) (1)
for any day prior to the date on which the Series 1998-2 Amortization
Period commences, the Aggregate Commitment Amount on such day and (2) for
any day on which the Series 1998-2 Amortization Period commences and for
any day thereafter, the Series 1998-2 Invested Amount on such day, in each
case, multiplied by (B) the Facility Fee Rate divided by
<PAGE>
9
360 and (ii) for the APA Bank Purchase Date or any day thereafter in any
Accrual Period, zero.
"DAILY INTEREST DEPOSIT" shall mean, for any Business Day, an amount
equal to (i) the amount of Daily Interest Expense for each day since the
preceding Business Day PLUS (ii) the aggregate amount of all previously
accrued Daily Interest Expense that has not yet been deposited in the
Series 1998-2 Non-Principal Collection Sub-subaccount PLUS (iii) the
aggregate amount of all Additional Interest for each day since the
preceding Business Day.
"DAILY INTEREST EXPENSE" shall mean, for any Business Day, an amount
equal to (i) the amount of accrued and unpaid Base Daily Interest Expense
in respect of such day PLUS (ii) the aggregate amount of all previously
accrued and unpaid Base Daily Interest Expense PLUS (iii) the aggregate
amount of all accrued and unpaid Additional Interest.
"DAILY REPORT" shall mean a report prepared by the Servicer on each
Business Day for the period specified therein, in substantially the form of
Exhibit D.
"DAILY SERVICING FEE DEPOSIT" shall mean, for any Business Day, an
amount equal to (i) the amount of Daily Servicing Fee Expense for each day
since the preceding Business Day PLUS (ii) the aggregate amount of all
previously accrued Daily Servicing Fee Expense that has not yet been
deposited in the Series 1998-2 Non-Principal Collection Sub-subaccount.
"DAILY SERVICING FEE EXPENSE" shall mean, for any day in any Accrual
Period the Series 1998-2 Interests' PRO RATA portion (determined in
accordance with Section 6.1) of the Servicing Fee accruing for such day.
"DAYS SALES OUTSTANDING" shall mean, as of any Settlement Report Date
and continuing until (but not including) the next Settlement Report Date,
the number of days equal to the product of (a) 91 and (b) the amount
obtained by dividing (i) the aggregate Principal Amount of Eligible
Receivables as of the last day of the immediately preceding Settlement
Period by (ii) the aggregate Principal Amount of Receivables generated by
the Sellers for the three Settlement Periods immediately preceding such
earlier Settlement Report Date.
"DECREASE" shall have the meaning assigned in Section 2.7.
"DEFAULTING APA BANK" shall have the meaning assigned in subsection
2.6(c).
"DILUTION HORIZON" shall mean, (i) for the period from the Issuance
Date until the sixth Settlement Report Date to occur thereafter, 5.3 days
as representing the time
<PAGE>
10
period it takes the Sellers to recognize a Dilution Adjustment, and (ii)
for each six-month period (beginning and ending on a Settlement Report
Date) to occur after such initial period, the number of days (expressed
as a dollar weighted average based upon the Dilution Adjustments for such
period) as determined by the Servicer in accordance with the procedures
utilized to calculate the dilution horizon in clause (i) above; PROVIDED
that in no event shall the Dilution Horizon be less than two days.
"DILUTION HORIZON FACTOR" shall mean (a) for the period from the
Issuance Date until the sixth Settlement Report Date to occur thereafter,
0.18 months, and (b) for each six-month period (beginning and ending on a
Settlement Report Date) to occur after such initial period, a fraction, (i)
the numerator of which is the Dilution Horizon for such period and (ii) the
denominator of which is 30; PROVIDED, HOWEVER, that if the Dilution Horizon
Factor for any period is less than the Dilution Horizon Factor for the
immediately preceding period, then the actual Dilution Horizon Factor for
such current period shall be recalculated to equal a fraction, the
numerator of which is equal to the average of the numerators used to
calculate the Dilution Horizon Factor for such immediately preceding period
and such current period and the denominator of which is 30.
"DILUTION PERIOD" shall mean, as of any Settlement Report Date and
continuing until (but not including) the next Settlement Report Date, the
quotient of (i) the product of (A) the aggregate Principal Amount of
Receivables which were originated by the Sellers during the Settlement
Period immediately preceding such earlier Settlement Report Date and (B)
the Dilution Horizon Factor then in effect and (ii) the Aggregate
Receivables Amount as of the last day of the Settlement Period preceding
such earlier Settlement Report Date.
"DILUTION RATIO" shall mean, for each Settlement Period, an amount
(expressed as a percentage) equal to the aggregate amount of Dilution
Adjustments (other than Dilution Adjustments related to rebates given by a
Seller to its customers relating to general price increases by the Tobacco
Companies for which the Tobacco Companies have granted rebates to the
Sellers, so long as the Seller has granted the rebate to its customer prior
to the time that the merchandise giving rise to the Receivable to which
such rebate is applied is shipped by the Seller) made during such
Settlement Period DIVIDED BY the aggregate Principal Amount of Receivables
which were originated by the Sellers during such Settlement Period.
"DILUTION RESERVE RATIO" shall mean, as of any Settlement Report Date
and continuing until (but not including) the next Settlement Report Date,
an amount (expressed as a percentage) which is calculated as follows:
<PAGE>
11
DRR = [(c * d) + [(e-d) * (e/d)]] * f
Where:
DRR = Dilution Reserve Ratio;
c = 2.0;
d = the average of the Dilution Ratio during the period of twelve
consecutive Settlement Periods ending prior to such earlier
Settlement Report Date;
e = the highest Dilution Ratio for any Settlement Period during the
period of twelve consecutive Settlement Periods ending prior to
such earlier Settlement Report Date; and
f = the Dilution Period.
"DISCOUNT" shall mean, with respect to any Commercial Paper, the
interest or discount component thereof.
"EARLY AMORTIZATION EVENT" shall have the meanings assigned in Section
5.1 of this Supplement and Section 7.1 of the Agreement.
"EARLY AMORTIZATION PERIOD" shall have the meaning assigned in Section
5.1 of this Supplement and Section 7.1 of the Agreement.
"EFFECTIVE DATE" shall have the meaning assigned in Section 9.1.
"ELIGIBLE ASSIGNEE" shall mean any financial institution that is a
United States Person (within the meaning of Section 7701(a)(30) of the
Internal Revenue Code) and that has a short term debt rating of at least
A-1 from S&P and P-1 from Moody's.
"EUROCURRENCY RESERVE REQUIREMENTS": for any day pertaining to a
Eurodollar Tranche, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on such
day (including, without limitation, basic, supplemental, marginal, special
and emergency reserves under any regulations of the Board or other
Governmental Authority having jurisdiction with respect thereto) dealing
with reserve requirements prescribed for eurocurrency funding (currently
referred to as "Eurocurrency Liabilities" in Regulation D of such Board)
maintained by a member bank of the Federal Reserve System.
<PAGE>
12
"EURODOLLAR BASE RATE" shall mean, with respect to each day during
each Eurodollar Period pertaining to a Eurodollar Tranche, the rate per
annum determined by the Funding Agent to the rate of interest per annum
(rounded upward if necessary to the nearest 1/16 of 1%) notified to the
Funding Agent by Chase as the rate of interest at which Dollar deposits in
the approximate amount of the portion of the Series 1998-2 Invested Amount
allocable to such Eurodollar Tranche as of such day and having a maturity
comparable to the Eurodollar Period applicable to such Eurodollar Tranche
would be offered to prime banks in the London interbank market at their
request at or about 11:00 a.m. (London time) on the second Business Day
prior to the commencement of such Eurodollar Period.
"EURODOLLAR PERIOD" shall mean, with respect to any Eurodollar
Tranche:
(a) initially, the period commencing on the Issuance Date
or conversion date, as the case may be, with respect to such
Eurodollar Tranche and ending one month thereafter (or such other
period which is acceptable to the Purchasers and which in no event
will be less than 15 days); and
(b) thereafter, each period commencing on the last day of the
immediately preceding Eurodollar Period applicable to such Eurodollar
Tranche and ending one month thereafter (or such other period which is
acceptable to the Purchasers and which in no event will be less than
15 days);
PROVIDED THAT all Eurodollar Periods must end on the next Distribution Date
and all of the foregoing provisions relating to Eurodollar Periods are
subject to the following:
(1) if any Eurodollar Period would otherwise end on a day that
is not a Business Day, such Eurodollar Period shall be extended to the
next succeeding Business Day unless the result of such extension would
be to carry such Eurodollar Period into another calendar month, in
which event such Eurodollar Period shall end on the immediately
preceding Business Day;
(2) any Eurodollar Period that would otherwise extend beyond the
Scheduled Revolving Termination Date shall end on the Scheduled
Revolving Termination Date; and
(3) any Eurodollar Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Eurodollar
Period) shall end on the last Business Day of the calendar month at
the end of such Eurodollar Period.
<PAGE>
13
"EURODOLLAR RATE" shall mean, with respect to each day during each
Eurodollar Period pertaining to a portion of the Series 1998-2 Invested
Amount allocated to a Eurodollar Tranche, a rate per annum determined for
such day in accordance with the following formula (rounded upwards, if
necessary, to the nearest 1/100th of 1%):
EURODOLLAR BASE RATE
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"EURODOLLAR TRANCHE" shall mean a portion of the Series 1998-2
Invested Amount for which the Series 1998-2 Monthly Interest is calculated
by reference to a Eurodollar Rate determined by reference to a particular
Eurodollar Period.
"EXCLUDED TAXES" shall mean, with respect to the Funding Agent, any
Purchaser or any other recipient of any payment to be made by or on account
of any increased obligation of the Company hereunder, (a) income or
franchise taxes imposed on (or measured by) its net income by the United
States of America, or by the jurisdiction under the laws of which such
recipient is organized or in which its principal office is located or, in
the case of any APA Bank, in which its applicable lending office is located
and (b) any branch profits imposed by the United States of America or any
similar tax imposed by any other jurisdiction in which the Company is
located.
"FACILITY FEE" shall have the meaning assigned in subsection 2.9(c).
"FACILITY FEE RATE" shall have the meaning assigned in the Fee Letter.
"FEE LETTER" shall mean, collectively, those certain Fee Letters,
dated as of the date hereof, among the Company, the Servicer, the Funding
Agent and the Initial Purchaser and acknowledged by the Trustee.
"FEDERAL FUNDS EFFECTIVE RATE" shall mean, for any day, the weighted
average of the rates on overnight federal funds transactions with members
of the Federal Reserve System arranged by federal funds brokers, as
published on the next succeeding Business Day by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Funding Agent from three federal funds brokers
of recognized standing selected by it.
"FLOATING TRANCHE" shall mean, on or after the APA Bank Purchase Date,
that portion of the Series 1998-2 Invested Amount not allocated to a
Eurodollar Tranche for which the Series 1998-2 Monthly Interest is
calculated by reference to the ABR.
"FUNDING AGENT" shall have the meaning specified in the recitals
hereto.
<PAGE>
14
"INCREASE" shall have the meaning assigned in subsection 2.5(a).
"INCREASE AMOUNT" shall have the meaning assigned in
subsection 2.5(a).
"INCREASE DATE" shall have the meaning assigned in subsection 2.5(a).
"INDEMNIFIED TAXES" shall mean Taxes other than Excluded Taxes.
"INITIAL PURCHASER" shall have the meaning specified in the recitals
hereto.
"INITIAL SERIES 1998-2 INVESTED AMOUNT" shall have the meaning
assigned in subsection 2.5(a).
"INTEREST SHORTFALL" shall have the meaning assigned in
subsection 3A.4(b).
"INVESTED PERCENTAGE" shall mean, with respect to any Business Day (i)
during the Series 1998-2 Revolving Period, the percentage equivalent of a
fraction, the numerator of which is the Series 1998-2 Allocated Receivables
Amount as of the end of the immediately preceding Business Day and the
denominator of which is the Aggregate Receivables Amount as of the end of
the immediately preceding Business Day and (ii) during the Series 1998-2
Amortization Period, the percentage equivalent of a fraction, the numerator
of which is the Series 1998-2 Allocated Receivables Amount as of the end of
the last Business Day of the Series 1998-2 Revolving Period (PROVIDED THAT
if during the Series 1998-2 Amortization Period, the amortization periods
of all other Outstanding Series which were outstanding prior to the
commencement of the Series 1998-2 Amortization Period commence, then, from
and after the date the last of such Series commences its Amortization
Period, the numerator shall be the Series 1998-2 Allocated Receivables
Amount as of the end of the Business Day preceding such date) and the
denominator of which is the greater of (A) the Aggregate Receivables Amount
as of the end of the immediately preceding Business Day and (B) the sum
of the numerators used to calculate the Invested Percentage for all
Outstanding Series on the Business Day for which such percentage is
determined.
"ISSUANCE DATE" shall mean April 1, 1998.
"LOSS RESERVE RATIO" shall mean, as of any Settlement Report Date and
continuing until (but not including) the next Settlement Report Date, an
amount (expressed as a percentage) which is calculated as follows:
<PAGE>
15
LRR = [(a * b)/c] * d * e
Where:
LRR = Loss Reserve Ratio;
a = the aggregate Principal Amount of Receivables originated by the
Sellers during the three Settlement Periods immediately preceding
such earlier Settlement Report Date;
b = the highest three-month rolling average of the Aged Receivables
Ratio that occurred during the period of twelve consecutive
Settlement Periods preceding such earlier Settlement Report Date;
c = the Aggregate Receivables Amount as of the last day of the
Settlement Period preceding such earlier Settlement Report Date;
and
d = 2.0
e = Payment Terms Factor
"MAJORITY PURCHASERS" shall mean, (i) on any day prior to the APA Bank
Purchase Date, the Initial Purchaser and the Required APA Banks and (ii) on
the APA Bank Purchase Date and any day thereafter, the Required APA Banks.
"MAXIMUM COMMITMENT AMOUNT" shall mean $30,000,000.
"MINIMUM RATIO" shall mean 13%.
"MONTHLY INTEREST PAYMENT" shall have the meaning assigned in
subsection 3A.6(a).
"MOODY'S" shall mean Moody's Investors Service or any successor
thereto.
"NON-DEFAULTING APA BANK" shall have the meaning assigned in
subsection 2.6(c).
"OPTIONAL TERMINATION DATE" shall have the meaning assigned in
subsection 2.7(d).
"OPTIONAL TERMINATION NOTICE" shall have the meaning assigned in
subsection 2.7(d).
<PAGE>
16
"OTHER TAXES" shall mean any and all current or future stamp or
documentary taxes or other excise or property taxes, charges or similar
levies arising from any payment made under the Transaction Documents or
from the execution, delivery or enforcement of, or otherwise with respect
to, any Transaction Document.
"PARCO INSOLVENCY EVENT" shall mean the occurrence of any one or more
of the following: (i) any proceeding shall have been instituted by the
Initial Purchaser seeking to adjudicate it as bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating
to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of any order for relief or the appointment of a receiver,
trustee or other similar official for it or any substantial part of its
property, or (ii) any proceeding of the type described in the foregoing
clause (i) shall be instituted against the Initial Purchaser and shall have
remained undismissed for a period of sixty (60) consecutive days, or an
order granting relief requested in any such proceeding shall be entered.
"PARCO RESIDUAL AMOUNT" shall have the meaning assigned in subsection
2.6(e).
"PARCO WIND-DOWN EVENT" shall mean the occurrence of any of the
following events:
(i) on the fifteenth Business Day prior to the Scheduled
Revolving Termination Date, the Commitments of the APA Banks
have not been extended for at least an additional 364 days;
(ii) the providers of the Initial Purchaser's program liquidity
and/or letter of credit facilities shall have given notice
that an event of default has occurred and is continuing
under their respective agreements with the Initial Purchaser
or shall have given notice that their commitments shall not
be extended thereunder;
(iii) the Initial Purchaser has notified the Funding Agent, the
Company and Trustee that it has elected not to fund the
Initial Series 1998-2 Invested Amount or an Increase
pursuant to subsection 2.5(b);
(iv) the Commercial Paper shall not be rated at least A-1 by S&P
and P-1 by Moody's, respectively; and
(v) an Early Amortization Period has commenced.
"PARTICIPANTS" shall have the meaning assigned in subsection 11.11(a).
<PAGE>
17
"PAYMENT TERMS FACTOR" shall mean, (a) for the period from the
Issuance Date until the sixth Settlement Report Date to occur thereafter,
0.82 months and (b) for each six-month period to occur after such initial
period, a fraction, the numerator of which is the sum of (i) the weighted
average payment terms (based upon the principal amount of the Receivables
and expressed as a number of days) for the Receivables originated during
such period and (ii) 60 and the denominator which is 90; PROVIDED, HOWEVER,
that if the Payment Terms Factor for any period is less than the Payment
Terms Factor for the immediately preceding period, then the actual Payment
Terms Factor for such current period shall be recalculated to equal a
fraction, the numerator of which is equal to the average of the numerators
used to calculate the Payment Terms Factor for such current period and the
three immediately preceding periods (without giving effect to this proviso)
and the denominator of which is 90.
"PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA.
"POTENTIAL PARCO WIND-DOWN EVENT" shall mean any event or
circumstance that with notice, the lapse of time, or both, would become
a PARCO Wind-Down Event.
"PROGRAM COSTS" shall mean, for any Business Day, the sum of (i) the
product of (A) all unpaid fees and expenses due and payable to counsel to,
and independent auditors of, the Company (other than fees and expenses
payable on or in connection with the closing of the issuance of the Series
1998-2 Interests) and (B) a fraction, the numerator of which is the
Aggregate Commitment Amount on such Business Day and the denominator of
which is the sum of (x) the Aggregate Invested Amounts on such Business Day
(other than the Series 1998-2 Invested Amount and the Invested Amount in
respect of any variable funding certificate of any other Outstanding
Series) and (y) the Aggregate Commitment Amount on such Business Day plus
the aggregate Commitment amount for any variable funding certificate of any
other Outstanding Series, and (ii) all unpaid fees and expenses due and
payable to any Rating Agencies rating the VFC Certificates; PROVIDED,
HOWEVER, that the amount of Program Costs payable pursuant to Section
3A.6(b)(iv) shall not exceed $100,000 in the aggregate in any fiscal year
of the Servicer.
"PURCHASE" shall mean the assignment by the Initial Purchaser to the
APA Banks of the Initial Purchaser's Series 1998-2 Purchaser Invested
Amount pursuant to Section 2.6.
"PURCHASE PRICE" shall mean, on the APA Bank Purchase Date, an amount
equal to the lesser of (i) the Initial Purchaser's Series 1998-2 Purchaser
Invested Amount (calculated without regard to clauses (d) and (e) of the
definition of Series 1998-2 Invested Amount) and (ii) the Adjusted
Liquidity Price on such date, in each
<PAGE>
18
case as increased by the sum of (1) all accrued and unpaid Discount on
all outstanding Commercial Paper issued to fund the Initial Purchaser's
Series 1998-2 Purchaser Invested Amount from the issuance date(s) thereof
to but excluding the APA Bank Purchase Date PLUS (2) the aggregate
Discount to accrue on all outstanding Commercial Paper issued to fund the
Initial Purchaser's Series 1998-2 Purchaser Invested Amount from and
including the APA Bank Purchase Date, to and excluding the maturity date
of each CP Tranche.
"PURCHASE PRICE DEFICIT" shall have the meaning assigned in
subsection 2.6(c).
"PURCHASER" shall mean, prior to the APA Bank Purchase Date, the
Initial Purchaser and, on and after the APA Bank Purchase Date, the APA
Banks and each Acquiring APA Bank.
"RATING AGENCY" and "RATING AGENCIES" shall mean Moody's, S&P or any
other nationally recognized statistical rating organization from which a
rating for the Commercial Paper was requested by the Initial Purchaser and
is currently in effect.
"RATING AGENCY CONDITION" shall mean, with respect to any action, that
(i) each Rating Agency shall have been given 10 days' (or such shorter
period as shall be acceptable to each Rating Agency) prior notice thereof
and that each of the Rating Agencies shall have notified the Initial
Purchaser and the Funding Agent in writing that such action will not result
in a reduction or withdrawal of the then current rating of the Commercial
Paper and (ii) the Required APA Banks shall have given their prior written
consent to such action.
"RECORD DATE" shall mean the first Business Day prior to each
Distribution Date.
"REDUCTION PERCENTAGE" shall mean the percentage equivalent of a
fraction, the numerator of which is the PARCO Residual Amount and the
denominator of which is the sum of the PARCO Residual Amount and the
Adjusted Liquidity Price on the APA Bank Purchase Date.
"REFERENCE RATE" shall have the meaning assigned in the definition of
ABR herein.
"REGISTER" shall mean a register maintained by the Funding Agent for
recording transfers of the Commitments.
"REQUIRED APA BANKS" shall mean APA Banks having Commitment
Percentages in the aggregate at least equal to 66-2/3% or, if the
Commitments have been terminated, holding at least 66-2/3% of the
outstanding Series 1998-1 Invested
<PAGE>
19
Amount; PROVIDED that the Commitment of any Defaulting APA Bank that has
not paid all amounts due and owing by it in respect of the purchase it
was obligated to make shall not be included in the Aggregate Commitment
Amount for purposes of this definition.
"SALE NOTICE" shall mean an irrevocable written notice given by an
authorized signatory or authorized officer of the Initial Purchaser (or on
behalf of the Initial Purchaser by Chase, in its capacity as the Initial
Purchaser's administrative agent) to the Funding Agent committing to sell,
assign and transfer to the APA Banks, the Initial Purchaser's Series 1998-2
Purchaser Invested Amount, which notice shall designate (i) the APA Bank
Purchase Date, (ii) the Initial Purchaser's Series 1998-2 Purchaser
Invested Amount, (iii) the Purchase Price (including a calculation of the
Purchase Price), (iv) that no PARCO Insolvency Event has occurred and
(v) wire transfer instructions specifying the account(s) into which the
proceeds of the Purchase Price shall be deposited.
"SCHEDULED REVOLVING TERMINATION DATE" shall mean the last day of the
Settlement Period ending in January 2003.
"SERIES 1998-2" shall mean Series 1998-2, the Principal Terms of which
are set forth in this Supplement.
"SERIES 1998-2 ACCRUED INTEREST SUB-SUBACCOUNT" shall have the meaning
assigned in subsection 3A.2(a).
"SERIES 1998-2 ADJUSTED INVESTED AMOUNT" shall mean, as of any date
of determination, (i) the Series 1998-2 Invested Amount on such date,
MINUS (ii) the amount on deposit in the Series 1998-2 Principal
Collection Sub-subaccount on such date.
"SERIES 1998-2 ALLOCABLE CHARGED-OFF AMOUNT" shall mean, with
respect to any Special Allocation Settlement Report Date, the "Allocable
Charged-Off Amount", if any, which has been allocated to Series 1998-2.
"SERIES 1998-2 ALLOCABLE RECOVERIES AMOUNT" shall mean, with respect
to any Special Allocation Settlement Report Date, the "Allocable Recoveries
Amount", if any, which has been allocated to Series 1998-2.
"SERIES 1998-2 ALLOCATED RECEIVABLES AMOUNT" shall mean, on any date
of determination, the lower of (i) the Series 1998-2 Target Receivables
Amount on such day and (ii) the product of (x) the Aggregate Receivables
Amount on such day and (y) the percentage equivalent of a fraction the
numerator of which is the Series 1998-2
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20
Target Receivables Amount on such day and the denominator of which is the
Aggregate Target Receivables Amount on such day.
"SERIES 1998-2 AMORTIZATION PERIOD" shall mean the period commencing
on the Business Day following the earliest to occur of (i) the date on
which an Early Amortization Period is declared to commence or automatically
commences, (ii) the Optional Termination Date and (iii) the Scheduled
Revolving Termination Date and ending on the earlier of (i) the date when
the Series 1998-2 Invested Amount shall have been reduced to zero and all
accrued interest and other amounts owing on the VFC Certificates and to the
Funding Agent and the Purchasers hereunder shall have been paid in full and
(ii) the Series 1998-2 Termination Date.
"SERIES 1998-2 COLLECTION SUBACCOUNT" shall have the meaning assigned
in subsection 3A.2(a).
"SERIES 1998-2 INTERESTS" shall mean, collectively, the VFC
Certificates and the Series 1998-2 Subordinated Interest.
"SERIES 1998-2 INVESTED AMOUNT" shall mean, as of any date of
determination, the sum of the Series 1998-2 Purchaser Invested Amounts of
all Purchasers on such date.
"SERIES 1998-2 MONTHLY INTEREST" shall have the meaning assigned in
subsection 3A.4(a).
"SERIES 1998-2 MONTHLY PRINCIPAL PAYMENT" shall have the meaning
assigned in Section 3A.5.
"SERIES 1998-2 MONTHLY SERVICING FEE" shall have the meaning assigned
in Section 6.1.
"SERIES 1998-2 NON-PRINCIPAL COLLECTION SUB-SUBACCOUNT" shall have the
meaning assigned in subsection 3A.2(a).
"SERIES 1998-2 PRINCIPAL COLLECTION SUB-SUBACCOUNT" shall have the
meaning assigned in subsection 3A.2(a).
"SERIES 1998-2 PURCHASER INVESTED AMOUNT" shall mean, with respect to
the Initial Purchaser on the Issuance Date or, if the Initial Purchaser
shall not fund the Initial Series 1998-2 Invested Amount, any APA Bank, an
amount equal to the Initial Series 1998-2 Invested Amount or such APA
Bank's Commitment Percentage of the Initial Series 1998-2 Invested Amount,
and with respect to the Initial Purchaser or any other Purchaser on any
date of determination thereafter, an amount equal to (a) the
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21
Initial Purchaser's or such other Purchaser's Series 1998-2 Purchaser
Invested Amount on the immediately preceding Business Day (or, with
respect to the day as of which such other Purchaser acquires an interest
in the Series 1998-2 Invested Amount, whether pursuant to Section 2.6, by
executing a counterpart hereof, a Commitment Transfer Supplement or
otherwise, the portion of the transferor's Series 1998-2 Purchaser
Invested Amount being purchased), PLUS (b) the amount of any increases in
such Purchaser's Series 1998-2 Purchaser Invested Amount pursuant to
Section 2.5 made on such day, MINUS (c) the amount of any distributions
to such Purchaser in respect of principal received and applied on such
day MINUS (d) the aggregate Series 1998-2 Allocable Charged-Off Amount
applied to such Purchaser on or prior to such date pursuant to subsection
3A.5(b)(ii) PLUS (e) (but only to the extent of any unreimbursed
reductions made pursuant to clause (d) above) the aggregate Series 1998-2
Allocable Recoveries Amount applied to such Purchaser on or prior to such
date pursuant to subsection 3A.5(c)(i).
"SERIES 1998-2 RATIO" shall mean, as of any Settlement Report Date and
continuing until (but not including) the next Settlement Report Date, the
greater of (i) the sum of the Loss Reserve Ratio and the Dilution Reserve
Ratio and (ii) the Minimum Ratio, in each case, then in effect.
"SERIES 1998-2 REQUIRED RESERVES" shall mean, (x) as of any date of
determination during the Series 1998-2 Revolving Period, an amount equal to
the sum of:
(a) an amount equal to the product of (A) the Series 1998-2
Adjusted Invested Amount on such day (after giving effect to any
increase or decrease thereof on such day) and (B) a fraction, the
numerator of which is the Series 1998-2 Ratio, and the denominator of
which is one MINUS the Series 1998-2 Ratio;
(b) the product of (i) the Series 1998-2 Invested Amount on such
day (after giving effect to any increase or decrease thereof on such
day) and (ii) a fraction, the numerator of which is the Carrying Cost
Reserve Ratio in effect for the Accrual Period in which such day
falls, and the denominator of which is one MINUS the Series 1998-2
Ratio; and
(c) the product of (i) the aggregate Principal Amount of
Receivables in the Trust on such day, (ii) a fraction, the numerator
of which is the Series 1998-2 Invested Amount on such day, and the
denominator of which is the sum of the Aggregate Invested Amount on
such day (after giving effect to any increase or decrease thereof on
such day), and (iii) a fraction, the numerator of which is the
Servicing Reserve Ratio, and the denominator of which is one MINUS the
Series 1998-2 Ratio;
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22
and (y) on any date of determination during the Series 1998-2 Amortization
Period, an amount equal to the Series 1998-2 Required Reserves on the last
Business Day of the Series 1998-2 Revolving Period; PROVIDED, in the case
of this clause (y), that such amount shall be adjusted on each Special
Allocation Settlement Report Date, if any, to the extent required as set
forth in Section 3A.5(b)(i) and Section 3A.5(c)(ii).
"SERIES 1998-2 REVOLVING PERIOD" shall mean the period commencing on
the Issuance Date and terminating on the earliest to occur of the close of
business on (i) the date on which an Early Amortization Period is
declared to commence or automatically commences, (ii) the Optional
Termination Date and (iii) the Commitment Termination Date.
"SERIES 1998-2 SUBORDINATED INTEREST AMOUNT" shall mean, for any date
of determination, an amount equal to (i) the Series 1998-2 Allocated
Receivables Amount MINUS (ii) the Series 1998-2 Adjusted Invested Amount.
"SERIES 1998-2 SUBORDINATED INTEREST REDUCTION AMOUNT" shall have the
meaning assigned in subsection 2.7(b).
"SERIES 1998-2 SUBORDINATED INTEREST" shall have the meaning assigned
in subsection 2.2(b).
"SERIES 1998-2 TARGET RECEIVABLES AMOUNT" shall mean, on any date of
determination, the sum of (i) the Series 1998-2 Adjusted Invested Amount on
such day and (ii) the Series 1998-2 Required Reserves for such day.
"SERIES 1998-2 TERMINATION DATE" shall mean the Distribution Date that
occurs in December, 2003.
"SERVICING RESERVE RATIO" shall mean, as of any Settlement Report Date
and continuing until (but not including) the next Settlement Report Date,
an amount (expressed as a percentage) equal to (i) the product of (A) the
Servicing Fee Percentage and (B) 2.0 TIMES Days Sales Outstanding as of
such earlier Settlement Report Date, DIVIDED BY (ii) 360.
"TAXES" shall mean any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any
Governmental Authority.
"TRANSACTION PARTIES" shall have the meaning assigned in subsection
2.6(d).
"TRANSFER ISSUANCE DATE" shall mean the date on which a Commitment
Transfer Supplement becomes effective pursuant to the terms of such
Commitment Transfer Supplement.
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23
"TRANSFEREE" shall have the meaning assigned in subsection 11.10(f).
"TRUST ACCOUNTS" shall have the meaning assigned in
subsection 3A.2(a).
"UCC CERTIFICATE" shall mean a certificate substantially in the form
of Exhibit H to this Supplement.
"UNACCRUED DISCOUNT PAYMENT AMOUNT" shall mean the portion of the
Purchase Price determined in accordance with clause (2) of the definition
thereof.
"UNALLOCATED BALANCE" shall mean, as of (i) any Business Day prior to
the APA Bank Purchase Date, the portion of the Series 1998-2 Invested
Amount allocated to any CP Tranche the CP Rate Period in respect of which
expires on such Business Day and (ii) the APA Bank Purchase Date or any
Business Day thereafter, the sum of (A) the portion of the Series 1998-2
Invested Amount for which interest is then being calculated by reference to
the ABR and (B) the portion of the Series 1998-2 Invested Amount allocated
to any Eurodollar Tranche the Eurodollar Period in respect of which expires
on such Business Day.
"VFC CERTIFICATE" shall mean a VFC Certificate, Series 1998-2,
executed by the Company and authenticated by or on behalf of the Trustee,
substantially in the form of Exhibit A.
"VFC CERTIFICATEHOLDERS" shall mean the Purchasers.
"VFC CERTIFICATEHOLDERS' INTEREST" shall have the meaning assigned in
subsection 2.2(a).
(b) If any term or provision contained herein conflicts with or is
inconsistent with any term, definition or provision contained in the Agreement,
the terms and provisions of this Supplement shall govern. All capitalized terms
not otherwise defined herein are defined in the Agreement. All Article, Section
or subsection references herein shall mean Article, Section or subsections of
this Supplement, except as otherwise provided herein. Unless otherwise stated
herein, the context otherwise requires or such term is otherwise defined in the
Agreement, each capitalized term used or defined herein shall relate only to the
Series 1998-2 Interests and no other Series of Investor Certificates issued by
the Trust.
<PAGE>
24
ARTICLE II
DESIGNATION OF CERTIFICATES; PURCHASE AND SALE
OF THE VFC CERTIFICATES
SECTION II.1. DESIGNATION. The Certificates and interests created
and authorized pursuant to the Agreement and this Supplement shall be divided
into two Classes, which shall be designated respectively as (i) the "VFC
Certificates, Series 1998-2" and (ii) an interest designated as the "Series
1998-2 Subordinated Interest."
SECTION II.2. THE SERIES 1998-2 INTERESTS. (a) The VFC Certificates
shall represent fractional undivided interests in the Trust, including the right
to receive distributions from (i) the Invested Percentage (expressed as a
decimal) of Collections received with respect to the Receivables and all other
funds on deposit in the Collection Account and (ii) all other funds on deposit
in the Series Collection Subaccounts and any subaccounts thereof (collectively,
the "VFC CERTIFICATEHOLDERS' INTEREST").
(b) The "SERIES 1998-2 SUBORDINATED INTEREST" shall be a fractional
undivided interest in the Trust, consisting of the right to receive
Collections with respect to the Receivables allocated to the VFC
Certificateholders' Interest and not required to be distributed to or for the
benefit of the Purchasers. The Exchangeable Company Interest and any other
Series of Investor Certificates outstanding shall represent the ownership
interest in the remainder of the Trust not allocated pursuant hereto to the
VFC Certificateholders' Interest or the Series 1998-2 Subordinated Interest.
(c) The VFC Certificates shall be substantially in the form of
Exhibit A and shall, upon issue, be executed and delivered by the Company to
the Trustee for authentication and redelivery as provided in Section 2.4
hereof and Section 5.2 of the Agreement.
SECTION II.3. PURCHASES OF INTERESTS IN THE VFC CERTIFICATES. (a)
INITIAL PURCHASE. Subject to the terms and conditions of this Supplement,
including delivery of notice in accordance with Section 2.4, (i) on the
Issuance Date, (A) the Initial Purchaser may, in its sole discretion,
purchase a VFC Certificate in an amount equal to the Initial Series 1998-2
Invested Amount or (B) if the Initial Purchaser shall have notified the
Funding Agent that it has elected not to purchase a VFC Certificate on the
Issuance Date, each APA Bank hereby severally agrees to purchase on the
Issuance Date a VFC Certificate in an amount equal to such APA Bank's
Commitment Percentage of the Initial Series 1998-2 Invested Amount and (ii)
thereafter, (A) if the Initial Purchaser shall have purchased a VFC
Certificate on the Issuance Date, the Initial Purchaser may, in its sole
discretion, maintain its VFC Certificate, subject to increase or decrease
during the Series 1998-2 Revolving Period, in accordance with the provisions
of this Supplement and (B) if the APA Banks shall have purchased VFC
Certificates on the Issuance Date or, in any case, on or after the APA Bank
Purchase Date, the APA Banks hereby severally agree to maintain their
respective VFC
<PAGE>
25
Certificates, subject to increase or decrease during the Series 1998-2
Revolving Period, in accordance with the provisions of this Supplement. The
Company hereby agrees to maintain ownership of the Series 1998-2 Subordinated
Interest, subject to increase or decrease during the Series 1998-2 Revolving
Period, in accordance with the provisions of this Supplement. Payments by
the Initial Purchaser or the APA Banks, as the case may be, in respect of the
VFC Certificates shall be made in immediately available funds on the Issuance
Date to the Funding Agent for payment to the Company.
(b) SUBSEQUENT PURCHASES. Subject to the terms and conditions of
this Supplement, each Acquiring APA Bank hereby severally agrees to maintain
its VFC Certificate, subject to increase or decrease during the Series 1998-2
Revolving Period, in accordance with the provisions of this Supplement.
(c) MAXIMUM SERIES 1998-2 PURCHASER INVESTED AMOUNT.
Notwithstanding anything to the contrary contained in this Supplement, at no
time shall the Series 1998-2 Purchaser Invested Amount (calculated without
regard to clauses (d) and (e) of the definition thereof) of any APA Bank
exceed such APA Bank's Commitment at such time.
SECTION II.4. DELIVERY. On the Issuance Date, the Company shall
sign, on behalf of the Trust, and shall direct the Trustee in writing
pursuant to Section 5.2 of the Agreement to duly authenticate, and the
Trustee, upon receiving such direction, shall so authenticate (i) the VFC
Certificates in such names and such denominations and deliver such VFC
Certificates to the Funding Agent, on behalf of the Initial Purchaser, or the
APA Banks, as the case may be, in accordance with such written directions.
The VFC Certificates shall be issued in minimum denominations of $1,000,000
and in integral multiples of $100,000 in excess thereof. The Trustee shall
mark on its books the actual Series 1998-2 Invested Amount and Series 1998-2
Subordinated Interest Amount outstanding on any date of determination, which,
absent manifest error, shall constitute PRIMA FACIE evidence of the
outstanding Series 1998-2 Invested Amount and Series 1998-2 Subordinated
Interest Amount from time to time.
SECTION II.5. PROCEDURE FOR INITIAL ISSUANCE AND FOR INCREASING
THE SERIES 1998-2 INVESTED AMOUNT. (a) Subject to subsection 2.5(c), (i) on
the Business Day designated in writing as provided herein (the "ISSUANCE
DATE"), the Initial Purchaser may agree, in its sole discretion, and each APA
Bank hereby agrees to purchase a VFC Certificate in accordance with Section
2.3 and (ii) on any Business Day during the Commitment Period, the Initial
Purchaser may agree, in its sole discretion, and each APA Bank hereby agrees
that the Series 1998-2 Invested Amount may be increased by increasing such
Purchaser's Series 1998-2 Purchaser Invested Amount (an "INCREASE"), upon the
request of the Servicer or the Company on behalf of the Trust (each date on
which an increase in the Series 1998-2 Invested Amount occurs hereunder being
herein referred to as the "INCREASE DATE" applicable to such Increase);
PROVIDED, HOWEVER, that the Servicer or the Company, as the case may be,
shall have given the Funding Agent (with a copy to the Trustee) irrevocable
written notice
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26
(effective upon receipt), substantially in the form of Exhibit F hereto, of
such request no later than (i) 1:00 p.m., New York City time, two Business
Days prior to the Issuance Date or such Increase Date, as the case may be, in
the case of any Increase Date occurring prior to the APA Bank Purchase Date
or (ii) (x) if the Initial Series 1998-2 Invested Amount or Increase Amount
is to be priced solely with reference to the ABR, on or prior to 12:00 noon,
New York City time, on the Issuance Date or such Increase Date, as the case
may be, or (y) if all or a portion of the Initial Series 1998-2 Invested
Amount or Increase Amount is to be allocated to a Eurodollar Tranche, 1:00
p.m., New York City time, three Business Days prior to the Issuance Date or
such Increase Date, as the case may be, in the case of any Increase Date
occurring on or after the APA Bank Purchase Date; PROVIDED, FURTHER, that the
provisions of this subsection shall not restrict the allocations of
Collections pursuant to Article III. Such notice shall state (x) the
Issuance Date or the Increase Date, as the case may be, (y) the initial
invested amount (the "INITIAL SERIES 1998-2 INVESTED AMOUNT"), or the
proposed amount of such Increase (the "INCREASE AMOUNT"), as the case may be,
and (z) on and after the APA Bank Purchase Date, what portions thereof will
be allocated to a Eurodollar Tranche and the Floating Tranche.
(b) If, prior to the APA Bank Purchase Date, the Initial Purchaser
elects not to fund any portion of a requested Increase, the Initial Purchaser
shall notify the Funding Agent thereof and deliver a Sale Notice in
accordance with Section 2.6 and each APA Bank shall purchase its Commitment
Percentage of the Initial Purchaser's Series 1998-2 Purchaser Invested Amount
in accordance with Section 2.6 and fund such Increase in an amount equal to
its Commitment Percentage of such Increase; PROVIDED, HOWEVER that an APA
Bank shall not be obligated to fund any portion of an Increase that would
cause its Series 1998-2 Purchaser Invested Amount to exceed its Commitment.
(c) The Purchasers shall not be required to make the initial
purchase of VFC Certificates on the Issuance Date or to increase their
respective Series 1998-2 Purchaser Invested Amounts on any Increase Date
hereunder unless:
(i) the related aggregate initial purchase amount or Increase
Amount is equal to $1,000,000 or an integral multiple of $100,000 in excess
thereof;
(ii) after giving effect to the initial purchase amount or
Increase Amount, (A) the Series 1998-2 Invested Amount would not exceed the
Maximum Commitment Amount on the Issuance Date or such Increase Date, as
the case may be, and (B) the Series 1998-2 Allocated Receivables Amount
would not be less than the Series 1998-2 Target Receivables Amount on the
Issuance Date or such Increase Date, as the case may be;
(iii) no Early Amortization Event or Potential Early Amortization
Event shall have occurred and be continuing;
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27
(iv) in the case of any funding by the Initial Purchaser, no
PARCO Wind-Down Event or Potential PARCO Wind-Down Event shall have
occurred and be continuing; and
(v) all of the representations and warranties made by each of
the Company, the Servicer, each Sub-Servicer and each Seller (other than
representations and warranties referred to in Section 2.06 of the
Receivables Sale Agreement) in each Transaction Document to which it is a
party are true and correct in all material respects on and as of the
Issuance Date or such Increase Date, as the case may be, as if made on and
as of such date (except to the extent such representations and warranties
are expressly made as of another date).
The Company's acceptance of funds in connection with (x) the Purchasers'
initial purchase of VFC Certificates on the Issuance Date and (y) each
Increase occurring on any Increase Date shall constitute a representation and
warranty by the Company to the Purchasers as of the Issuance Date or such
Increase Date (except to the extent such representations and warranties are
expressly made as of another date or relate to particular receivables), as
the case may be, that all of the conditions contained in this subsection
2.5(c) have been satisfied.
(d) After receipt by the Funding Agent of the notice required by
subsection 2.5(a) from the Servicer or the Company on behalf of the Trust,
the Funding Agent shall, so long as the conditions set forth in subsections
2.5(a) and (c) are satisfied, promptly provide telephonic notice (i) prior to
the APA Bank Purchase Date, to the Initial Purchaser, and (ii) on and after
the APA Bank Purchase Date, to each APA Bank, of the Increase Date and of the
portion of the Increase Amount allocable to such APA Bank (which shall equal
such APA Bank's Commitment Percentage of the Increase Amount). If the
Initial Purchaser elects to fund an Increase, the Initial Purchaser agrees to
pay in immediately available funds the amount of such Increase on the related
Increase Date to the Funding Agent for payment to the Trust for deposit in
the Series 1998-2 Principal Collection Sub-subaccount. On or after the APA
Bank Purchase Date, each APA Bank agrees to pay in immediately available
funds such APA Bank's Commitment Percentage of each Increase on the related
Increase Date to the Funding Agent for payment to the Trust for deposit in
the Series 1998-2 Principal Collection Sub-subaccount.
SECTION II.6. SALE BY THE INITIAL PURCHASER OF ITS SERIES 1998-2
PURCHASER INVESTED AMOUNT TO THE APA BANKS. (a) On any date during the
Commitment Period, the Initial Purchaser may, in its own discretion, and the
Initial Purchaser shall upon the occurrence of a PARCO Wind-Down Event, in
each case, by delivering a Sale Notice to the Funding Agent, the Company and
the Trustee, sell to the APA Banks (in accordance with their respective
Commitment Percentages) and each APA Bank hereby agrees to purchase its
Commitment Percentage of all right, title and interest of the Initial
Purchaser in its Series 1998-2 Purchaser Invested Amount. Any Sale Notice
shall be delivered by the Initial Purchaser to the Funding Agent, the Company
and the Trustee prior to 12:30 p.m., New York
<PAGE>
28
City time, on the APA Bank Purchase Date and shall constitute an irrevocable
offer by the Initial Purchaser to sell 100% of its Series 1998-2 Purchaser
Invested Amount at the Purchase Price. Any Sale Notice shall be deemed to be
a representation and warranty by the Initial Purchaser that no PARCO
Insolvency Event shall have occurred and be continuing. Each APA Bank hereby
agrees to purchase from the Initial Purchaser such APA Bank's Commitment
Percentage of the Initial Purchaser's Series 1998-2 Purchaser Invested Amount
for a purchase price equal to such APA Bank's Commitment Percentage of the
Purchase Price on the APA Bank Purchase Date (which date, subject to
subsection 2.6(b), may be the same as the date of the Sale Notice).
Notwithstanding anything to the contrary set forth in this Supplement, no APA
Bank shall have any obligation to purchase the Initial Purchaser's Series
1998-2 Purchaser Invested Amount if, on such Purchase Date, any PARCO
Insolvency Event shall have occurred and be continuing.
(b) If, at or prior to 12:30 p.m., New York City time, on any
Business Day, the Initial Purchaser delivers the Sale Notice to the Funding
Agent specifying that the APA Bank Purchase Date shall be the same date as
the date of the Sale Notice, the Funding Agent shall, by no later than 1:00
p.m., New York City time, notify (by telecopy or by telephone call promptly
confirmed in writing by telecopy) each APA Bank of the receipt and content of
the Sale Notice. Each APA Bank shall purchase its Commitment Percentage of
the Initial Purchaser's VFC Certificate by depositing its Commitment
Percentage of the Purchase Price in immediately available funds into the
account(s) specified by the Initial Purchaser in the Sale Notice no later
than 2:00 p.m., New York City time. If the Initial Purchaser delivers the
Sale Notice to the Funding Agent after 12:30 p.m., New York City time, on any
Business Day or the Initial Purchaser delivers the Sale Notice to the Funding
Agent specifying that the APA Bank Purchase Date shall be a date other than
the date of the Sale Notice, the Funding Agent shall promptly advise (by
telecopy or by telephone call promptly confirmed in writing by telecopy) each
APA Bank of the receipt and content of the Sale Notice. Notwithstanding the
fact that the APA Bank Purchase Date may occur on a date which is later than
the date on which the Sale Notice is delivered to the Funding Agent, the
several obligations of each APA Bank to make such purchase and to make
payment of the amounts required to be paid by it pursuant to subsection
2.6(a) shall arise immediately upon receipt by the Funding Agent of the Sale
Notice. Upon payment of the Purchase Price as provided herein and delivery
to the Trustee by the Funding Agent of the Initial Purchaser's VFC
Certificate, the Company shall sign, on behalf of the Trust, and shall direct
the Trustee in writing to duly authenticate, and the Trustee, upon receiving
such direction, shall so authenticate, a new VFC Certificate in the name of
each APA Bank and in a denomination equal to such APA Bank's Commitment
Percentage as set forth in such written direction and shall deliver such VFC
Certificate to each such APA Bank in accordance with such written direction.
(c) If, by 2:00 p.m., New York City time, one or more APA Banks
(each, a "DEFAULTING APA BANK," and each APA Bank other than the Defaulting
APA Bank being referred to as a "NON-DEFAULTING APA BANK") fails to make its
Commitment Percentage of the Purchase Price available to the Funding Agent
pursuant to subsection 2.6(b) (the aggregate
<PAGE>
29
amount not so made available to the Funding Agent being herein called the
"PURCHASE PRICE DEFICIT"), then the Funding Agent shall, by no later than
2:30 p.m., New York City time, instruct each Non-Defaulting APA Bank to pay,
by no later than 3:00 p.m., New York City time, in immediately available
funds, to the account designated by the Funding Agent, an amount equal to the
lesser of (x) such Non-Defaulting APA Bank's proportionate share (based upon
the relative Commitments of the Non-Defaulting APA Banks) of the Purchase
Price Deficit and (y) its unused Commitment. A Defaulting APA Bank shall
forthwith, upon demand, pay to the Funding Agent for the ratable benefit of
the Non-Defaulting APA Banks all amounts paid by each Non-Defaulting APA Bank
on behalf of such Defaulting APA Bank, together with interest thereon, for
each day from the date a payment was made by a Non-Defaulting APA Bank until
the date such Non-Defaulting APA Bank has been paid such amounts in full, at
a rate per annum equal to the sum of the Federal Funds Effective Rate plus
2%. In addition, without prejudice to any other rights that the Initial
Purchaser may have under applicable law, each Defaulting APA Bank shall pay
to the Initial Purchaser forthwith upon demand, the difference between the
Defaulting APA Bank's unpaid Commitment Percentage of the Purchase Price and
the amount paid with respect thereto by the Non-Defaulting APA Banks,
together with interest thereon, for each day from the date of the Funding
Agent's request for such Defaulting APA Bank's Commitment Percentage of the
Purchase Price pursuant to Section 2.6(b) until the date the requisite amount
is paid to the Initial Purchaser in full, at a rate per annum equal to the
sum of the Federal Funds Effective Rate plus 2%.
(d) The transfer of the Initial Purchaser's VFC Certificate
pursuant to this Section 2.6 shall be without recourse or warranty, express
or implied, except that the Initial Purchasers represent that such VFC
Certificate is free and clear of adverse claims created by or arising as a
result of claims against the Initial Purchaser. By executing and delivering
a Sale Notice pursuant to Section 2.6(a),(i) the Initial Purchaser makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
VFC Certificate or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the VFC Certificate, or any other
agreement, instrument or other document furnished pursuant thereto or in
connection therewith, including without limitation any Transaction Document,
and (ii) the Initial Purchaser makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Trust, the Trustee, the Servicer, each Sub-Servicer, each Seller or any
Obligor (collectively, the "TRANSACTION PARTIES") or the Funding Agent, or
the performance or observance by the Transaction Parties of any of their
respective obligations under the VFC Certificate or the Transaction Documents.
(e) If the Adjusted Liquidity Price on the APA Bank Purchase Date
is less than the Series 1998-2 Invested Amount on the APA Bank Purchase Date
(the amount of such insufficiency, the "PARCO RESIDUAL AMOUNT"), each APA
Bank agrees that (i) on each Distribution Date after the APA Bank Purchase
Date on which interest is distributed to VFC Certificateholders pursuant to
subsection 3A.6(a), the Funding Agent shall distribute to the
<PAGE>
30
Initial Purchaser its Reduction Percentage of such interest payments and (ii)
on each Distribution Date after the APA Purchase Date on which amounts in
reduction of the Series 1998-2 Invested Amount are distributed to VFC
Certificateholders pursuant to Section 2.7 or subsection 3A.6(c), the Funding
Agent shall distribute to the Initial Purchaser its Reduction Percentage of
such amounts.
SECTION II.7. PROCEDURE FOR DECREASING THE SERIES 1998-2 INVESTED
AMOUNT; OPTIONAL TERMINATION. (a) On any Business Day during the Series
1998-2 Revolving Period or the Series 1998-2 Amortization Period (except for
Distribution Dates during the Series 1998-2 Amortization Period (which shall
be governed by subsection 3A.6(c))), upon the written request of the Servicer
or the Company on behalf of the Trust, the Series 1998-2 Invested Amount may
be reduced (a "DECREASE") by the distribution by the Trustee to the Funding
Agent for the PRO RATA benefit of the Purchasers in accordance with their
respective Series 1998-2 Purchaser Invested Amount of funds on deposit in the
Series 1998-2 Principal Collection Sub-subaccount on such day in an amount
not to exceed the amount of such funds on deposit on such day; PROVIDED that
the Servicer shall have given the Funding Agent (with a copy to the Trustee)
irrevocable written notice (effective upon receipt), prior to 1:00 p.m., New
York City time, (i)on the second Business Day prior to such Decrease, in the
case of any Decrease occurring prior to the APA Bank Purchase Date and
(ii)(A) if the Decrease relates solely to a Floating Tranche, on the Business
Day of such Decrease or (B) if all or any portion of the Decrease relates to
a Eurodollar Tranche, on the Business Day that is three Business Days prior
to such Decrease, and which notice shall state the amount of such Decrease;
PROVIDED, FURTHER, that (x) such Decrease shall be in an amount equal to
$1,000,000 and integral multiples of $100,000 in excess thereof or if the
Series 1998-2 Invested Amount is less than $1,000,000 then such Decrease
shall equal the Series 1998-2 Invested Amount, and (y) prior to the APA Bank
Purchase Date, such Decrease shall be in an amount no greater than the
Unallocated Balance on such day.
(b) Simultaneously with any such Decrease during the Series 1998-2
Revolving Period, the Series 1998-2 Subordinated Interest Amount shall be
reduced by an amount (the "SERIES 1998-2 SUBORDINATED INTEREST REDUCTION
AMOUNT") such that the Series 1998-2 Subordinated Interest Amount shall equal
the Series 1998-2 Required Reserves after giving effect to such Decrease.
During the Series 1998-2 Revolving Period, after the distribution described
in subsection (a) above has been made, and the Series 1998-2 Subordinated
Interest Amount shall have been reduced by the Series 1998-2 Subordinated
Interest Reduction Amount, a distribution shall be made to the owner of the
Series 1998-2 Subordinated Interest out of remaining funds on deposit in the
Series 1998-2 Principal Collection Sub-subaccount in an amount equal to the
lesser of (x) the Series 1998-2 Subordinated Interest Reduction Amount and
(y) the amount of such remaining funds on deposit in the Series 1998-2
Principal Collection Sub-subaccount.
(c) On or after the APA Bank Purchase Date, any reduction in the
Series 1998-2 Invested Amount on any Business Day shall be allocated first to
reduce the
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31
Unallocated Balance and then to reduce the portion of the Series 1998-2
Invested Amount allocated to Eurodollar Tranches in such order as the Company
may select in order to minimize costs payable pursuant to Section 7.4.
(d)(i) On any Business Day unless the Scheduled Revolving
Termination Date, an Early Amortization Event or a Potential Early
Amortization Event shall have occurred and be continuing, the Company shall
have the right to deliver an irrevocable written notice (an "OPTIONAL
TERMINATION NOTICE") to the Trustee, the Servicer and the Rating Agencies in
which the Company declares that the Series 1998-2 Revolving Period shall
terminate on the date (the "OPTIONAL TERMINATION DATE") set forth in such
notice (which date, in any event, shall be the last day of a Settlement
Period which is not less than 10 days from the date on which such notice is
delivered).
(ii) From and after the Optional Termination Date, the Series
1998-2 Amortization Period shall commence for all purposes under this
Agreement and the other Transaction Documents. The Trustee shall give prompt
written notice of its receipt of an Optional Termination Notice to the
Purchasers and each Rating Agency.
SECTION II.8. REDUCTIONS OF THE COMMITMENTS. (a) On any Business Day
during the Series 1998-2 Revolving Period, the Company, on behalf of the Trust,
may, upon three Business Days' prior written notice to the Funding Agent
(effective upon receipt) (with copies to the Servicer and the Trustee) reduce or
terminate the Commitments (a "COMMITMENT REDUCTION") in an aggregate amount
equal to $5,000,000 or a whole multiple of $1,000,000 in excess thereof;
PROVIDED that no such termination or reduction shall be permitted if, after
giving effect thereto and to any reduction in the Series 1998-2 Invested Amount
on such date, the Series 1998-2 Invested Amount would exceed the Aggregate
Commitment Amount then in effect. Each APA Banks's Commitment shall be reduced
by such APA Bank's Commitment Percentage of the amount of such Commitment
Reduction.
(b) Once reduced, the Commitments may not be subsequently
reinstated. Upon effectiveness of any such reduction, the Funding Agent shall
prepare a revised Schedule 1 to reflect the reduced Commitment of each APA
Bank and Schedule 1 of this Supplement shall be deemed to be automatically
superseded by such revised Schedule 1. The Funding Agent shall distribute
such revised Schedule 1 to the Company, the Servicer, the Trustee and each
APA Bank.
SECTION II.9. INTEREST; FEES. (a) Interest shall be payable on
the VFC Certificates on each Distribution Date pursuant to subsection 3A.6(a).
(b) The Trustee (acting at the written direction of the Servicer
upon which the Trustee may conclusively rely) shall distribute pursuant to
subsection 3A.6(b), from amounts on deposit in the Series 1998-2
Non-Principal Collection Sub-subaccount, to the Funding Agent, for the PRO
RATA account of the APA Banks in accordance with their respective
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32
Commitment Percentages, on each Distribution Date, a commitment fee with
respect to each Accrual Period ending on such date (the "COMMITMENT FEE") (i)
during the Series 1998-2 Revolving Period at the Commitment Fee Rate of the
average daily excess of the Aggregate Commitment Amount OVER the average
aggregate Series 1998-2 Purchaser Invested Amounts of the APA Banks during
such Accrual Period and (ii) during the Series 1998-2 Amortization Period at
the Commitment Fee Rate of the average daily Series 1998-2 Invested Amount
during such Accrual Period; PROVIDED HOWEVER, that no Commitment Fee will be
payable hereunder for any Accrual Period or portion thereof during the Series
1998-2 Amortization Period that commences on or after the APA Bank Purchase
Date . The Commitment Fee shall be payable (i) monthly in arrears on each
Distribution Date and (ii) on the Commitment Termination Date. To the extent
that funds on deposit in the Series 1998-2 Non-Principal Collection
Sub-subaccount at any such date are insufficient to pay the Commitment Fee
due on such date, the Servicer shall so notify the Company and the Company
shall immediately pay the Funding Agent the amount of any such deficiency.
(c) The Trustee (acting at the written direction of the Servicer upon
which the Trustee may conclusively rely) shall distribute pursuant to subsection
3A.6(b), from amounts on deposit in the Series 1998-2 Non-Principal Collection
Sub-subaccount, to the Funding Agent, for the account of the Initial Purchaser,
on each Distribution Date prior to the APA Bank Purchase Date and on the
Distribution Date immediately succeeding the APA Bank Purchase Date, a facility
fee (the "FACILITY FEE") with respect to each Accrual Period ending on such date
(or, in the case of the Distribution Date immediately succeeding the APA Bank
Purchase Date, the period from and including the immediately preceding
Distribution Date to but excluding the APA Bank Purchase Date) (i) during the
Series 1998-2 Revolving Period, at the Facility Fee Rate of the average daily
Aggregate Commitment Amount during such period and (ii) during the Series 1998-2
Amortization Period, at the Facility Fee Rate of the average daily Series 1998-2
Invested Amount during such period. The Facility Fee shall be payable (i)
monthly in arrears on each Distribution Date prior to the APA Bank Purchase Date
and (ii) on the Distribution Date immediately succeeding the APA Bank
Purchase Date. To the extent that funds on deposit in the Series 1998-2
Non-Principal Collection Sub-subaccount at any such date are insufficient to
pay the Facility Fee due on such date, the Servicer shall so notify the
Company and the Company shall immediately pay the Funding Agent the amount of
any such deficiency.
(d) Calculations of per annum rates and fees under this Supplement
shall be made on the basis of a 360- (or 365-/366-, in the case of interest
on the Floating Tranche based on the ABR) day year with respect to Commitment
Fees, Facility Fees and interest rates. Each determination of the Eurodollar
Rate by the Funding Agent shall be conclusive and binding upon each of the
parties hereto in the absence of manifest error.
SECTION II.10. INDEMNIFICATION BY THE COMPANY AND THE SERVICER.
(a) The Company agrees to indemnify and hold harmless the Funding Agent, each
Purchaser and each of their respective officers, directors, agents and
employees (each, a "COMPANY INDEMNIFIED
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32
PERSON") from and against any loss, liability, expense, damage or injury
suffered or sustained by (a "CLAIM") such Company indemnified person by
reason of (i) any acts, omissions or alleged acts or omissions arising out
of, or relating to, activities of the Company pursuant to any Pooling and
Servicing Agreement or the other Transaction Documents to which it is a
party, (ii) a breach of any representation or warranty made or deemed made by
the Company (or any of its officers) in any Pooling and Servicing Agreement
or other Transaction Documents or (iii) a failure by the Company to comply
with any applicable law or regulation or to perform its covenants,
agreements, duties or obligations required to be performed or observed by it
in accordance with the provisions of any Pooling and Servicing Agreement or
the other Transaction Documents, including, but not limited to, any judgment,
award, settlement, reasonable attorneys' fees and other reasonable costs or
expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim, except to the extent such loss, liability,
expense, damage or injury (A) resulted from the gross negligence, bad faith
or wilful misconduct of such Company indemnified person or its officers,
directors, agents, principals, employees or employers, (B) resulted solely
from a default by an Obligor with respect to any Receivable or (C) include
any income or franchise taxes imposed on (or measured by) any Company
indemnified person's net income; PROVIDED that any payments made by the
Company pursuant to this subsection shall be made solely from funds available
to the Company which are not otherwise required to be applied to the payment
of any amounts (other than amounts payable to the Company) pursuant to any
Pooling and Servicing Agreements, shall be non-recourse other than with
respect to such funds, and shall not constitute a claim against the Company
to the extent that insufficient funds exist to make such payment.
(b) The Servicer agrees to indemnify and hold harmless the Funding
Agent, each Purchaser and each of their respective officers, directors, agents
and employees (each, a "SERVICER INDEMNIFIED PERSON") from and against any Claim
by reason of (i) any Claims by third parties against any Seller indemnified
person resulting from any acts, omissions or alleged acts or omissions arising
out of, or relating to, activities of the Servicer pursuant to any Pooling and
Servicing Agreement or the other Transaction Documents to which it is a party,
(ii) a breach of any representation or warranty made or deemed made by the
Servicer (or any of its officers) in any Pooling and Servicing Agreement or
other Transaction Document or (iii) a failure by the Servicer to comply with
any applicable law or regulation or to perform its covenants, agreements,
duties or obligations required to be performed or observed by it in
accordance with the provisions of any Pooling and Servicing Agreement or the
other Transaction Documents, including, but not limited to, any judgment,
award, settlement, reasonable attorneys' fees and other reasonable costs or
expenses incurred in connection with the defense of any actual or threatened
action, proceeding or claim, except to the extent such loss, liability,
expense, damage or injury resulted from the gross negligence, bad faith or
wilful misconduct of such Servicer indemnified person or its officers,
directors, agents, principals, employees or employers.
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34
ARTICLE III
ARTICLE III OF THE AGREEMENT
Section 3.1 of the Agreement and each other section of Article III
of the Agreement relating to another Series shall read in their entirety as
provided in the Agreement. Article III of the Agreement (except for Section
3.1 thereof and any portion thereof relating to another Series) shall read in
its entirety as follows and shall be exclusively applicable to the Series
1998-2 Interests:
SECTION 3A.2. ESTABLISHMENT OF TRUST ACCOUNTS. (a) The Trustee
shall cause to be established and maintained in the name of the Trustee, on
behalf of the Trust, (i) for the benefit of the Purchasers and (ii) in the
case of clauses (A) and (B) below, for the benefit, subject to the prior and
senior interest of the Purchasers, of the owner of the Series 1998-2
Subordinated Interest, (A) a subaccount of the Collection Account (the
"SERIES 1998-2 COLLECTION SUBACCOUNT"), which subaccount is the Series
Collection Subaccount with respect to Series 1998-2; (B) two subaccounts of
the Series 1998-2 Collection Subaccount: (1) the Series 1998-2 Principal
Collection Sub-subaccount and (2) the Series 1998-2 Non-Principal Collection
Sub-subaccount (respectively, the "SERIES 1998-2 PRINCIPAL COLLECTION
SUB-SUBACCOUNT" and the "SERIES 1998-2 NON-PRINCIPAL COLLECTION
SUB-SUBACCOUNT") and (C) a subaccount of the Series 1998-2 Non-Principal
Collection Sub-subaccount (the "SERIES 1998-2 ACCRUED INTEREST
SUB-SUBACCOUNT"; all accounts established pursuant to this subsection 3A.2(a)
and listed on Schedule 2, collectively, the "TRUST ACCOUNTS"), each Trust
Account to bear a designation indicating that the funds deposited therein are
held for the benefit of the Persons (and, for each such Person, to the
extent) set forth in clauses (i) and (ii) above. The Trustee shall possess
all right, title and interest in all funds from time to time on deposit in,
and all Eligible Investments credited to, the Trust Accounts and in all
proceeds thereof. The Trust Accounts shall be under the sole dominion and
control of the Trustee for the exclusive benefit of the Persons (and, for
each such Person, to the extent) set forth in clauses (i) and (ii) above.
(b) All Eligible Investments in the Trust Accounts shall be held by
the Trustee, on behalf of the Certificateholders, for the exclusive benefit of
the Purchasers and, subject to the prior interest of the Purchasers, the owner
of the Series 1998-2 Subordinated Interest; PROVIDED, HOWEVER, that funds on
deposit in a Trust Account which is a Sub-subaccount of a Collection Account
may, at the direction of the Company, be invested together with funds held in
other Sub-subaccounts of the Collection Account. In the absence of written
direction from the Company all funds held in any Trust Account will remain
uninvested. After giving effect to any distribution to the Company pursuant
to subsection 3A.3(b), amounts on deposit and available for investment in the
Series 1998-2 Principal Collection Sub-subaccount shall be invested by the
Trustee at the written direction of the Company in Eligible Investments that
mature, or that are payable or redeemable upon demand of the holder thereof,
(i) in the case of any such investment made during the Series 1998-2
Revolving Period, on or prior to the next Business Day and (ii) in the case
of any such
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35
investment made during the Series 1998-2 Amortization Period, on or prior to
the Business Day immediately preceding the next Distribution Date. Amounts
on deposit and available for investment in the Series 1998-2 Non-Principal
Collection Sub-subaccount and the Series 1998-2 Accrued Interest
Sub-subaccount shall be invested by the Trustee at the written direction of
the Company in Eligible Investments that mature, or that are payable or
redeemable upon demand of the holder thereof, on or prior to the Business Day
immediately preceding the next Distribution Date. As of the Business Day
immediately preceding such next Distribution Date, (x) all interest and other
investment earnings (net of losses and investment expenses) on funds
deposited in the Series 1998-2 Accrued Interest Sub-subaccount shall be
deposited in the Series 1998-2 Non-Principal Collection Sub-subaccount and
(y) all interest and investment earnings (net of losses and investment
expenses) on funds deposited in the Series 1998-2 Principal Collection
Sub-subaccount shall be deposited in the Series 1998-2 Non-Principal
Collection Sub-subaccount. In the absence of written direction from the
Company all funds held in any Trust Account will remain uninvested.
SECTION 3A.3. DAILY ALLOCATIONS. In accordance with the written
direction of the Servicer, upon which the Trustee may conclusively rely:
(a) The portion of the Aggregate Daily Collections allocated to the
Series 1998-2 Interests pursuant to Article III of the Agreement shall be
allocated and distributed on each Business Day as set forth in this Article
III by the Trustee as follows:
(i) on each Business Day, an amount equal to the Accrued Expense
Amount for such day (or, during the Series 1998-2 Revolving Period, such
greater amount as the Company may request in writing) shall be transferred
from the Series 1998-2 Collection Subaccount to the Series 1998-2
Non-Principal Collection Sub-subaccount;
(ii) any remaining funds on deposit in the Series 1998-2
Collection Subaccount shall be transferred by the Trustee to the Series
1998-2 Principal Collection Sub-subaccount.
(b)(i) On each Business Day during the Series 1998-2 Revolving Period
(including Distribution Dates), after giving effect to (x) all allocations of
Aggregate Daily Collections on such Business Day and (y) any deposit resulting
from an Increase, if any, pursuant to subsection 2.5(c) on such Business Day,
amounts on deposit in the Series 1998-2 Principal Collection Sub-subaccount
shall be distributed by the Trustee to the Company (but only to the extent
that the Trustee has received a Daily Report which reflects the receipt of
the Collections on deposit therein) not later than 2:00 p.m., New York City
time, in accordance with directions contained in the Daily Report; PROVIDED
that such distribution shall be made only if no Early Amortization Event or
Potential Early Amortization Event relating to an Early Amortization Event
set forth in subsections (a), (d) (but only with respect to a Servicer
Default set forth in subsection 6.1(e) of the Servicing Agreement), (g), (i)
or (j) of
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36
Section 5.1 of this Supplement has occurred and is continuing and only to the
extent that, if after giving effect to such distribution, the Series 1998-2
Target Receivables Amount would not exceed the Series 1998-2 Allocated
Receivables Amount; PROVIDED FURTHER that if the Company or the Servicer, on
behalf of the Company, shall have given the Funding Agent irrevocable written
notice (effective upon receipt) at least two Business Days prior to such day,
in the case of any notice given prior to the APA Bank Purchase Date, on such
day, in the case of any notice given on or after the APA Bank Purchase Date
with respect to the Floating Tranche, or at least three Business Days prior
to such day, in the case of any notice given on or after the APA Bank
Purchase Date with respect to the Eurodollar Tranche, the Company or the
Servicer may instruct the Trustee in writing (specifying the related amount)
to withdraw all or a portion of such amounts on deposit in the Series 1998-2
Principal Collection Sub-subaccount and apply such withdrawn amounts toward
the reduction of the Series 1998-2 Invested Amount and the Series 1998-2
Subordinated Interest Amount in accordance with Section 2.6. Amounts
distributed to the Company hereunder shall be deemed to be paid first from
Collections received directly by the Servicer and second from Collections
received in the Lockboxes.
(ii) On each Business Day during the Series 1998-2 Amortization
Period (including Distribution Dates), funds deposited in the Series 1998-2
Principal Collection Sub-subaccount shall be invested in Eligible Investments
that mature on or prior to the Business Day immediately preceding the next
Distribution Date and shall be distributed on such Distribution Date in
accordance with subsection 3A.6(c). Except as set forth in subsection
3A.6(c), no amounts on deposit in the Series 1998-2 Principal Collection
Sub-subaccount shall be distributed by the Trustee to the Company or the
owner of the Series 1998-2 Subordinated Interest during the Series 1998-2
Amortization Period.
(c) On each Business Day, an amount equal to the Daily Interest
Deposit for such day shall be transferred by the Trustee from the Series
1998-2 Non-Principal Collection Sub-subaccount to the Series 1998-2 Accrued
Interest Sub-subaccount.
(d) The allocations to be made pursuant to this Section 3A.3 are
subject to the provisions of Sections 2.5, 2.7, 7.2 and 9.1 of the Agreement.
SECTION 3A.4. DETERMINATION OF INTEREST. (a) (i) The amount of
interest distributable with respect to the VFC Certificates ("SERIES 1998-2
MONTHLY INTEREST") on each Distribution Date shall be the amount of Daily
Interest Expense accrued during the Accrual Period ending on such
Distribution Date.
(ii) If a change in the CP Rate, the weighted average Eurodollar
Rate or the ABR on or after any Settlement Report Date results in a change
in Series 1998-2 Monthly Interest for the Accrual Period ending on the
Distribution Date immediately succeeding such Settlement Report Date, the
Servicer shall amend the Settlement Statement to reflect the adjustment in
the Series 1998-2 Monthly Interest for such
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37
Accrual Period caused by such change and any consequent adjustments and the
Servicer shall also provide written notification to the Trustee of any such
change. Any amendment to the Settlement Statement pursuant to this
subsection 3A.4(a)(ii) shall be completed by 1:00 p.m. on the day preceding
the next Distribution Date.
(b) On each Distribution Date, the Servicer shall determine the
excess, if any (the "INTEREST SHORTFALL"), of (i) the Series 1998-2 Monthly
Interest for the Accrual Period ending on such Distribution Date OVER (ii)
the amount which will be available to be distributed to the Purchasers on
such Distribution Date in respect thereof pursuant to this Supplement. If
the Interest Shortfall with respect to any Distribution Date is greater than
zero, an additional amount ("ADDITIONAL INTEREST") equal to the product of
(A) the number of days until such Interest Shortfall shall be repaid DIVIDED
BY 365 (or 366, as the case may be), (B) the ABR PLUS 2.0% and (C) such
Interest Shortfall (or the portion thereof which has not been paid to the
Purchasers) shall be payable as provided herein with respect to the VFC
Certificates on each Distribution Date following such Distribution Date, to
but excluding the Distribution Date on which such Interest Shortfall is paid
to the VFC Certificateholders.
(c) On any Business Day, the Company may, subject to subsection
3A.4(e), elect to allocate all or any portion of the Available Pricing Amount
(i), prior to the APA Bank Purchase Date, to one or more CP Tranches with CP
Rate Periods commencing on such Business Day by giving the Funding Agent
irrevocable written or telephonic (confirmed in writing) notice thereof,
which notice must be received by the Funding Agent prior to 1:00 p.m., New
York City time, two Business Days prior to such Business Day or (ii) on or
after the APA Bank Purchase Date, to one or more Eurodollar Tranches with
Eurodollar Periods commencing on such Business Day by giving the Funding
Agent irrevocable written or telephonic (confirmed in writing) notice
thereof, which notice must be received by the Funding Agent prior to 1:00
p.m., New York City time, three Business Days prior to such Business Day.
Such notice shall specify (i) the applicable Business Day, (ii) the CP Rate
Period for each CP Tranche or the Eurodollar Period for each Eurodollar
Tranche, as the case may be, to which a portion of the Available Pricing
Amount is to be allocated and (iii) the portion of the Available Pricing
Amount being allocated to each such CP Tranche or Eurodollar Tranche, as the
case may be. On or after the APA Bank Purchase Date, the Funding Agent shall
notify each APA Bank of the contents of each such notice promptly upon
receipt thereof. Prior to the APA Bank Purchase Date, the Company shall
allocate the Series 1998-2 Invested Amount so that the aggregate amounts
allocated to outstanding CP Rate Periods at all times equal the Series 1998-2
Invested Amount.
(d) Any reduction in the Series 1998-2 Invested Amount on any
Business Day shall be allocated in the following order of priority:
FIRST, to reduce the Unallocated Balance, as appropriate; and
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38
SECOND, to reduce the portion of the Series 1998-2 Invested Amount
allocated to Eurodollar Tranches in such order as the Company may select in
order to minimize costs payable pursuant to Section 7.4.
(e) Notwithstanding anything to the contrary contained in this
Section 3A.4, (i) prior to the APA Bank Purchase Date, (A) the Initial
Purchaser shall approve the length of each CP Rate Period and the portion of
the Series 1998-2 Invested Amount allocated to such CP Rate Period, (B) the
Initial Purchaser may select, in its sole discretion, any new CP Rate Period
if (x) the Company fails to provide notice of a new CP Rate Period on a
timely basis or (y) the Funding Agent, on behalf of the Initial Purchaser,
determines, in its sole discretion, that the CP Rate Period requested by the
Company is unavailable or for any reason commercially undesirable, (C) the
portion of the Series 1998-2 Invested Amount allocable to each CP Tranche
must be in an amount equal to $1,000,000 or an integral multiple of $100,000
in excess thereof and (D) no more than ten CP Tranches shall be outstanding
at any one time and (ii) on and after the APA Bank Purchase Date, (A) the
portion of the Series 1998-2 Invested Amount allocable to each Eurodollar
Tranche must be in an amount equal to $500,000 or an integral multiple of
$500,000 in excess thereof, (B) no more than five Eurodollar Tranches shall
be outstanding at any one time, (C) after the occurrence and during the
continuance of any Early Amortization Event or Potential Early Amortization
Event relating to an Early Amortization Event set forth in subsections (a),
(d) (but only with respect to a Servicer Default set forth in subsection
6.1(e) of the Servicing Agreement), (g) or (j) of Section 5.1 of this
Supplement, the Company may not elect to allocate any portion of the
Available Pricing Amount to a Eurodollar Tranche and (D) after the end of the
Series 1998-2 Revolving Period, the Company may not select any Eurodollar
Period that does not end on or prior to the next succeeding Distribution Date.
SECTION 3A.5. DETERMINATION OF SERIES 1998-2 MONTHLY PRINCIPAL.
(a) PAYMENTS OF SERIES 1998-2 PRINCIPAL. The amount (the "SERIES 1998-2
MONTHLY PRINCIPAL PAYMENT") distributable from the Series 1998-2 Principal
Collection Sub-subaccount on each Distribution Date during the Series 1998-2
Amortization Period shall be equal to the amount on deposit in such account
on the immediately preceding Settlement Report Date; PROVIDED, HOWEVER, that
the Series 1998-2 Monthly Principal Payment on any Distribution Date shall
not exceed the Series 1998-2 Invested Amount on such Distribution Date after
giving effect to the reductions and increases pursuant to paragraphs (b) and
(c) below. In addition, on the last day of any Eurodollar Period that is not
a Distribution Date, the Trustee, at the written direction of the Servicer,
shall distribute from amounts on deposit in the Series 1998-2 Accrued
Interest Sub-subaccount an amount equal to the interest due on the Eurodollar
Tranche on the last day of such Eurodollar Period.
(b) REDUCTIONS TO SERIES 1998-2 PRINCIPAL. If, on any Special
Allocation Settlement Report Date, the Series 1998-2 Allocable Charged-Off
Amount is greater than zero for the related Settlement Period, the Trustee shall
(in accordance with written directions from
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39
the Servicer, upon which the Trustee may conclusively rely) make the
following allocations of such amounts in the following order of priority:
(i) the Series 1998-2 Required Reserves shall be reduced (but not
below zero) by an amount equal to the Series 1998-2 Allocable Charged-Off
Amount (which shall also be reduced by the amount so applied); and
(ii) then, to the extent that the Series 1998-2 Allocable
Charged-Off Amount is greater than zero following the application in
clause (i) above, the Series 1998-2 Invested Amount shall be reduced
(but not below zero) by such remaining Series 1998-2 Allocable
Charged-Off Amount (which shall also be reduced by the amount so
applied).
(c) INCREASES TO SERIES 1998-2 PRINCIPAL. If, on any Special
Allocation Settlement Report Date, the Series 1998-2 Allocable Recoveries
Amount is greater than zero for the related Settlement Period, the Trustee
shall (in accordance with written directions from the Servicer upon which the
Trustee may conclusively rely) make the following allocations (after giving
effect to the applications in paragraph (b) of such amount in the following
order of priority):
(i) the Series 1998-2 Invested Amount shall be increased (but only
to the extent of any previous reductions of the Series 1998-2 Invested
Amount pursuant to subsection 3A.5(b)(ii)) by the amount of the Series
1998-2 Allocable Recoveries Amount (which shall also be reduced by the
amount so applied);
(ii) then, to the extent that the Series 1998-2 Allocable
Recoveries Amount is greater than zero following the applications in
clause (i) above, the Series 1998-2 Required Reserves shall be increased
(but only to the extent of any previous reductions of the Series 1998-2
Required Reserves pursuant to subsection 3A.5(b)(i)) by such remaining
Series 1998-2 Allocable Recoveries Amount (which shall also be reduced
by the amount so applied).
SECTION 3A.6. APPLICATIONS. (a) On each Distribution Date, the
Trustee shall distribute to the Purchasers, from amounts on deposit in the
Series 1998-2 Accrued Interest Sub-subaccount, an amount equal to the Series
1998-2 Monthly Interest payable on such Distribution Date (such amount, the
"MONTHLY INTEREST PAYMENT"), PLUS the amount of any Monthly Interest Payment
previously due but not distributed to the Purchasers on a prior Distribution
Date, PLUS the amount of any Additional Interest for such Distribution Date and
any Additional Interest previously due but not distributed to the Purchasers on
a prior Distribution Date.
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40
(b) On each Distribution Date, the Trustee shall apply funds on
deposit in the Series 1998-2 Non-Principal Collection Sub-subaccount in the
following order of priority to the extent funds are available:
(i) an amount equal to the Series 1998-2 Monthly Servicing Fee
for the Accrual Period ending on such Distribution Date shall be withdrawn
from the Series 1998-2 Non-Principal Collection Sub-subaccount by the
Trustee and paid to the Servicer or, if Core-Mark or any Affiliate
thereof is not the Servicer, an amount equal to the Series 1998-2 Monthly
Servicing Fee shall be paid to the Person acting as Successor Servicer
(less, in each case, any amounts payable to the Trustee pursuant to
Section 8.5 of the Agreement, which shall be paid to the Trustee);
(ii) an amount equal to the Facility Fee for the Accrual Period
ending on such Distribution Date shall be withdrawn from the Series 1998-2
Non-Principal Collection Sub-subaccount by the Trustee and paid to the
Funding Agent, for the account of the Initial Purchaser;
(iii) an amount equal to the Commitment Fee for the Accrual Period
ending on such Distribution Date shall be withdrawn from the Series 1998-2
Non-Principal Collection Sub-subaccount by the Trustee and paid to the
Funding Agent, for the PRO RATA account of the APA Banks, in accordance
with their respective Commitment Percentages; and
(iv) an amount equal to any unpaid Program Costs due and
payable shall be withdrawn from the Series 1998-2 Non-Principal
Collection Sub-subaccount by the Trustee and paid to the Persons owed
such amounts.
Any remaining amounts on deposit in the Series 1998-2 Non-Principal Collection
Sub-subaccount (in excess of the Accrued Expense Amount as of such day) not
allocated pursuant to clauses (i) through (v) above shall be paid to the owner
of the Series 1998-2 Subordinated Interest; PROVIDED, HOWEVER, that during the
Series 1998-2 Amortization Period, such remaining amounts shall be deposited in
the Series 1998-2 Principal Collection Sub-subaccount for distribution in
accordance with subsection 3A.6(c).
(c) During the Series 1998-2 Amortization Period, the Trustee shall
apply, on each Distribution Date, amounts on deposit in the Series 1998-2
Principal Collection Sub-subaccount in the following order of priority:
(i) an amount equal to the Series 1998-2 Monthly Principal Payment
for such Distribution Date shall be distributed from the Series 1998-2
Principal Collection Sub-subaccount to the Purchasers; and
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(ii) if, following the repayment in full of the Series 1998-2
Invested Amount, any amounts are owed to the Trustee, the Purchasers or any
other Person hereunder, such amounts shall be transferred from the Series
1998-2 Principal Collection Sub-subaccount and paid to the Trustee, the
Purchasers or such other Person; and
(iii) following the repayment in full of the Series 1998-2 Invested
Amount and of all of the amounts set forth in clause (ii), the remaining
amount on deposit in the Series 1998-2 Principal Collection Sub-subaccount
on such Distribution Date, if any, shall be distributed to the owner of the
Series 1998-2 Subordinated Interest.
Further, on any other Business Day during the Series 1998-2
Amortization Period, funds may be distributed from the Series 1998-2 Principal
Collection Sub-subaccount to the Purchasers in accordance with Section 2.7(a) of
this Supplement.
ARTICLE IV
DISTRIBUTIONS AND REPORTS
Article IV of the Agreement (except for any portion thereof relating
to another Series) shall read in its entirety as follows and the following shall
be exclusively applicable to the VFC Certificates:
SECTION 4A.1. DISTRIBUTIONS. (a) On each Distribution Date, the
Trustee shall distribute to each Purchaser its applicable pro rata share (based
on each such Purchaser's Series 1998-2 Invested Amount) of the amount to be
distributed to the Purchasers pursuant to Article III.
(b) All allocations and distributions hereunder shall be in accordance
with the Daily Report and the Monthly Settlement Statement and shall be made in
accordance with the provisions of Section 11.4 hereof and subject to Section
3.1(g) of the Agreement.
SECTION 4A.2. DAILY REPORTS. The Servicer shall provide the Funding
Agent and the Trustee with a Daily Report in accordance with subsection 4.1(a)
of the Servicing Agreement. The Funding Agent shall make copies of the Daily
Report available to the Purchasers at their reasonable request at the Funding
Agent's office in New York, New York.
SECTION 4A.3. STATEMENTS AND NOTICES. (a) MONTHLY SETTLEMENT
STATEMENTS. On each Settlement Report Date, the Servicer shall deliver to the
Trustee and the Funding Agent (commencing with the Settlement Report Date
occurring on May 15, 1998) a Monthly Settlement Statement in the Form of Exhibit
E setting forth, among other things, the Loss Reserve Ratio, the Dilution
Reserve Ratio, the Minimum Ratio, the Carrying Cost Reserve Ratio, the Servicing
Reserve Ratio and the components of the calculation thereof, the Series
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42
1998-2 Monthly Interest, the Additional Interest, the Series 1998-2 Monthly
Servicing Fee, the Commitment Fee and the Series 1998-2 Monthly Principal
Payment, each as recalculated for the period until the next succeeding
Settlement Report Date. The Funding Agent shall forward a copy of each
Monthly Settlement Statement to any Purchaser upon request by such Purchaser.
The Company and the Servicer will deliver copies of all notices, reports,
statements and other documents delivered by it pursuant to the Pooling and
Servicing Agreements to each Rating Agency. A copy of any such items may be
obtained by any Certificateholder upon a written request delivered to the
Trustee at the Corporate Trust Office.
(b) ANNUAL CERTIFICATEHOLDERS' TAX STATEMENT. On or before January
31 of each calendar year (or such earlier date as required by applicable law),
beginning with calendar year 1999, the Trustee shall furnish, or cause to be
furnished, to each Person who at any time during the preceding calendar year
was a Purchaser, a statement prepared by the Company containing the aggregate
amount distributed to such Person for such calendar year or the applicable
portion thereof during which such Person was a Purchaser, together with such
other information as is required to be provided by an issuer of indebtedness
under the Internal Revenue Code and such other customary information as the
Company deems necessary or desirable to enable the Purchasers to prepare
their tax returns. Such obligation of the Trustee shall be deemed to have
been satisfied to the extent that substantially comparable information shall
have been prepared by the Servicer and provided to the Trustee or the Funding
Agent and to the Purchasers, in each case pursuant to any requirements of the
Internal Revenue Code as from time to time in effect.
(c) EARLY AMORTIZATION EVENT/DISTRIBUTION OF PRINCIPAL NOTICES.
Upon the occurrence of an Early Amortization Event or Potential Early
Amortization Event with respect to Series 1998-2, the Company or the
Servicer, as the case may be, shall give prompt written notice thereof to the
Trustee and the Funding Agent. As promptly as reasonably practicable after
its receipt of notice of the occurrence of an Early Amortization Event with
respect to Series 1998-2, the Trustee shall give notice thereof (i) to each
Rating Agency (which notice shall be given in writing not later than the
second Business Day after such receipt) and (ii) to the Funding Agent, who in
turn shall give notice to each Purchaser. In addition, on the Business Day
preceding each day on which a distribution of principal is to be made during
the Series 1998-2 Amortization Period, the Servicer shall direct the Funding
Agent to send notice to each Purchaser, which notice shall set forth the
amount of principal to be distributed on the related date to the Purchasers
with respect to the outstanding VFC Certificates.
ARTICLE V
ADDITIONAL EARLY AMORTIZATION EVENTS
SECTION V.1. ADDITIONAL EARLY AMORTIZATION EVENTS. If any one of
the events specified in Section 7.1 of the Agreement (after any grace periods
or consents
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43
applicable thereto) or any one of the following events (each, an "EARLY
AMORTIZATION EVENT") shall occur during the Series 1998-2 Revolving Period
with respect to the Series 1998-2 Interests:
(a) (i) failure on the part of the Servicer to direct any payment or
deposit to be made or failure of any payment or deposit to be made in
respect of interest owing on any VFC Certificates or the Commitment Fee
within two Business Days of the date such interest or Commitment Fee is
due, (ii) failure on the part of the Servicer to direct any payment or
deposit to be made in respect of principal owing on any VFC Certificates on
the date such principal is due or (iii) failure on the part of the Servicer
to direct any payment or deposit to be made, or of the Company to make any
payment or deposit in respect of any other amounts owing by the Company,
under any Pooling and Servicing Agreement within five Business Days of the
date such other amount is due or such deposit is required to be made;
(b) (i) failure on the part of the Company to duly observe or perform
in any material respect any of the covenants or agreements of the Company
set forth in Sections 2.7(b) or (l) or Section 2.8 of the Agreement or
(ii) failure on the part of the Company duly to observe or perform in any
material respect any other covenants or agreements of the Company set forth
in any Pooling and Servicing Agreement, which failure continues unremedied
30 days after the earlier of the date on which a Responsible Officer of the
Company or the Servicer has knowledge thereof and the date on which written
notice of such failure, requiring the same to be remedied, shall have been
given to the Company by the Trustee, or to the Company and the Trustee by
the Funding Agent or Purchasers representing 25% or more of the Series
1998-2 Invested Amount;
(c) any representation or warranty made or deemed made by the Company
in any Pooling and Servicing Agreement to or for the benefit of the
Purchasers (i) proves to have been incorrect in any material respect when
made or when deemed made and (ii) continues to be incorrect until 30 days
after the earlier of the date on which a Responsible Officer of the Company
or the Servicer has knowledge thereof and the date on which notice of such
failure, requiring the same to be remedied, has been given by the Trustee
to the Company or by Purchasers representing 25% or more of the Series
1998-2 Invested Amount to the Company and the Trustee; PROVIDED, HOWEVER,
that an Early Amortization Event with respect to the Series 1998-2
Interests shall not be deemed to have occurred under this paragraph if the
incorrectness of such representation or warranty gives rise to an
obligation to repurchase the related Receivables and the Company has
repurchased the related Receivable or all such Receivables, if applicable,
in accordance with the provisions of any Pooling and Servicing Agreement
within ten Business Days of the day on which the Company was obligated to
do so;
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(d) a Servicer Default with respect to the Servicer shall have
occurred and be continuing;
(e) a Purchase Termination Event (as defined in the Receivables Sale
Agreement) shall have occurred with respect to Core-Mark and be continuing
under the Receivables Sale Agreement;
(f) a Change in Control shall have occurred;
(g) the Series 1998-2 Allocated Receivables Amount shall be less than
the Series 1998-2 Target Receivables Amount for a period of five
consecutive Business Days;
(h) any of the Agreement, the Servicing Agreement, this Supplement or
the Receivables Sale Agreement shall cease, for any reason, to be in full
force and effect in any material respect, or the Company, any Seller, the
Servicer, any Sub-Servicer or any Affiliate of any thereof shall so assert
in writing;
(i) the Trust shall for any reason cease to have a valid and perfected
first priority undivided ownership or security interest in substantially
all of the Trust Assets (subject to no other Liens other than Permitted
Liens described in clauses (i) and (iv) of the definition thereof), or any
of Core-Mark, the Company or any Affiliate of either thereof shall so
assert; or
(j) 15 days shall have elapsed after there shall have been filed
against Core-Mark, the Company or the Trust (i) a notice of federal tax
Lien with respect to taxes exceeding $100,000 in the aggregate from the
Internal Revenue Service, (ii) a notice of Lien with respect to amounts
exceeding $100,000 in the aggregate from the PBGC under Section 412(n) of
the Internal Revenue Code or Section 302(f) of ERISA for a failure to make
a required installment or other payment to a plan to which either of such
sections applies, (iii) a notice of state tobacco excise tax Lien with
respect to taxes exceeding $100,000 in the aggregate from any state
Governmental Authority or (iv) a notice of any other Lien the existence of
which could reasonably be expected to have a material adverse effect on the
business, operations or financial condition of such Person, unless in each
case there shall have been delivered to the Trustee and each Rating Agency
proof of the release of, or payment of amounts secured by, such Lien;
(k) Core-Mark or any of its Subsidiaries shall default in the
observance or performance of any agreement or condition relating to any of
its outstanding Indebtedness (including, without limitation, Indebtedness
outstanding under the Credit Agreement) or contained in any instrument or
agreement evidencing, securing or relating thereto, or any other event
shall occur or condition exist, the effect of which
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45
default or other event or condition is to cause such Indebtedness to
become due prior to its stated maturity; PROVIDED, HOWEVER, that no Early
Amortization Event shall be deemed to occur under this paragraph unless
the aggregate amount of Indebtedness in respect of which any default or
other event or condition referred to in this paragraph shall have
occurred shall be equal to at least $5,000,000;
(l) any action, suit, investigation or proceeding at law or in equity
(including, without limitation, injunctions, writs or restraining orders)
shall be brought or commenced or filed by or before any arbitrator, court
or Governmental Authority against the Company or the Servicer or any
properties, revenues or rights of either thereof which could reasonably be
expected to have a Material Adverse Effect;
(m) the Trust shall issue any Series of Investor Certificates other
than the VFC Certificates or the Series 1998-1 Certificates; or
(n) one or more judgments or decrees shall be entered against the
Servicer or the Company involving in the aggregate a liability (not paid or
fully covered by insurance) of $1,000,000 or more and such judgments or
decrees shall not have been vacated, discharged, stayed or bonded pending
appeal within 60 days from the entry thereof.
then, in the case of (x) any event described in Section 7.1 of the Agreement,
after the applicable grace period (if any) set forth in such Section, and
paragraph (m) above, automatically without any notice or action on the part of
the Trustee or Purchasers, an early amortization period shall immediately
commence or (y) any other event described above, after the applicable grace
period (if any) set forth in such subsections, the Trustee may, and at the
written direction of the Required APA Banks shall, by written notice then given
to the Company and the Servicer, declare that an early amortization period has
commenced as of the date of such notice with respect to Series 1998-2 (any such
period under clause (x) or (y) above, an "EARLY AMORTIZATION PERIOD"); PROVIDED,
HOWEVER, that in the case of the event described in clause (g) above, if an
Early Amortization Period has not been declared within ten Business Days after
the occurrence of such event, then an Early Amortization Period shall occur
automatically unless, (i) prior to the end of such ten Business Day period, the
Series 1998-2 Allocated Receivables Amount shall no longer be less than the
Series 1998-2 Target Receivables Amount and (ii) so long as the Series 1998-2
Allocated Receivables Amount continues to be equal to or greater than the Series
1998-2 Target Receivables Amount, the Majority Purchasers shall have waived the
occurrence of such event.
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46
ARTICLE VI
SERVICING FEE
SECTION VI.1. SERVICING COMPENSATION. A monthly servicing fee (the
"SERIES 1998-2 MONTHLY SERVICING FEE") shall be payable to the Servicer on each
Distribution Date for the preceding Settlement Period in an amount equal to the
product of (a) the Servicing Fee and (b) a fraction the numerator of which is
the daily average Aggregate Commitment Amount for such Settlement Period and the
denominator of which is the sum of (i) the Aggregate Invested Amounts (other
than the Series 1998-2 Invested Amount and the Invested Amount in respect of any
variable funding certificate of any other Outstanding Series) on the first day
of such Settlement Period and (ii) the Aggregate Commitment Amount on the first
day of such Settlement Period plus the Aggregate Commitment amount for any
variable funding certificate of any other Outstanding Series.
ARTICLE VII
CHANGE IN CIRCUMSTANCES
SECTION VII.1. ILLEGALITY. Notwithstanding any other provision
herein, if, after the Issuance Date, the adoption of or any change in any
Requirement of Law or in the interpretation, administration or application
thereof shall make it unlawful for any APA Bank to make or maintain its
portion of the VFC Certificateholders' Interest in any Eurodollar Tranche and
such APA Bank shall notify in writing the Funding Agent, the Trustee and the
Company, then the portion of each Eurodollar Tranche applicable to such APA
Bank shall thereafter be calculated by reference to the ABR. If any such
change in the method of calculating interest occurs on a day which is not the
last day of the Eurodollar Period with respect to any Eurodollar Tranche, the
Company shall pay to the Funding Agent for the account of such APA Bank the
amounts, if any, as may be required pursuant to Section 7.4.
SECTION VII.2. INCREASED COSTS. (a) If any Change in Law (except
with respect to Taxes which shall be governed by Section 7.3) shall:
(i) impose, modify or deem applicable any reserve, special deposit
or similar requirement against assets of, deposits with or for the account
of, or credit extended by, any APA Bank (except any such reserve
requirement reflected in the Eurodollar Rate); or
(ii) impose on any APA Bank or the London interbank market any
other condition affecting the Transaction Documents or the funding of
Eurodollar Tranches by such APA Bank;
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47
and the result of any of the foregoing shall be to increase the cost to such APA
Bank of making, converting into, continuing or maintaining Eurodollar Tranches
(or maintaining its obligation to do so) or to reduce any amount received or
receivable by such APA Bank hereunder (whether principal, interest or
otherwise), then the Company will pay to such APA Bank such additional amount or
amounts as will compensate such APA Bank for such additional costs incurred or
reduction suffered.
(b) If any APA Bank determines that any Change in Law regarding
capital requirements has or would have the effect of reducing the rate of
return on such APA Bank's capital or the capital of any corporation
controlling such APA Bank as a consequence of its obligations hereunder to a
level below that which such APA Bank or such corporation could have achieved
but for such Change in Law (taking into consideration such APA Bank's or such
corporation's policies with respect to capital adequacy), then from time to
time, the Company shall pay to such APA Bank such additional amount or
amounts as will compensate such APA Bank for any such reduction suffered.
(c) A certificate of an APA Bank setting forth the amount or amounts
necessary to compensate such APA Bank as specified in subsections (a) and (b)
of this Section 7.2 shall be delivered to the Company (with a copy to the
Funding Agent) and shall be conclusive absent manifest error. The agreements
in this Section shall survive the termination of this Supplement and the
Agreement and the payment of all amounts payable hereunder and thereunder.
(d) Failure or delay on the part of any APA Bank to demand
compensation pursuant to this Section 7.2 shall not constitute a waiver of
such APA Bank's right to demand such compensation; PROVIDED that the Company
shall not be required to compensate an APA Bank pursuant to this Section 7.2
for any increased costs or reductions incurred more than 270 days prior to
the date that such APA Bank notifies the Company of the Change in Law giving
rise to such increased costs or reductions and of such APA Bank's intention
to claim compensation therefor; PROVIDED FURTHER that, if the Change in Law
giving rise to such increased costs or reductions is retroactive, then the
270-day period referred to above shall be extended to include the period of
retroactive effect thereof.
SECTION VII.3. TAXES. (a) Any and all payments by or on account
of any obligation of the Company hereunder shall be made free and clear of
and without deduction for any Indemnified Taxes or Other Taxes; PROVIDED that
if the Company shall be required to deduct any Indemnified Taxes or Other
Taxes from such payments, then (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 7.3) the Funding
Agent or such APA Bank receives an amount equal to the sum that it would have
received had no such deductions been made, (ii) the Company shall make such
deductions and (iii) the Company shall pay the full amount deducted to the
relevant Governmental Authority in accordance with applicable law.
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(b) In addition, the Company shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) The Company shall indemnify the Funding Agent and each APA Bank
within the later of 10 days after written demand therefor and the
Distribution Date next following such demand for the full amount of any
Indemnified Taxes or Other Taxes paid by the Funding Agent or such APA Bank
on or with respect to any payment by or on account of any obligation of the
Company hereunder or under any other Transaction Document (including
Indemnified Taxes or Other Taxes imposed or asserted on or attributable to
amounts payable under this Section 7.3) and any penalties, interest and
reasonable expenses arising therefrom or with respect thereto, whether or not
such Indemnified Taxes or Other Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate as to the
amount of such payment or liability delivered to the Company by the Funding
Agent or an APA Bank shall be conclusive absent manifest error. Any payments
made by the Company pursuant to this subsection shall be made solely from
funds available to the Company which are not otherwise required to be applied
to the payment of any amounts (other than amounts payable to the Company)
pursuant to any Pooling and Servicing Agreements, shall be non-recourse other
than with respect to funds in excess of the funds needed to make such
payment, and shall not constitute a claim against the Company to the extent
that insufficient funds exist to make such payment. The agreements in
this subsection shall survive the termination of this Supplement and the
Agreement and the payment of all amounts payable hereunder and thereunder.
(d) As soon as practicable after any payment of Indemnified Taxes
or Other Taxes by the Company to a Governmental Authority, the Company shall
deliver to the Funding Agent the original or a certified copy of a receipt
issued by such Governmental Authority evidencing such payment, a copy of the
return reporting such payment or other evidence of such payment reasonably
satisfactory to the Funding Agent.
(e) The Funding Agent and any APA Bank that is entitled to an
exemption from or reduction of an Indemnified Tax or Other Tax with respect
to payments made under this Supplement and the Agreement shall (but with
respect to any Indemnified Tax or Other Tax arising from a Change in Law,
only to the extent the Funding Agent or such APA Bank is legally able to do
so) deliver to the Company (with a copy to the Funding Agent) such properly
completed and executed documentation prescribed by applicable law and
reasonably requested by the Company on the later of (i) 30 Business Days
after such request is made and the applicable forms are provided to such APA
Bank or (ii) 30 Business Days before prescribed by applicable law as will
permit such payments to be made without withholding or with an exemption from
or reduction of Indemnified Taxes or Other Taxes.
(f) If the Funding Agent or an APA Bank (or a Transferee) receives
a refund solely in respect of Taxes or Other Taxes, it shall pay over such
refund to the Company to the extent that it has already received indemnity
payments or additional amounts pursuant to
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this Section 7.3 with respect to such Taxes or Other Taxes giving rise to the
refund, net of all out-of-pocket expenses and without interest (other than
interest paid by the relevant Governmental Authority with respect to such
refund); PROVIDED, HOWEVER, that the Company shall, upon request of the
Funding Agent or such APA Bank (or Transferee), repay such refund (plus
interest or other charges imposed by the relevant Governmental Authority) to
the Funding Agent or such APA Bank (or Transferee) if the Funding Agent or
such APA Bank (or Transferee) is required to repay such refund to such
Governmental Authority. Nothing contained herein shall require the Funding
Agent or an APA Bank (or Transferee) to make its tax returns (or any other
information relating to its taxes which it deems confidential) available to
the Company or any other Person.
SECTION VII.4. BREAK FUNDING PAYMENTS. The Company agrees to
indemnify each APA Bank and to hold each APA Bank harmless from any loss or
expense which such APA Bank may sustain or incur as a consequence of (a)
default by the Company in making a borrowing of, conversion into or
continuation of a Eurodollar Tranche after the Company has given irrevocable
notice requesting the same in accordance with the provisions of this
Supplement, or (b) default by the Company in making any prepayment in
connection with a Decrease after the Company has given irrevocable notice
thereof in accordance with the provisions of Section 2.7 of this Supplement
or (c) the making of a prepayment of a Eurodollar Tranche prior to the
termination of the Eurodollar Period for such Eurodollar Tranche. Such
indemnification may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid or not
so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day
of the Eurodollar Period (or in the case of a failure to borrow, convert or
continue, the Eurodollar Period that would have commenced on the date of such
prepayment or of such failure) in each case at the Eurodollar Rate for such
Eurodollar Tranche provided for herein over (ii) the amount of interest (as
reasonably determined by such APA Bank) which would have accrued to such APA
Bank on such amount by placing such amount on deposit for a comparable period
with leading banks in the interbank eurodollar market; PROVIDED that any
payments made by the Company pursuant to this subsection shall be made solely
from funds available to the Company which are not otherwise required to be
applied to the payment of any amounts (other than amounts payable to the
Company) pursuant to any Pooling and Servicing Agreements, shall be
non-recourse other than with respect to funds in excess of the funds needed
to make such payment, and shall not constitute a claim against the Company to
the extent that insufficient funds exist to make such payment. This covenant
shall survive the termination of this Supplement and the Agreement and the
payment of all amounts payable hereunder and thereunder. A certificate as to
any additional amounts payable pursuant to the foregoing sentence submitted
by any APA Bank to the Company shall be conclusive absent manifest error.
SECTION VII.5. ALTERNATE RATE OF INTEREST. If prior to the
commencement of any Eurodollar Period:
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(a) the Funding Agent determines (which determination shall be
conclusive absent manifest error) that adequate and reasonable means do not
exist for ascertaining the Eurodollar Rate for such Eurodollar Period, or
(b) the Funding Agent is advised by the Majority Purchasers that the
Eurodollar Rate for such Eurodollar Period will not adequately and fairly
reflect the cost to such Purchasers of making or maintaining the Eurodollar
Tranches during such Eurodollar Period,
then the Funding Agent shall forthwith give telecopy or telephonic notice
thereof to the Company, the Trustee and the Purchasers, whereupon until the
Funding Agent notifies the Company and the Trustee that the circumstances
giving rise to such notice no longer exist, the Available Pricing Amount
shall not be allocated to any Eurodollar Tranche.
SECTION VII.6. MITIGATION OBLIGATIONS. (a) If any APA Bank requests
compensation under Section 7.2, or if the Company is required to pay any
additional amount to any APA Bank or any Governmental Authority for the account
of any APA Bank pursuant to Section 7.3, then such APA Bank shall use reasonable
efforts to designate a different lending office for funding or booking its
obligations under this Supplement and the Agreement or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such APA Bank, such designation or assignment (i) would
eliminate or reduce amounts payable pursuant to Section 7.2 or 7.3, as the case
may be, in the future and (ii) would not subject such APA Bank to any
unreimbursed cost or expense and would not otherwise be disadvantageous to such
APA Bank. The Company hereby agrees to pay all reasonable costs and expenses
incurred by any APA Bank in connection with any such designation or assignment.
(b) If any APA Bank requests compensation under Section 7.2, or if
the Company is required to pay any additional amount to any APA Bank or any
Governmental Authority for the account of any APA Bank pursuant to Section
7.3, or if any APA Bank defaults in its obligations hereunder, then the
Company may, at its sole expense and effort, upon notice to such APA Bank and
the Funding Agent, require such APA Bank to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 11.11), all its interests, rights and obligations under this
Supplement to an assignee that shall assume such obligations (which assignee
may be another APA Bank, if an APA Bank accepts such assignment); PROVIDED
that (i) the Company shall have received the prior written consent of the
Funding Agent, which consent shall not unreasonably be withheld, (ii) such
APA Bank shall have received payment of an amount equal to its Series 1998-2
Purchaser Invested Amount, accrued interest thereon, accrued fees and all
other amounts payable to it hereunder, from the assignee (to the extent of
such Series 1998-2 Purchaser Invested Amount and accrued interest and fees)
or the Company (in the case of all other amounts) and (iii) in the case of
any such assignment resulting from a claim for compensation under Section 7.2
or payments required to be made pursuant to Section 7.3, such assignment
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will result in a reduction in such compensation or payments. An APA Bank
shall not be required to make any such assignment and delegation if, prior
thereto, as a result of a waiver by such APA Bank or otherwise, the
circumstances entitling the Company to require such assignment and delegation
cease to apply.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES, COVENANTS
SECTION VIII.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE SERVICER. The Company and the Servicer each hereby represents and
warrants to the Trustee, the Funding Agent and each of the Purchasers that
each and every of their respective representations and warranties contained
in the Agreement is true and correct in all material respects as of the
Issuance Date and as of the date of each Increase.
SECTION VIII.2. COVENANTS OF THE COMPANY AND THE SERVICER. The
Company and the Servicer hereby agree, in addition to their obligations under
the Agreement and the Servicing Agreement, that:
(a) they shall not terminate the Agreement unless in compliance with
the terms of the Agreement and each Supplement relating to an Outstanding
Series;
(b) within 60 days of the date hereof, they will (i) deliver to the
Trustee executed copies of software licenses or sublicenses, in a form
reasonably acceptable to the Trustee, which grant to the Trustee the right
to utilize any of the software owned or licensed by the Servicer that is
necessary to perform the collection and administrative functions to be
performed by the Trustee under the Transaction Documents, (ii) deliver to
the Trustee executed copies of any landlord waivers, in a form reasonably
acceptable to the Trustee, that may be necessary to grant to the Trustee
access to the leased premises of the Servicer for which the Trustee may
require access to perform the collection and administrative functions to
be performed by the Trustee under the Transaction Documents, except to
the extent the Company or the Servicer, as the case may be, owns such
property and (iii) have taken all actions reasonably requested by the
Trustee in connection with, and to ensure completion of, each of the
Servicer Site Review and the Standby Liquidation System;
(c) they shall afford the Funding Agent or any representatives of the
Funding Agent access to all records relating to the Receivables at any
reasonable time during regular business hours, upon reasonable prior notice
(and without prior notice if an Early Amortization Event has occurred),
according to the Servicer's normal security and confidentiality
requirements, for purposes of inspection and shall permit the
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Funding Agent or any representative of the Funding Agent to visit any of
the Company's or the Servicer's, as the case may be, offices or
properties during regular business hours and as often as may reasonably
be desired to discuss the business, operations, properties, financial and
other conditions of the Company or the Servicer with their respective
officers and employees and with their independent certified public
accountants; PROVIDED that Funding Agent shall notify the Company or the
Servicer, as the case may be, prior to any contact with such accountants
and shall give the Company or the Servicer the opportunity to participate
in such discussions;
(d) neither the Company nor the Servicer shall take any action, nor
permit any Seller to take any action, requiring the satisfaction of the
Rating Agency Condition pursuant to any Transaction Document without the
prior written consent of the Majority Purchasers;
(e) it shall cooperate in good faith to allow the Trustee to use the
Servicer's available facilities and expertise upon the Servicer's
termination or default;
(f) it shall only direct investments in Eligible Investments which are
rated by Moody's and, for purposes of Moody's, references in the definition
of Eligible Investments to "one of the two highest rating category" shall
be deemed to read "the highest rating category".
SECTION VIII.3. COVENANTS OF THE SERVICER. The Servicer hereby
agrees that:
(a) it shall provide to the Funding Agent (i) no later than 45 days
after the Initial Closing Date and (ii) in the case of an addition of a
Seller, prior to the related Seller Addition Date (as defined in the
Receivables Sale Agreement), evidence that each Seller, or such Seller, as
the case may be, maintains disaster recovery systems and back-up computer and
other information management systems that are reasonably satisfactory to the
Funding Agent;
(b) it shall provide to the Funding Agent, simultaneously with
delivery to the Trustee or the Rating Agencies, all reports, notices,
certificates, statements and other documents required to be delivered to the
Trustee or the Rating Agencies pursuant to the Agreement, the Servicing
Agreement and the other Transaction Documents and furnish to the Funding
Agent promptly after receipt thereof a copy of each material notice, material
demand or other material communication (excluding routine communications)
received by or on behalf of the Company or the Servicer with respect to the
Transaction Documents; and
(c) it shall provide notice to the Funding Agent of the appointment
of a Successor Servicer pursuant to Section 6.2 of the Servicing Agreement.
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53
SECTION VIII.4. OBLIGATIONS UNAFFECTED. The obligations of the
Company and the Servicer to the Funding Agent and the Purchasers under this
Supplement shall not be affected by reason of any invalidity, illegality or
irregularity of any of the Receivables or any sale of any of the Receivables.
ARTICLE IX
CONDITIONS PRECEDENT
SECTION IX.1. CONDITIONS PRECEDENT TO EFFECTIVENESS OF SUPPLEMENT.
This Supplement shall become effective on the date (the "EFFECTIVE DATE") on
which the following conditions precedent have been satisfied:
(a) DOCUMENTS. The Funding Agent shall have received an original copy
for the Initial Purchaser and each APA Bank, each executed and delivered in
form and substance satisfactory to it of (i) the Agreement, executed by a
duly authorized officer of each of the Company, the Servicer and the
Trustee, (ii) this Supplement, executed by a duly authorized officer of
each of the Company, the Servicer, the Trustee, the Funding Agent, the
Initial Purchaser and the APA Banks and (iii) the other Transaction
Documents, each duly executed by the parties thereto.
(b) CORPORATE DOCUMENTS; CORPORATE PROCEEDINGS OF THE COMPANY AND
SERVICER. The Funding Agent shall have received, with a copy for the
Initial Purchaser and each APA Bank, from the Company, each Seller and the
Servicer, true and complete copies of:
(i) the certificate of incorporation, including all
amendments thereto, of such Person, certified as of a recent date by the
Secretary of State or other appropriate authority of the state of
incorporation, as the case may be, and a certificate of compliance, of
status or of good standing, as and to the extent applicable, of each
such Person as of a recent date, from the Secretary of State or other
appropriate authority of such jurisdiction;
(ii) a certificate of the Secretary of such Person, dated the
Effective Date and certifying (A) that attached thereto is a true and
complete copy of the by-laws of such Person, as in effect on the
Effective Date and at all times since a date prior to the date of the
resolutions described in clause (B) below, (B) that attached thereto
is a true and complete copy of the resolutions, in form and substance
reasonably satisfactory to the Funding Agent, of the Board of
Directors of such Person or committees thereof authorizing the
execution, delivery and performance of the Transaction Documents to
which it is a party and the transactions contemplated thereby, and
that such resolutions
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54
have not been amended, modified, revoked or rescinded and are in
full force and effect, (C) that the certificate of incorporation of
such Person has not been amended since the date of the last
amendment thereto shown on the certificate of good standing (or its
equivalent) furnished pursuant to clause (i) above and (D) as to
the incumbency and specimen signature of each officer executing any
Transaction Documents or any other document delivered in connection
herewith or therewith on behalf of such Person; and
(iii) a certificate of another officer as to the incumbency and
specimen signature of the Secretary or Assistant Secretary executing
the certificate pursuant to clause (ii) above.
(c) GOOD STANDING CERTIFICATES. The Funding Agent shall have received
copies of certificates of compliance, of status or of good standing, dated
as of a recent date, from the Secretary of State or other appropriate
authority of such jurisdiction, with respect to the Company, the Servicer
and each Seller, in each State where the ownership, lease or operation of
property or the conduct of business requires it to qualify as a foreign
corporation, except where the failure to so qualify would not have a
material adverse effect on the business, operations, properties or
condition (financial or otherwise) of the Company, the Servicer or such
Seller, as the case may be.
(d) CONSENTS, LICENSES, APPROVALS, ETC. The Funding Agent shall have
received, with a counterpart for the Initial Purchaser and each APA Bank,
certificates dated the date hereof of a Responsible Officer of the Company,
the Servicer and each Seller either (i) attaching copies of all material
consents, licenses and approvals required in connection with the execution,
delivery and performance by the Company, the Servicer or such Seller, as
the case may be, of this Supplement or the Receivables Sale Agreement, as
the case may be, and the validity and enforceability of this Supplement and
the Agreement against the Company and the Servicer and the Receivables Sale
Agreement against such Seller, and such consents, licenses and approvals
shall be in full force and effect or (ii) stating that no such consents,
licenses or approvals are so required.
(e) NO LITIGATION. The Funding Agent shall have received confirmation
that there is no pending or, to their knowledge after due inquiry,
threatened action or proceeding affecting Core-Mark or any of its
Subsidiaries before any Governmental Authority that could reasonably
be expected to have a Material Adverse Effect with respect to Core-Mark
and its Subsidiaries taken as a whole.
(f) LIEN SEARCHES. The Funding Agent shall have received a written
search report listing all effective financing statements that name the
applicable Seller or the Company as debtor or assignor and that are filed
in the jurisdictions in which filings were made pursuant to paragraph (h)
below and in any other jurisdictions that
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55
the Funding Agent determines are necessary or appropriate, together with
copies of such financing statements (none of which, except for those
described in paragraph (g) below shall cover any Receivables or
Receivables Property), and tax and judgment lien searches showing no such
liens that are not permitted by the Transaction Documents
(g) UCC CERTIFICATE. The Funding Agent shall have received from each
Seller and the Company a UCC Certificate, completed in a manner
satisfactory to the Funding Agent, duly executed by a Responsible Officer
of such Seller or the Company, as the case may be, and dated the Issuance
Date.
(h) FILINGS, REGISTRATIONS AND RECORDINGS. Any documents (including,
without limitation, financing statements) required to be filed in order (i)
to perfect the sale of the Receivables by each Seller to the Company
pursuant to the Receivables Sale Agreement and (ii) to create, in favor of
the Trustee, a perfected ownership/security interest in the Trust Assets
under the Agreement with respect to which an ownership/security interest
may be perfected by a filing under the UCC or other comparable statute,
shall, in each case, have been properly prepared and executed for immediate
filing in each office in each jurisdiction listed in the Agreement or the
Receivables Sale Agreement, as the case may be, and such filings are the
only filings required in order to perfect the sale of the Receivables to
the Company under the Receivables Sale Agreement or to the Trust, under the
Agreement, as the case may be, in the jurisdictions listed therein. The
Funding Agent shall have received evidence reasonably satisfactory to it of
each such filing, registration or recordation and reasonably satisfactory
evidence of the payment of any necessary fee, tax or expense relating
thereto.
(i) LEGAL OPINIONS. The Funding Agent shall have received, with a
counterpart for the Initial Purchaser and each APA Bank and the Trustee,
opinions of counsel to the Company and the Servicer, dated the Issuance
Date, as to corporate, tax, bankruptcy ("true sale" and "non-substantive
consolidation"), perfection and priority of security and/or ownership
interests and other matters in form and substance acceptable to the Funding
Agent and their counsel.
(j) FEES. The Funding Agent shall have received payment of all fees
and other amounts due and payable to it, the Initial Purchaser or the APA
Banks on or before the Effective Date, pursuant to the Fee Letter.
(k) ESTABLISHMENT OF ACCOUNTS. The Funding Agent (x) shall have
received evidence reasonably satisfactory to it that the Collection
Account, the Lockbox Accounts, the Eligible Segregated Account and all
other Trust Accounts shall have been established in accordance with the
terms and provisions of the Pooling and Servicing Agreements, and (y) shall
otherwise be satisfied with the arrangements for collection of the
Receivables pursuant thereto.
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(l) POLICIES. The Funding Agent shall have received, with sufficient
copies for the Initial Purchaser and each APA Bank, a copy of the Policies
of each Seller, which shall be satisfactory in form and substance to the
Funding Agent.
(m) FINANCIAL STATEMENTS. The Funding Agent shall have received, with
a counterpart for the Initial Purchaser, each APA Bank and the Trustee, on
or prior to the Effective Date consolidated balance sheets, consolidated
statements of income, consolidated and consolidating statements of
shareholders' equity and consolidated statements of cash flows of Core-Mark
and its consolidated Subsidiaries as of and for the Fiscal Years ended
December 31, 1995, and December 31, 1996 and December 31, 1997, in each
case audited by and accompanied by the opinion of KPMG Peat Marwick LLP,
which shall be satisfactory in form and substance to the Funding Agent, the
Initial Purchaser and the Trustee.
(n) EXECUTION OF THE CREDIT AGREEMENT. The Credit Agreement shall
have been executed prior to or on the date hereof.
(o) INSURANCE. The Funding Agent shall have received, with a
counterpart for each Purchaser and the Trustee, on or prior to the
Effective Date a schedule listing all policies of product liability
insurance maintained by each Seller and certification by a Responsible
Officer of such Seller with respect thereto.
(p) BACK-UP SERVICING ARRANGEMENTS. The Funding Agent shall have
received evidence that each Seller maintains disaster recovery systems and
back-up computer and other information management systems that, in the
Funding Agent's reasonable judgment, are sufficient to protect such
Seller's business against material interruption or loss or destruction of
its primary computer and information management systems.
(q) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company and the Servicer in the Agreement and this
Supplement shall be true and correct in all material respects.
ARTICLE X
THE FUNDING AGENT
SECTION X.1. APPOINTMENT. Each Purchaser hereby irrevocably
designates and appoints the Funding Agent as the agent of such Purchaser
under this Supplement and each such Purchaser irrevocably authorizes the
Funding Agent, in such capacity, to take such action on its behalf under the
provisions of this Supplement and to exercise such powers and perform such
duties as are expressly delegated to the Funding Agent by the terms of this
Supplement, together with such other powers as are reasonably incidental
thereto.
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57
Notwithstanding any provision to the contrary elsewhere in this Supplement,
the Funding Agent shall not have any duties or responsibilities except those
expressly set forth herein, or any fiduciary relationship with any Purchaser,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Supplement or otherwise exist against the
Funding Agent.
SECTION X.2. DELEGATION OF DUTIES. The Funding Agent may execute
any of its duties under this Supplement by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel (who may be
counsel for the Company or the Servicer), independent public accountants and
other experts selected by it concerning all matters pertaining to such
duties. The Funding Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys in-fact selected by it with reasonable
care.
SECTION X.3. EXCULPATORY PROVISIONS. Neither the Funding Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with the Agreement or this
Supplement (x) with the consent or at the request of the Majority Purchasers
or (y) in the absence of its own gross negligence or willful misconduct or
(ii) responsible in any manner to any of the Purchasers for any recitals,
statements, representations or warranties made by the Company or any officer
thereof contained in this Supplement or any other Transaction Document or in
any certificate, report, statement or other document referred to or provided
for in, or received by the Funding Agent under or in connection with, this
Supplement or any other Transaction Document or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Supplement
or any other Transaction Document or for any failure of the Company to
perform its obligations hereunder or thereunder. The Funding Agent shall not
be under any obligation to any Purchaser to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or
conditions of, this Supplement or any other Transaction Document, or to
inspect the properties, books or records of the Company.
SECTION X.4. RELIANCE BY FUNDING AGENT. The Funding Agent shall
be entitled to rely, and shall be fully protected in relying, upon any
Certificate, writing, resolution, notice, consent, certificate, affidavit,
letter, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including, without limitation, counsel to the
Company or the Servicer), independent accountants and other experts selected
by the Funding Agent and shall not be liable for any action taken or omitted
to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts. The Funding Agent may deem and treat the
payee of any Certificate as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Funding Agent. The Funding Agent shall be fully justified in
failing or refusing to take any action under this Supplement or any other
Transaction Document unless it shall first receive such advice or
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concurrence of the Majority Purchasers as it deems appropriate or it shall
first be indemnified to its satisfaction by the Purchasers against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Funding Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this
Supplement and the other Transaction Documents in accordance with a request
of the Majority Purchasers, and such request and any action taken or failure
to act pursuant thereto shall be binding upon all the Purchasers.
SECTION X.5. NOTICE OF SERVICER DEFAULT OR EARLY AMORTIZATION
EVENT OR POTENTIAL EARLY AMORTIZATION EVENT. The Funding Agent shall not be
deemed to have knowledge or notice of the occurrence of any Servicer Default
with respect to the Servicer or any Early Amortization Event or Potential
Early Amortization Event hereunder unless the Funding Agent has received
notice from a Purchaser, the Company or the Servicer referring to the
Agreement or this Supplement, describing such Servicer Default or Early
Amortization Event or Potential Early Amortization Event and stating that
such notice is a "notice of a Servicer Default with respect to the Servicer"
or a "notice of an Early Amortization Event or Potential Early Amortization
Event", as the case may be. In the event that the Funding Agent receives
such a notice, the Funding Agent shall give notice thereof to the Purchasers,
the Trustee, the Company and the Servicer. The Funding Agent shall take such
action with respect to such Servicer Default or Early Amortization Event or
Potential Early Amortization Event as shall be reasonably directed by the
Majority Purchasers, PROVIDED that unless and until the Funding Agent shall
have received such directions, the Funding Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with
respect to such Servicer Default or Early Amortization Event or Potential
Early Amortization Event as it shall deem advisable in the best interests of
the Purchasers.
SECTION X.6. NON-RELIANCE ON THE FUNDING AGENT AND OTHER
PURCHASERS. Each Purchaser expressly acknowledges that neither the Funding
Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates has made any representations or warranties to
it and that no act by the Funding Agent hereinafter taken, including any
review of the affairs of the Company, shall be deemed to constitute any
representation or warranty by the Funding Agent to any Purchaser. Each
Purchaser represents to the Funding Agent that it has, independently and
without reliance upon the Funding Agent or any other Purchaser, and based on
such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Company and made
its own decision to enter into this Supplement. Each Purchaser also
represents that it will, independently and without reliance upon the Funding
Agent or any other Purchaser, and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit
analysis, appraisals and decisions in taking or not taking action under this
Supplement and the other Transaction Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of
the Company. Except for notices, reports and other documents expressly
required to be
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59
furnished to the Purchasers by the Funding Agent hereunder, the Funding Agent
shall not have any duty or responsibility to provide any Purchaser with any
credit or other information concerning the business, operations, property,
condition (financial or otherwise), prospects or creditworthiness of the
Company which may come into the possession of the Funding Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
SECTION X.7. INDEMNIFICATION. The Purchasers agree to indemnify
the Funding Agent in its capacity as such (to the extent not reimbursed by
the Company and the Servicer and without limiting the obligation of the
Company and the Servicer to do so), ratably according to their respective
Series 1998-2 Purchaser Invested Amounts in effect on the date on which
indemnification is sought, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time be
imposed on, incurred by or asserted against the Funding Agent in any way
relating to or arising out of the Commitments, this Supplement, any of the
other Transaction Documents or any documents contemplated by or referred to
herein or therein or the transactions contemplated hereby or thereby or any
action taken or omitted by the Funding Agent under or in connection with any
of the foregoing; PROVIDED that no Purchaser shall be liable for the payment
of any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the Funding Agent's gross negligence or willful misconduct. The
agreements in this Section shall survive the payment of all amounts payable
hereunder.
SECTION X.8. THE FUNDING AGENT IN ITS INDIVIDUAL CAPACITY. The
Funding Agent and its Affiliates may make loans to, accept deposits from and
generally engage in any kind of business with the Company, the Servicer or
any of their Affiliates as though the Funding Agent were not the Funding
Agent hereunder. With respect to any VFC Certificate held by the Funding
Agent, the Funding Agent shall have the same rights and powers under this
Supplement and the other Transaction Documents as any Purchaser and may
exercise the same as though it were not the Funding Agent, and the terms "APA
Bank" and "Purchaser" shall include the Funding Agent in its individual
capacity.
SECTION X.9. SUCCESSOR FUNDING AGENT. The Funding Agent may
resign as Funding Agent upon 10 days' notice to the Purchaser and the
Company, such resignation not to be effective until a successor funding agent
is appointed. If the Funding Agent shall resign as Funding Agent under this
Supplement, then the Majority Purchasers shall appoint from among the
Purchasers a successor administrative agent for the Purchasers, which
successor administrative agent shall be approved by the Company and the
Servicer (which approval shall not be unreasonably withheld), whereupon such
successor administrative agent shall succeed to the rights, powers and duties
of the Funding Agent, and the term "Funding Agent" shall mean such successor
administrative agent effective upon such appointment and approval, and the
former Funding Agent's rights, powers and duties as Funding Agent shall be
terminated, without any other or further act or deed on the part of such
former Funding Agent
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or any of the parties to this Supplement. After any retiring Funding Agent's
resignation as Funding Agent, the provisions of this Article 10 shall inure
to its benefit as to any actions taken or omitted to be taken by it while it
was Funding Agent under this Supplement.
ARTICLE XI
MISCELLANEOUS
SECTION XI.1. RATIFICATION OF AGREEMENT. As supplemented by this
Supplement, the Agreement is in all respects ratified and confirmed and the
Agreement as so supplemented by this Supplement shall be read, taken and
construed as one and the same instrument.
SECTION XI.2. GOVERNING LAW. THIS SUPPLEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND
THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION XI.3. FURTHER ASSURANCES. Each of the Company, the
Servicer and the Trustee agrees, from time to time, to do and perform any and
all acts and to execute any and all further instruments required or
reasonably requested by the Funding Agent or the Majority Purchasers more
fully to effect the purposes of this Supplement and the sale of the VFC
Certificates hereunder, including, without limitation, in the case of the
Company and the Servicer, the execution of any financing or registration
statements or similar documents or notices or continuation statements
relating to the Receivables and the other Trust Assets for filing or
registration under the provisions of the UCC or similar legislation of any
applicable jurisdiction.
SECTION XI.4. PAYMENTS. Each payment to be made hereunder shall
be made on the required payment date in lawful money of the United States and
in immediately available funds, if to the Purchasers, at the office of the
Funding Agent set forth in Section 11.9. Except in the circumstances
described in subsection 2.6(c), then on each Distribution Date, the Funding
Agent shall remit in like funds to each Purchaser its applicable PRO RATA
share (based on each such Purchaser's Series 1998-2 Purchaser Invested
Amount) of each such payment received by the Funding Agent for the account of
the Purchasers.
SECTION XI.5. COSTS AND EXPENSES. The Company agrees to pay all
reasonable out-of-pocket costs and expenses of the Funding Agent (including,
without limitation, reasonable fees and disbursements of one counsel to the
Funding Agent) in connection with (i) the preparation, execution and delivery
of this Supplement, the Agreement and the other Transaction Documents and
amendments or waivers of any such documents and
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(ii) the enforcement by the Funding Agent of the obligations and liabilities
of the Company and the Servicer under the Agreement, this Supplement, the
other Transaction Documents or any related document; PROVIDED that any
payments made by the Company pursuant to this subsection shall be made solely
from funds available to the Company which are not otherwise required to be
applied to the payment of any amounts (other than amounts payable to the
Company) pursuant to any Pooling and Servicing Agreements, shall be
non-recourse other than with respect to funds in excess of the funds needed
to make such payment, and shall not constitute a claim against the Company to
the extent that insufficient proceeds exist to make such payment.
SECTION XI.6. NO WAIVER; CUMULATIVE REMEDIES. No failure to
exercise and no delay in exercising, on the part of the Trustee, the Funding
Agent or any Purchaser, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, remedy, power or privilege hereunder preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exhaustive of any rights, remedies, powers and privileges
provided by law.
SECTION XI.7. AMENDMENTS. (a) Subject to subsection (c) of this
Section 11.7, this Supplement may be amended in writing from time to time by
the Servicer, the Company and the Trustee, with the consent of the Funding
Agent but without the consent of any holder of any outstanding VFC
Certificate, to cure any ambiguity, to correct or supplement any provisions
herein which may be inconsistent with any other provisions herein or to add
any other provisions to or change in any manner or eliminate any of the
provisions with respect to matters or questions raised under this Supplement
which shall not be inconsistent with the provisions of any Pooling and
Servicing Agreement; PROVIDED, HOWEVER, that such action shall not, as
evidenced by an Officer's Certificate or, to the extent in the reasonable
view of the Company, a question of law exists, an Opinion of Counsel
delivered to the Trustee, adversely affect in any material respect the
interests of the VFC Certificateholders. The Trustee may, but shall not be
obligated to, enter into any such amendment pursuant to this paragraph or
paragraph (b) below which affects the Trustee's rights, duties or immunities
under any Pooling and Servicing Agreement or otherwise.
(b) Subject to subsection (c) of this Section 11.7, this Supplement
may also be amended in writing from time to time by the Servicer, the Company
and the Trustee with the consent of the Majority Purchasers for the purpose
of adding any provisions to or changing in any manner or eliminating any of
the provisions of this Supplement or of modifying in any manner the rights of
the VFC Certificateholders (including, without limitation, the acceleration
of the payment of sums payable to or for the account of the Purchasers under
any provision of this Supplement); PROVIDED, HOWEVER, that no such amendment
shall, unless signed or consented to in writing by all Purchasers, (i) extend
the time for payment, or reduce the amount, of any sum payable to or for the
account of any Purchaser under any provision of this Supplement or extend the
Series 1998-2 Termination Date, (ii) subject any Purchaser to
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any additional obligation (including, without limitation, any change in the
determination of any amount payable by any Purchaser) or (iii) change the
Aggregate Commitment Amount, the amount of any interest or fees or the
percentage of Purchasers which shall be required for any action under this
subsection or any other provision of this Supplement.
(c) Any amendment hereof can be effected without the Funding
Agent's being party thereto; PROVIDED, HOWEVER, that no such amendment,
modification or waiver of this Supplement that affects rights or duties of
the Funding Agent shall be effective unless the Funding Agent shall have
given its prior written consent thereto.
(d) No amendment hereof shall be effective until the Rating Agency
Condition has been satisfied (unless Series 1998-2 has not been rated, in
which case this subsection 11.7(d) shall not apply).
SECTION XI.8. SEVERABILITY. If any provision hereof is void or
unenforceable in any jurisdiction, such voidness or unenforceability shall
not affect the validity or enforceability of (i) such provision in any other
jurisdiction or (ii) any other provision hereof in such or any other
jurisdiction.
SECTION XI.9. NOTICES. All notices, requests and demands to or
upon any party hereto to be effective shall be given (i) in the case of the
Company, the Servicer and the Trustee, in the manner set forth in Section
10.5 of the Agreement and (ii) in the case of the Funding Agent, the Initial
Purchaser, each APA Bank and the Rating Agencies (if the Series 1998-2 has
been rated), in writing, and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand or
three days after being deposited in the mail, postage prepaid, or, in the
case of facsimile notice, when received, (A) in the case of each APA Bank, at
its address set forth on Schedule 1 hereto, (B) addressed as follows in the
case of the Funding Agent and (C) addressed to the Rating Agencies (if the
Series 1998-2 has been rated) as notified by such Rating Agencies; or to such
other address as may be hereafter notified by the respective parties hereto:
Funding Agent: The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Attention: Andrew Taylor
Fax: 212-946-7776
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S&P: Standard & Poor's Ratings Service
25 Broadway
New York, New York 10004
Attention: Asset-Backed Surveillance Group
Fax: 212-412-0225
Moody's: Moody's Investors Service
99 Church Street
New York, New York 10007
Attention: Sam Pilcer
Fax: 212-553-3850
Initial Purchaser: Park Avenue Receivables Corporation
25 West 43rd Street, Suite 704
New York, New York 10036
Attention: Andy Stidd
Fax: 212-302-8767
SECTION XI.10. SUCCESSORS AND ASSIGNS. This Supplement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that the Company may not assign or
transfer any of its rights under this Supplement without the prior written
consent of all of the Purchasers, the Initial Purchaser may not assign or
transfer any of its rights under this Supplement except as set forth in
Section 2.6 and each APA Bank may not assign or transfer any of its rights
under this Supplement except as set forth in Section 11.11.
SECTION XI.11. PARTICIPATIONS; ASSIGNMENTS. (a) Any APA Bank may,
in the ordinary course of its business and in accordance with applicable law,
at any time sell to one or more financial institutions or other entities
("PARTICIPANTS") participations in its VFC Certificate and its rights
hereunder pursuant to documentation in form and substance satisfactory to
such APA Bank and the Participant; PROVIDED, HOWEVER, that (i) in the event
of any such sale by an APA Bank to a Participant, (A) such APA Bank's
obligations under this Supplement shall remain unchanged, (B) such APA Bank
shall remain solely responsible for the performance thereof and (C) the
Company shall continue to deal solely and directly with such APA Bank in
connection with its rights and obligations under the Pooling and Servicing
Agreements, (ii) no APA Bank shall sell any participating interest under
which the Participant shall have rights to approve any amendment to, or any
consent or waiver with respect to, any Pooling and Servicing Agreement,
except to the extent that the approval of such amendment, consent or waiver
otherwise would require the unanimous consent of all APA Banks hereunder,
(iii) no sale by an APA Bank to a Participant shall be given effect if such
sale is not otherwise permitted under subsection 5.3(e) of the Agreement, and
(iv) each Participant shall, prior to becoming a Participant, execute and
deliver to the Funding Agent an
<PAGE>
64
Assignment/Participation Certification. The Company agrees that each APA
Bank is entitled, in its own name, to enforce for the benefit of, or as agent
for, any Participant any and all rights, claims and interest of such
Participant in respect of the Trust and the Company's obligations under this
Supplement. A Participant shall have the right to receive Article VII Costs
but only to the extent that the related selling APA Bank would have had such
right absent the sale of the related participation.
(b) Any APA Bank may, upon the satisfaction of all applicable
requirements under Section 5.3 of the Agreement, in the ordinary course of
its business and in accordance with applicable law, at any time sell all or
any part of its rights and obligations under this Supplement and the VFC
Certificate to (i) its Affiliates and to any other APA Bank and, (ii) upon
prior written notice to the Funding Agent and the Rating Agency, one or more
banks or other entities (an "ACQUIRING APA BANK"), in each case pursuant to a
commitment transfer supplement, substantially in the form of Exhibit C (the
"COMMITMENT TRANSFER SUPPLEMENT"), executed by such Acquiring APA Bank, such
assigning APA Bank and the Funding Agent (and, in the case of an Acquiring
APA Bank that is not then an existing APA Bank or an Affiliate thereof, by
the Company and the Servicer), and delivered to the Funding Agent for its
acceptance and recording in the Register. Notwithstanding the foregoing, no
APA Bank shall so sell its rights or obligations hereunder (other than to its
Affiliate or any other APA Bank) without the prior written consent of the
Company, which consent shall not be unreasonably withheld, and no APA Bank
shall sell its rights hereunder (w) if such sale is not otherwise permitted
under subsection 5.3(e) of the Agreement, (x) if such sale is for any amount
less than $5,000,000 (y) if such Acquiring APA Bank is not an Eligible
Assignee and (z) unless, prior to such sale, the purchaser of such rights
shall have executed and delivered to the Funding Agent and the Transfer Agent
and Registrar an Assignment/Participation Certification. Upon such execution,
delivery, acceptance and recording, (A) the Company shall sign, on behalf of
the Trust, and shall direct the Trustee in writing to duly authenticate, and
the Trustee, upon receiving such direction, shall so authenticate, a new VFC
Certificate in the name and the denomination determined pursuant to the
related Commitment Transfer Supplement and set forth in such written
direction and shall deliver such VFC Certificate to the Acquiring APA Bank in
accordance with such written direction, and (B) from and after the Transfer
Issuance Date determined pursuant to such Commitment Transfer Supplement, (I)
the Acquiring APA Bank thereunder shall be a party hereto and, to the extent
provided in such Commitment Transfer Supplement, have the rights and
obligations of an APA Bank hereunder with a Commitment as set forth therein
and (II) the transferor APA Bank thereunder shall, to the extent provided in
such Commitment Transfer Supplement, be released from its obligations under
this Supplement. Such Commitment Transfer Supplement shall be deemed to
amend this Supplement (including the Schedules attached hereto) to the
extent, and only to the extent, necessary to reflect the addition of such
Acquiring APA Bank as a "APA Bank" and the resulting adjustment of Commitment
Percentages arising from the purchase by such Acquiring APA Bank of all or a
portion of the rights and obligations of such transferor APA Bank under this
Supplement and the VFC Certificates.
<PAGE>
65
(c) The Funding Agent shall maintain at its address referred to in
Section 11.9 a copy of each Commitment Transfer Supplement delivered to it.
(d) Upon its receipt of a Commitment Transfer Supplement executed
by a transferor APA Bank and an Acquiring APA Bank (and, in the case of a
Transferee that is not then an existing APA Bank or an Affiliate thereof, by
the Company and the Servicer) and a processing fee of $3,500, the Funding
Agent shall (i) promptly accept such Commitment Transfer Supplement and (ii)
on the Transfer Issuance Date determined pursuant thereto record the
information contained therein in the Register and give notice of such
acceptance and recordation to the Initial Purchaser, the APA Banks, the
Servicer and the Company.
(e) The Company and the Servicer each authorizes each APA Bank to
disclose to any Participant or Acquiring APA Bank (each, a "TRANSFEREE") and
any prospective Transferee any and all financial information in such APA
Bank's possession concerning the Company, the Servicer or the Receivables
which has been delivered to such APA Bank by the Company or the Servicer
pursuant to this Supplement or which has been delivered to such APA Bank by
or on behalf of the Company in connection with such APA Bank's credit
evaluation of the Company, the Servicer, the Trust and the Trust Assets prior
to becoming a party to this Supplement; PROVIDED, HOWEVER, if any such
information is subject to a confidentiality agreement between such APA Bank
and the Company or the Servicer, the Transferee or prospective Transferee
shall have agreed to be bound by the terms and conditions of such
confidentiality agreement.
(f) Notwithstanding any other provisions herein, no transfer or
assignment of any interests or obligations of any APA Bank hereunder or any
grant of participations therein shall be permitted if such transfer,
assignment or grant would result in a prohibited transaction under Section
4975 of the Internal Revenue Code or Section 406 of ERISA or cause the Trust
Assets to be regarded as plan assets pursuant to 29 C.F.R. Section
2510.3-101.
SECTION XI.12. ADJUSTMENTS; SET-OFF. (a) If any Purchaser (a
"BENEFITTED PURCHASER") shall at any time receive in respect of its Series
1998-2 Invested Amount any distribution of principal, interest, Commitment
Fees or other fees, or any interest thereon, or receive any collateral in
respect thereof (whether voluntarily or involuntarily, by set-off or
otherwise) in a greater proportion than any such distribution received by any
other Purchaser, if any, in respect of such other Purchaser's Series 1998-2
Invested Amount, or interest thereon, such Benefitted Purchaser shall
purchase for cash from the other Purchasers such portion of each such other
Purchaser's interest in the VFC Certificates, or shall provide such other
Purchasers with the benefits of any such collateral, or the proceeds thereof,
as shall be necessary to cause such Benefitted Purchaser to share the excess
payment or benefits of such collateral or proceeds ratably with each of the
Purchasers; PROVIDED, HOWEVER, that if all or any portion of such excess
payment or benefits is thereafter recovered from such Benefitted Purchaser,
such purchase shall be rescinded, and the purchase price and benefits
returned, to the extent of such recovery, but without interest. The Company
agrees that each Purchaser so
<PAGE>
66
purchasing a portion of the VFC Certificateholders' Interest may exercise all
rights of payment (including, without limitation, rights of set-off) with
respect to such portion as fully as if such Purchaser were the direct holder
of such portion.
(b) In addition to any rights and remedies of the Purchasers
provided by law, each Purchaser shall have the right, without prior notice to
the Company, any such notice being expressly waived by the Company to the
extent permitted by applicable law, upon any amount becoming due and payable
by the Company hereunder or under the VFC Certificates to set-off and
appropriate and apply against any and all deposits (general or special, time
or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Purchaser to or for the credit or the account of the Company.
Each Purchaser agrees promptly to notify the Company and the Funding Agent
after any such set-off and application made by such Purchaser; PROVIDED that
the failure to give such notice shall not affect the validity of such set-off
and application.
SECTION XI.13. COUNTERPARTS. This Supplement may be executed in
any number of counterparts and by the different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original, and all of which taken together shall constitute one and the same
agreement.
SECTION XI.14. NO BANKRUPTCY PETITION. (a) The Funding Agent and
each Purchaser hereby covenants and agrees that, prior to the date which is
one year and one day after the later of (i) the last day of the Series 1998-2
Amortization Period and (ii) the last day of the amortization period of any
other Outstanding Series, it will not institute against, or join any other
Person in instituting against, the Company any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings, or other similar
proceedings under any federal or state bankruptcy or similar law.
(b) The Company, the Servicer, the Trustee, the Funding Agent and
each APA Bank hereby covenants and agrees that, prior to the date which is
one year and one day after the payment in full of all outstanding Commercial
Paper, it will not institute against, or join any other Person in instituting
against, the Initial Purchaser any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other similar proceedings under any
federal or state bankruptcy or similar law.
<PAGE>
67
SECTION XI.15. LIMITATION ON ADDITION AND TERMINATION OF SELLERS.
(a) Notwithstanding anything to the contrary contained in the Receivables
Sale Agreement, no Seller or Seller Division shall be added thereunder unless
(subject to the proviso contained in clause (iv) below) each of the following
conditions shall have been satisfied:
(i) (x) in the case of a proposed addition of a Seller, each of the
conditions set forth in Section 3.02 of the Receivables Sale Agreement, and
(y) in the case of a proposed addition of a Seller Division, the conditions
set forth in subsections 3.02(a)(ii), (e), (f), (g), (h), (j) and (k) (in
each case, applied to the applicable New Division as if it were a proposed
additional Seller) of the Receivables Sale Agreement, shall have been
satisfied.
(ii) The Company shall have received copies of the Policies of such
additional Seller (or such Seller Division, as the case may be, if
different from the Policies of the Seller of which it is a New Division),
which Policies shall be in form and substance satisfactory to the Company.
(iii) The Company shall have received confirmation (A) that there
is no pending or, to its knowledge after due inquiry, threatened action or
proceeding affecting such additional Seller (or such Seller Division, as
the case may be) before any Governmental Authority (I) that could
reasonably be expected to have a Material Adverse Effect or (II) that
purports to affect the legality, validity or enforceability of this
Supplement, the Agreement or any other Transaction Document or any of the
transactions contemplated hereby or thereby.
(iv) The Company and the Trustee shall have received evidence that the
Rating Agency Condition shall have been satisfied with respect to the
addition of such Seller (or addition of such Seller Division, as the case
may be); PROVIDED that such satisfaction of the Rating Agency Condition
(and such receipt of evidence thereof) shall not be required with respect
to the addition of up to two Subsidiaries of Core-Mark (and/or New
Divisions) as Sellers (or Seller Divisions) during any calendar year, each
of which Subsidiaries (or New Divisions) meets the following criteria: (x)
such Subsidiary (or New Division) is in the same line of business as the
existing Sellers as of the related Seller Addition Date (as defined in the
Receivables Sale Agreement) and (y) as of such date, immediately prior to
giving effect to such addition (the "MEASUREMENT DATE"), the ratio
(expressed as a percentage) of (A) the aggregate Principal Amount of what
would constitute all Eligible Receivables of such Subsidiary (or New
Division) at the end of the Business Day immediately preceding the
Measurement Date if it were a Seller (or Seller Division) MINUS the amount
which would constitute the Overconcentration Amount applicable to such
Receivables on the Measurement Date if such Subsidiary (or New Division)
were a Seller (or Seller Division) to (B) the sum of the Aggregate
Receivables Amount as of the end of such day plus the amount described
pursuant to clause (A) is less than 10 percent.
<PAGE>
68
(v) The Trustee shall have received Opinions of Counsel of outside
counsel addressed to the Trustee covering matters with respect to such
Seller as were covered in the opinions delivered on the Issuance Date with
respect to the original Sellers, including "true-sale" and non-substantive
consolidation opinions.
(vi) The Company and the Trustee shall have received a certificate
prepared by a Responsible Officer of the Servicer certifying that after
giving effect to the addition of such Seller (or such Seller Division, as
the case may be), the Aggregate Target Receivables Amount shall equal the
Aggregate Allocated Receivables Amount on the related Seller Addition Date.
(b) Notwithstanding anything to the contrary contained in the
Receivables Sale Agreement, the Company shall not consent to any request made
pursuant to Section 9.13 thereof, nor shall any Seller which is the subject
of such request be terminated under the Receivables Sale Agreement, in each
case unless (i) no Early Amortization Event, Potential Early Amortization
Event or Potential Purchase Termination Event (as defined in the Receivables
Sale Agreement) (other than with respect to the Seller to be so terminated)
has occurred and is continuing (both before and after giving effect to such
termination) and (ii) the Trustee shall have received prior notice of such
termination (which notice shall be accompanied by a PRO FORMA Daily Report
confirming that the Aggregate Target Receivables Amount equals or exceeds the
Aggregate Allocated Receivables Amount, each calculated after giving effect
to such termination and excluding all Receivables originated by the Seller to
be terminated).
(c) Upon the termination of a Seller pursuant to Section 9.13 of
the Receivables Sale Agreement and the foregoing paragraph (b), all
calculations for purposes of Series 1998-2 (including, without limitation,
for purposes of the PRO FORMA calculations pursuant to paragraph (b) above)
shall exclude in each case the Receivables originated by such terminated
Seller.]
ARTICLE XII
FINAL DISTRIBUTIONS
SECTION XII.1. CERTAIN DISTRIBUTIONS. (a) Not later than 2:00
p.m., New York City time, on the Distribution Date following the date on
which the proceeds from the disposition of the Receivables pursuant to
subsection 7.2(b) of the Agreement are deposited into the Series 1998-2
Non-Principal Collection Sub-subaccount and the Series 1998-2 Principal
Collection Sub-subaccount, the Trustee shall distribute such amounts pursuant
to Article III of this Supplement.
<PAGE>
69
(b) Notwithstanding anything to the contrary in this Supplement or
the Agreement, any distribution made pursuant to this Section shall be deemed
to be a final distribution pursuant to Section 9.3 of the Agreement with
respect to the VFC Certificates.
<PAGE>
70
IN WITNESS WHEREOF, the Company, the Servicer, the Trustee, the
Funding Agent and the Initial Purchasers have caused this Series 1998-2
Supplement to be duly executed by their respective officers as of the day and
year first above written.
CM CAPITAL CORPORATION
By: /s/ ROBERT A. ALLEN
-------------------------------------
Name: Robert A. Allen
Title: President & CEO
CORE-MARK INTERNATIONAL, INC., in its
individual capacity and as Servicer
By: /s/ LEO F. KORMAN
-------------------------------------
Name: Leo F. Korman
Title: Senior Vice President & CFO
THE CHASE MANHATTAN BANK,
as Funding Agent
By: /s/ BRADLEY S. SCHWARTZ
-------------------------------------
Name: Bradley S. Schwartz
Title: Vice President
THE CHASE MANHATTAN BANK, not in its
individual capacity but solely as Trustee
By: /s/ KIMBERLY K. COSTA
-------------------------------------
Name: Kimberly K. Costa
Title: Second Vice President
PARK AVENUE RECEIVABLES CORPORATION,
as the Initial Purchaser
By: /s/ ANDREW L. STIDD
-------------------------------------
Name: Andrew L. Stidd
Title: President
<PAGE> 71
THE CHASE MANHATTAN BANK, as an APA Bank
By: /s/ BRADLEY S. SCHWARTZ
-------------------------------------
Name: Bradley S. Schwartz
Title: Vice President
<PAGE>
EXECUTION COPY
Exhibit 10.21
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
---------------
CM CAPITAL CORPORATION,
as Company,
CORE-MARK INTERNATIONAL, INC.,
as Servicer,
SUBSIDIARIES OF CORE-MARK INTERNATIONAL, INC.,
NAMED HEREIN,
as Sub-Servicers
and
THE CHASE MANHATTAN BANK,
as Trustee
---------------
SERVICING AGREEMENT
Dated as of April 1, 1998
---------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
ARTICLE I
<S> <C>
DEFINITIONS . . . . . . . . . . . . . . . . . 1
1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Other Definitional Provisions . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
ADMINISTRATION AND SERVICING
OF RECEIVABLES . . . . . . . . . . . . . . . . 2
2.1. Appointment of Servicer and Sub-Servicers . . . . . . . . . . . . . . . 2
2.2. Servicing Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3. Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4. Reconciliation of Deposits. . . . . . . . . . . . . . . . . . . . . . . 8
2.5. Servicing Compensation. . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SERVICER AND THE SUB-SERVICERS . . . . . . . . . . . 9
3.1. Corporate Existence; Compliance with Law. . . . . . . . . . . . . . . . 9
3.2. Corporate Power; Authorization; Consents. . . . . . . . . . . . . . . . 10
3.3. Enforceability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4. No Legal Bar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5. No Material Litigation. . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6. Requirements of Law . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7. No Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.8. Servicing Ability . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.9. Location of Records . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE IV
COVENANTS OF THE SERVICER. . . . . . . . . . . . . . 11
4.1. Delivery of Daily Reports . . . . . . . . . . . . . . . . . . . . . . . 11
4.2. Delivery of Monthly Settlement Statement. . . . . . . . . . . . . . . . 12
4.3. Delivery of Quarterly Servicer's Certificate. . . . . . . . . . . . . . 12
4.4. Delivery of Independent Public Accountants' Servicing Reports . . . . . 13
4.5. No Guarantee or Assumption of Company's Liabilities.. . . . . . . . . . 13
4.6. Extension, Amendment and Adjustment of Receivables; Amendment of
and Compliance with Policies . . . . . . . . . . . . . . . . . . . . 13
4.7. Servicer's Conduct. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
4.8. Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.9. Location of Records . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.10. Visitation Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.11. Lockbox Agreement; Lockbox Accounts; Eligible Segregated
Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
4.12. Delivery of Financial Statements . . . . . . . . . . . . . . . . . . . 15
4.13. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE V
OTHER MATTERS RELATING TO THE SERVICER AND THE SUB-SERVICERS . . . 16
5.1. Merger, Consolidation, etc. . . . . . . . . . . . . . . . . . . . . . . 16
5.2. Indemnification of the Trust and the Trustee. . . . . . . . . . . . . . 17
5.3. Servicer Not to Resign. . . . . . . . . . . . . . . . . . . . . . . . . 18
5.4. Access to Certain Documentation and Information Regarding the
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VI
SERVICER DEFAULTS. . . . . . . . . . . . . . . . 18
6.1. Servicer Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2. Trustee to Act; Appointment of Successor. . . . . . . . . . . . . . . . 21
6.3. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VII
MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . 24
7.1. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.2. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.3. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.4. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.5. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.6. Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . 24
7.7. Merger and Integration. . . . . . . . . . . . . . . . . . . . . . . . . 24
7.8. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.9. No Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.10. No Bankruptcy Petition . . . . . . . . . . . . . . . . . . . . . . . . 25
7.11. Consequential Damages. . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
EXHIBITS
EXHIBIT A Form of Quarterly Servicer's Certificate
EXHIBIT B Form of Agreed Upon Procedures
SCHEDULE 1 Lockbox Accounts, Lockbox Processors, Collection P.O. Boxes
and Eligible Segregated Accounts
-ii-
<PAGE>
SERVICING AGREEMENT, dated as of April 1, 1998, among CM Capital
Corporation, a Delaware corporation (the "COMPANY"); Core-Mark International,
Inc. a Delaware corporation ("CORE-MARK"), as servicer (in such capacity, the
"SERVICER") and each of its other subsidiaries from time to time parties hereto
(each, a "SUB-SERVICER") and The Chase Manhattan Bank, a New York banking
corporation, not in its individual capacity, but solely as trustee (in such
capacity, the "TRUSTEE").
W I T N E S E T H :
WHEREAS, the Company and the Sellers (as defined in the Pooling
Agreement referred to below) have entered into a Receivables Sale and
Contribution Agreement, dated as of the date hereof (as amended, supplemented or
otherwise modified from time to time, the "RECEIVABLES SALE AGREEMENT");
WHEREAS, pursuant to the Receivables Sale Agreement, the Sellers sell
and contribute to the Company, and the Company purchases and receives from the
Sellers, all of the Sellers' right, title and interest in, to and under the
Receivables (as defined in the Pooling Agreement referred to below) now existing
or hereafter created and in the rights of the Seller in, to and under all
Related Property related thereto;
WHEREAS, the Company in turn has transferred the Receivables now
existing or hereafter created and the rights of the Company in, to and under all
Related Property related thereto to a master trust pursuant to a Pooling
Agreement, dated as of the date hereof (as amended, supplemented or otherwise
modified from time to time, the "POOLING AGREEMENT"), among the Company, the
Servicer and the Trustee; and
WHEREAS, the parties hereto wish to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
I.1. DEFINITIONS. Unless otherwise defined herein, capitalized terms
which are used herein shall have the meanings assigned to such terms in Section
1.1 of the Pooling Agreement, as defined above, and each Supplement defined
therein, among the Company, the Servicer and the Trustee.
<PAGE>
2
I.2. OTHER DEFINITIONAL PROVISIONS. (a) All terms defined herein
or in the Pooling Agreement or any Supplement shall have their defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.1 of the Pooling Agreement or any Supplement, and accounting terms partly
defined in Section 1.1 of the Pooling Agreement or any Supplement to the extent
not defined, shall have the respective meanings given to them under GAAP. To
the extent that the definitions of accounting terms herein are inconsistent with
the meanings of such terms under GAAP, the definitions contained herein shall
control.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references contained in this agreement are references to
Sections, subsections, Schedules and Exhibits in or to this Agreement unless
otherwise specified.
(d) The definitions contained in Section 1.1 of the Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine, the feminine and the neuter genders of such terms.
(e) Where reference is made in this Agreement or the Pooling Agreement
to the principal amount of Receivables, such reference shall, unless explicitly
stated otherwise, be deemed a reference to the Principal Amount (as such term is
defined in Section 1.1 of the Pooling Agreement) of such Receivables.
(f) Any reference herein or in any other Transaction Document to a
provision of the Internal Revenue Code or ERISA shall be deemed a reference to
any successor provision thereto.
(g) All references herein to any agreement or instrument shall be
deemed references to such agreement or instrument as amended, supplemented or
otherwise modified from time to time.
ARTICLE II
ADMINISTRATION AND SERVICING
OF RECEIVABLES
II.1. APPOINTMENT OF SERVICER AND SUB-SERVICERS. Core-Mark
hereby agrees to act as the Servicer under the Pooling and Servicing Agreement,
the Company and the Trustee hereby consent to Core-Mark's acting as the
Servicer, and the Investor
<PAGE>
3
Certificateholders by their acceptance of the Certificates consent to
Core-Mark's acting as the Servicer. In addition, Core-Mark hereby agrees to
act as, the Company and the Trustee hereby consent to Core-Mark's being
appointed to act as, and the Investor Certificateholders by their acceptance
of the Certificates consent to Core-Mark's being appointed to act as, such
parties' agent to coordinate the servicing of the Receivables by the
Sub-Servicers. In such agency capacities, the Servicer will have
responsibility for the management of the servicing and administration of
Receivables and receipt of Collections in respect of the Receivables and will
have the authority to make any management decisions relating to the
Receivables to the extent such authority is granted to the Servicer under any
Pooling and Servicing Agreement. The Company, the Trustee and the Investor
Certificateholders shall treat Core-Mark as the Servicer and may conclusively
rely on the instructions, notices and reports of Core-Mark as Servicer for so
long as Core-Mark is the Servicer. In addition, (x) each Sub-Servicer agrees
to act as a Sub-Servicer under each Pooling and Servicing Agreement, (y) the
Company and the Trustee hereby consent to such Sub-Servicer's acting as a
Sub-Servicer and being appointed their agent to service and administer the
Receivables originated by it, and (z) the Investor Certificateholders by
their acceptance of the Certificates consent to such Sub-Servicer's acting as
a Sub-Servicer and being appointed their agent to service and administer the
Receivables originated by it. Each Sub-Servicer will be responsible, as
directed by the Servicer, for the servicing and administration of the
Receivables originated by such Sub-Servicer.
II.2. SERVICING PROCEDURES. (a) The Servicer shall manage the
servicing and administration of the Receivables, the collection of payments due
under the Receivables and the charging off of any Receivables as uncollectible,
all in accordance with the Policies and all the terms and provisions of the
Pooling and Servicing Agreements. The Servicer shall have full power and
authority, acting alone or through any party properly designated by it
hereunder, to do any and all things in connection with such servicing and
administration which it may deem necessary or desirable, but at all times
subject to the terms of this Agreement and the other Transaction Documents.
Without limiting the generality of the foregoing and subject to Section 6.1, the
Servicer or its designee is hereby authorized and empowered (i) to give
direction to the Trustee with respect to withdrawals from, and payments to, the
Collection Account (including the subaccounts thereof) in accordance with the
Daily Report and as otherwise specified in the Pooling and Servicing Agreements,
(ii) to execute and deliver, on behalf of the Trust for the benefit of the
Investor Certificateholders, any and all instruments of satisfaction or
cancellation, or of partial or full release or discharge, and all other
comparable instruments, with respect to the Receivables and, after the
delinquency of any Receivable and to the extent permitted under and in
compliance with applicable Requirements of Law, to commence enforcement
proceedings with respect to such Receivables and (iii) to make any filings,
refilings, reports, notices, applications and registrations with, and to seek
any consents or authorizations from, the Securities and Exchange Commission and
any state securities authority on behalf of the Trust as may be necessary or
advisable to comply with any federal or state securities or reporting
requirements or laws.
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4
(b) Each Servicing Party shall, at its cost and expense and as
agent for the Company, the Trust and the Investor Certificateholders,
collect, consistent with its past practices and in accordance with the
Policies, as and when the same becomes due, the amount owing on each
Receivable with respect to which it is the Servicing Party. No Servicing
Party will make any material changes that deviate from the Policies in its
administrative, servicing and collection systems except (i) as expressly
permitted by the terms of any Pooling and Servicing Agreement and (ii) after
giving written notice to the Trustee and the Rating Agencies of any such
change. In the event of default under any Receivable, the responsible
Servicing Party shall have the power and authority, on behalf of the Company
and the Trust for the benefit of the Investor Certificateholders, to take
such action in respect of such Receivable as such Servicing Party may deem
advisable. In the enforcement or collection of any Receivable, the relevant
Servicing Party shall be entitled to sue thereon (i) in its own name or (ii)
if, but only if, the Company consents in writing (which consent shall not be
unreasonably withheld), as agent for the Company. In no event shall any
Servicing Party be entitled to take any action which would make the Company,
the Trustee or the Investor Certificateholders a party to any litigation
without the express prior written consent of such Person.
(c) Without limiting the generality of the foregoing and subject to
Section 6.2, each Servicing Party is hereby authorized and empowered to delegate
any or all of its servicing, collection, enforcement and administrative duties
hereunder with respect to the Receivables to a Person who agrees to conduct such
duties in accordance with the Policies. Such Servicing Party shall notify the
Company, the Trustee and any Rating Agency of the appointment of a designee as
provided for herein; PROVIDED, HOWEVER, that, in the event that such delegation
would reasonably be expected to adversely affect the ability of such Servicing
Party or the Servicer to perform its obligations in the manner contemplated by
any Pooling and Servicing Agreement, or otherwise to have a material adverse
effect upon the Receivables taken as a whole, such Servicing Party shall give
prior written notice to the Company, the Trustee, each Agent and the Rating
Agencies of any such delegation, and prior to such delegation's being effective,
such Servicing Party and the Servicer shall have received notice that the Rating
Agency Condition shall be satisfied after giving effect to such delegation and
shall have obtained the consent of the Company and each Agent to such
delegation. No delegation of duties by a Servicing Party permitted hereunder
will relieve such Servicing Party or the Servicer of its liability and
responsibility with respect to such duties.
(d) Except as provided in any Pooling and Servicing Agreement, neither
any Servicing Party nor any Successor Servicer shall be obligated to use
servicing procedures, offices, employees or accounts for servicing the
Receivables transferred to the Company and, subsequently, to the Trust, which
are separate from the procedures, offices, employees and accounts used by such
Servicing Party or such Successor Servicer, as the case may be, in connection
with servicing other receivables.
(e) Each Servicing Party shall maintain reasonable and customary
fidelity bond coverage insuring against losses through wrongdoing of its
officers and employees who are involved in the servicing of the Receivables,
including, without limitation, depositor's forgery.
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5
(f) Each Servicing Party shall comply with and perform its servicing
obligations with respect to the Receivables in accordance with the contracts, if
any, relating to the Receivables and the Policies, except insofar as any failure
to so comply or perform would not have (a) a material impairment of the ability
of the Servicer to perform its obligations under the Transaction Documents, (b)
a material impairment of the validity or enforceability of any of the
Transaction Documents against the Servicer, (c) a material impairment of the
collectibility of the Receivables serviced by the Servicer taken as a whole or
(d) a material impairment of the interests, rights or remedies of the Company
under or with respect to the Transaction Documents or the Receivables taken as a
whole (collectively, a "MATERIAL ADVERSE EFFECT").
(g) No Servicing Party shall take any action to cause any Receivable
to be evidenced by any "instrument" (other than an instrument which constitutes
or together with a security agreement constitutes "chattel paper" (each as
defined in the UCC as in effect in any state in which the Company's or the
applicable Seller's chief executive office or books and records relating to such
Receivable are located)) or any title in bearer form except in connection with
its enforcement or collection of an Aged Receivable, in which event such
Servicing Party shall deliver such instrument to the Trustee as soon as
reasonably practicable but in no event more than 5 days after the execution
thereof. Each Servicing Party shall comply with the provisions of Schedule 3 to
the Pooling Agreement with respect to any chattel paper evidencing a Receivable.
II.3. COLLECTIONS. (a) As of the Initial Closing Date, the Servicer
shall have established Lockbox Accounts with Lockbox Banks, engaged Lockbox
Processors, opened Collection P.O. Boxes, and established Eligible Segregated
Accounts, in each case listed on Schedule 1 hereto and meeting the requirements
of clause (b) below, which are sufficient to allow collection of the Receivables
in accordance with the Pooling and Servicing Agreements. The Sub-Servicers, or
the Servicer on their behalf, shall instruct at all times all Obligors to make
all payments in respect of the Receivables to a Lockbox, a Lockbox Account, a
Collection P.O. Box, an Eligible Segregated Account or the Collection Account;
PROVIDED that to the extent that any Servicing Party in the normal course of its
business and consistent with past practices has permitted such Obligors to remit
payments to a Collector such Obligors may be instructed to continue to remit
payments to a Collector, subject in all cases to the provisions of this Section
2.3. Each Servicing Party is hereby authorized to collect payments in
accordance with the foregoing sentence. With respect to any payments in respect
of the Receivables that are made directly to any Servicing Party (including,
without limitation, to any Collection P.O. Box, or any employees of such
Servicing Party or independent contractors employed thereby other than a
Collector), such Servicing Party shall, within one Business Day of receipt
thereof, deposit such amounts (in the form received) to a Lockbox Account, or an
Eligible Segregated Account and, prior to forwarding such amounts, such
Servicing Party shall hold such payments in trust as custodian for the Trustee.
Any payments collected by a Collector shall be deposited (in the form received)
by a Collector, into a Lockbox Account or an Eligible Segregated Account within
one Business Day following receipt thereof; PROVIDED, that on any Business Day
all Collectors may hold in the aggregate up to $150,000 provided that in all
events such payments shall be deposited within three
<PAGE>
6
Business Days following receipt thereof. All Collections received in a
Lockbox shall, within one Business Day of receipt thereof, be deposited by
the applicable Lockbox Processor in a Lockbox Account. All immediately
available funds on deposit in a Lockbox Account shall be transferred by the
relevant Lockbox Bank to the Collection Account within one Business Day of
such funds becoming immediately available. All immediately available funds on
deposit in an Eligible Segregated Account shall be transferred by the
Eligible Segregated Account Bank to the Collection Account within one
Business Day of such funds becoming immediately available. Each of the
Company and each Servicing Party represents, warrants and agrees that all
Collections shall be collected, processed and deposited by it pursuant to,
and in accordance with the terms hereof and the other Pooling and Servicing
Agreements, the Lockbox Agreements and the Eligible Segregated Account
Agreements.
(b)(i) No Person shall act as a Lockbox Bank or a Lockbox Processor
unless it has entered into a Lockbox Agreement with the Company and, in the case
of a Lockbox Bank, unless the unsecured and uncollateralized obligations of such
Person (or its holding company parent) are rated in one of the three highest
long-term or short-term rating categories by each Rating Agency rating such
Person and, in the case of a Lockbox Processor, unless such person is bonded
against loss for an amount not less than $5,000,000 by a nationally recognized
bonding company. Each Lockbox Agreement shall provide that the Lockbox Bank or
the Lockbox Processor thereunder, as the case may be, is irrevocably directed,
and such Lockbox Bank or Lockbox Processor, as the case may be, irrevocably
agrees, to (i) deposit funds received in the Lockbox directly into the Lockbox
Account and (ii) in the case of a Lockbox Bank only, transfer immediately
available funds on deposit in the Lockbox Account within one Business Day of
such funds becoming immediately available to the Trustee for deposit in the
Collection Account. A new Lockbox Account may be designated by the Company and
the Servicer; PROVIDED that the Lockbox Bank or the Lockbox Processor, as the
case may be, chosen to maintain or process payments for deposit into such new
Lockbox Account shall have entered into a Lockbox Agreement with the Company,
the Servicer and the Trustee. The Company or the Servicer shall notify each
Rating Agency and the Trustee of the designation of a new Lockbox Account and
the related Lockbox and Lockbox Bank or Lockbox Processor, as the case may be.
Prior to any resignation of a Lockbox Bank or a Lockbox Processor or termination
of a Lockbox Bank or a Lockbox Processor by the Company or the Trustee, the
Servicer hereby agrees to obtain a replacement Lockbox Bank or Lockbox
Processor, as the case may be (which may be a Person currently acting as a
Lockbox Bank or Lockbox Processor, as the case may be), in the case of a Lockbox
Bank the unsecured and uncollateralized obligations of which (or of its holding
company parent) are rated in one of the three highest long-term or short-term
rating categories by each Rating Agency rating such replacement Lockbox Bank or,
in the case of a Lockbox Processor, which is bonded against loss for an amount
not less than $5,000,000 by a nationally recognized bonding company to serve
under a Lockbox Agreement.
(ii) No Person shall act as a Eligible Segregated Bank unless it has
entered into a Eligible Segregated Account Agreement with the Company and the
uncollateralized obligations of such Person (or its holding company parent) are
rated in one of the three highest long-term or short-term rating categories by
each Rating Agency rating such Person.
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7
Each Eligible Segregated Account Bank Agreement shall provide that the
Eligible Segregated Account Bank is irrevocably directed, and such Eligible
Segregated Account Bank, irrevocably agrees, to transfer immediately
available funds on deposit in the Eligible Segregated Account within one
Business Day of such funds becoming immediately available to the Trustee for
deposit in the Collection Account. A new Eligible Segregated Account may be
designated by the Company and the Servicer; PROVIDED that the Eligible
Segregated Account Bank chosen to maintain such new Eligible Segregated
Account shall have entered into an Eligible Segregated Account Bank Agreement
with the Company, the Servicer and the Trustee. The Company or the Servicer
shall notify each Rating Agency and the Trustee of the designation of a new
Eligible Segregated Account. Prior to any resignation of an Eligible
Segregated Account Bank or termination of an Eligible Segregated Account Bank
by the Company or the Trustee, the Servicer hereby agrees to obtain a
replacement Eligible Segregated Account Bank the unsecured and
uncollateralized obligations of which (or of its holding company parent) are
rated in one of the three highest long-term or short-term rating categories
by each Rating Agency rating such replacement Eligible Segregated Account
Bank.
(iii) Each Collection P.O. Box shall be opened in the name of the
Company (but which shall accept mail addressed to the Servicer or the Sellers)
and the Trustee shall be irrevocably authorized to collect mail from such
Collection P.O. Box in the event of a Servicer Default.
(c) The Trustee shall administer amounts on deposit in the Collection
Account, and the Servicer, on behalf of the Trust, shall, have the authority
revocable by the Trustee upon the occurrence and during the continuance of a
Servicer Default, to administer amounts on deposit in the Lockbox Accounts and
the Eligible Segregated Accounts, in each case in accordance with the terms of
the Pooling and Servicing Agreements. The Servicer and the Sub-Servicers, on
behalf of the Trust, (i) shall enforce all terms of each Lockbox Agreement and
Eligible Segregated Account Agreement against the relevant Lockbox Processor,
Lockbox Bank and Eligible Segregated Account Bank, as the case may be, and (ii)
shall take steps in a prompt and timely manner to replace any Lockbox Processor,
Lockbox Bank and Eligible Segregated Account Bank which does not comply with the
provisions of the relevant Lockbox Agreement or Eligible Segregated Account
Bank, as the case may be in all material respects. Each of the Company and each
Servicing Party acknowledges and agrees that (i) it shall not have any right to
withdraw any funds on deposit in the Collection Account, an Eligible Segregated
Account or any Lockbox Account and (ii) all amounts deposited in the Collection
Account, an Eligible Segregated Account or any Lockbox Account shall be under
the sole dominion and control of the Trustee (subject to the Servicer's
revocable right to direct the application of such amounts as provided by the
terms of any Pooling and Servicing Agreement).
(d) As soon as practicable but in any event not later than the
Business Day following the date that the Servicer determines, identifies and
certifies in writing to the Trustee that any of the collected funds received in
any of the Lockboxes, the Lockbox Accounts, the Eligible Segregated Accounts or
the Collection Account do not constitute Collections on account of the
Receivables, such monies which do not constitute such
<PAGE>
8
Collections shall be remitted to the applicable Seller to the extent such
determination and identification is reasonably satisfactory to the Trustee.
(e) All collections received or deposited in the Collection Account
as "Collections" shall be deemed, for purposes of the Transaction Documents,
to have been received or deposited as of the Business Day Received (as
defined in the immediately succeeding sentence). As used herein, the term
"BUSINESS DAY RECEIVED" shall mean (i) if funds are deposited in the
Collection Account by 1:00 p.m., New York City time, such day of deposit and
(ii) if funds are deposited in the Collection Account after 1:00 p.m., New
York City time, the Business Day next following such day of deposit.
(f) Unless otherwise required by law or unless an Obligor designates
that a payment be applied to a specific Receivable, all Collections received
from an Obligor shall be applied to the oldest Receivables of such Obligor.
II.4. RECONCILIATION OF DEPOSITS. If in respect of a Collection of a
Receivable any Servicing Party deposits into a Lockbox Account or Eligible
Segregated Account (a) a check received in respect of such Collection which
check is not honored for any reason or (b) an amount that is less than or more
than the actual amount of such Collection, such Servicing Party or the Servicer
shall, in lieu of making a reconciling withdrawal or deposit, as the case may
be, adjust the amount subsequently deposited into such Lockbox Account or
Eligible Segregated Account to reflect such dishonored check or mistake. Any
Receivable in respect of which a dishonored check is received shall be deemed
not to have been paid; PROVIDED that no adjustments made pursuant to this
Section 2.4 will change any amount previously reported pursuant to Section 4.2.
II.5. SERVICING COMPENSATION. (a) As full compensation for its
servicing activities hereunder and reimbursement for its expenses as set forth
in subsection 2.5(b), the Servicer shall be entitled to receive on each
Distribution Date for the preceding Settlement Period prior to the termination
of the Trust pursuant to Section 9.1 of the Pooling Agreement a servicing fee
(the "SERVICING FEE"). The Servicing Fee shall be an amount equal to (i) the
product of (A) the Servicing Fee Percentage and (B) the daily average aggregate
Principal Amount of the Receivables in the Trust for the Settlement Period
immediately preceding such Settlement Period (or, if such later Settlement
Period is the initial Settlement Period, the aggregate Principal Amount of the
Receivables at March 27, 1998) and (C) the number of days in such Settlement
Period, DIVIDED BY (ii) 360. Except as otherwise set forth in the related
Supplement, the share of the Servicing Fee allocable to each Outstanding Series
for any Settlement Period shall be an amount equal to the product of (i) the
Servicing Fee for such Settlement Period and (ii) a fraction (expressed as a
percentage) (A) the numerator of which is the daily average Invested Amount for
such Settlement Period with respect to such Series and (B) the denominator of
which is the daily average Aggregate Invested Amount for such Settlement Period
(with respect to any such Series, the "MONTHLY SERVICING FEE"). The Servicing
Fee shall be payable to the Servicer solely pursuant to the terms of, and to the
extent amounts are available for payment under, Article III of the Pooling
Agreement.
<PAGE>
9
(b) The Company hereby directs the Servicer, and the Servicer
hereby agrees, to pay amounts due to the Trustee pursuant to Section 8.5 of
the Pooling Agreement and the reasonable fees and disbursements of
independent accountants and counsel, including the Trustee's reasonable
out-of-pocket expenses relating to the Trustee's inspections, if any, of the
Servicer's servicing facility in connection with the Trustee's role as
potential Successor Servicer, which inspections shall occur not more
frequently than once per calendar year, and all other fees and expenses of
the Trustee (including counsel fees, if any) not expressly stated in the
Pooling and Servicing Agreements to be for the account of the Investor
Certificateholders; PROVIDED, HOWEVER, that in no event shall the Servicer be
liable for any federal, state or local income or franchise tax, or any
interest or penalties with respect thereto, assessed on the Trust, the
Trustee or the Investor Certificateholders except in accordance with Section
5.2 and as otherwise expressly provided herein. Notwithstanding anything to
the contrary herein or in any other Pooling and Servicing Agreement, if the
Servicer is Core-Mark or an Affiliate thereof, in the event that the Servicer
fails to pay any amount due to the Trustee pursuant to Section 8.5 of the
Pooling Agreement, or following the commencement and continuance of an Early
Amortization Period, the Trustee shall be entitled, in addition to any other
rights it may have under law and under the Pooling Agreement, to receive
directly such amounts owing to it under the Pooling and Servicing Agreements
from, and in the same order of priority as, the Servicing Fee before payment
to the Servicer of any portion thereof; PROVIDED, that in the event the
Servicer shall have elected to waive its rights to payment of the Servicing
Fee or the Servicing Fee is deferred pursuant to subsection 2.5(a), the
Trustee shall nonetheless be entitled to receive such amounts from payments
which would ordinarily be applied to the payment of the Servicing Fee, in the
same order of priority as though such Servicing Fee were payable. The
Servicer shall be required to pay expenses for its own account, and shall not
be entitled to any payment therefor other than the Servicing Fee. Nothing
contained herein shall be construed to limit the obligation of the Servicer
or the Company to pay any amounts due the Trustee pursuant to Section 8.5 of
the Pooling Agreement or pursuant to the terms of any applicable Supplement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
THE SERVICER AND THE SUB-SERVICERS
As of (a) the Initial Closing Date and (b) each Issuance Date, each
Servicing Party hereby makes the following representations and warranties to
each of the other parties hereto:
III.1. CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Such Servicing Party
(i) is a corporation duly incorporated, validly existing and in good standing
under the laws of the jurisdiction of its organization, (ii) has all requisite
corporate power and authority, and all legal right, to own and operate its
properties, to lease the properties it operates as lessee and to conduct its
business as now conducted, (iii) is duly qualified as a foreign corporation to
do business and in good standing (or is exempt from such requirements) under the
laws of each
<PAGE>
10
jurisdiction in which the servicing of Receivables as required by this
Agreement requires such qualification and (iv) is in compliance with all
Requirements of Law applicable to the collection and servicing of Receivables
and the transactions contemplated by the Transaction Documents, except, in
the case of clauses (ii), (iii) and (iv), to the extent that a failure to
have such power, authority or right, to qualify and be in good standing or to
comply, as the case may be, would not reasonably be expected to have a
Material Adverse Effect.
III.2. CORPORATE POWER; AUTHORIZATION; CONSENTS. Such Servicing
Party has the corporate power and authority, and the legal right, to execute,
deliver and perform this Agreement and the other Transaction Documents to
which it is a party and has taken all necessary corporate action to authorize
the execution, delivery and performance of this Agreement and the other
Transaction Documents to which it is a party. No consent or authorization
of, filing with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the execution,
delivery, performance, validity or enforceability of this Agreement and the
other Transaction Documents to which it is a party by or against such
Servicing Party other than (i) those consents which have duly been obtained
or made and are in full force and effect on the Initial Closing Date or the
relevant Issuance Date, as the case may be, (ii) any filings of UCC-1
financing statements necessary to perfect the Company's or the Trust's
interest in the Receivables and the Related Property, (iii) those that may be
required under state securities or "blue sky" laws in connection with the
offering or sale of Certificates and (iv) any such consent, authorization,
filing, notice or other act, the absence of which would not reasonably be
expected to have a Material Adverse Effect with respect to such Servicing
Party or the Servicer. This Agreement and each other Transaction Document to
which it is a party have been duly executed and delivered on behalf of such
Servicing Party.
III.3. ENFORCEABILITY. This Agreement and each other Transaction
Document to which it is a party constitute the legal, valid and binding
obligation of such Servicing Party enforceable against it in accordance with its
terms, except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect affecting the enforcement of creditors' rights generally and except as
such enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity).
III.4. NO LEGAL BAR. The execution, delivery and performance of this
Agreement and each other Transaction Document to which it is a party will not
violate any Requirement of Law or Contractual Obligation of such Servicing Party
(other than any violation which would not reasonably be expected to have a
Material Adverse Effect with respect to such Servicing Party or the Servicer),
and will not result in, or require, the creation or imposition of any Lien
(other than Permitted Liens) on any of its properties or revenues pursuant to
any such Requirement of Law or Contractual Obligation.
III.5. NO MATERIAL LITIGATION. (a) There are no actions, suits,
investigations or proceedings at law or in equity or by or before any
arbitrator, court or Governmental Authority now pending or, to the knowledge of
such Servicing Party, threatened against or
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11
affecting it or any of its properties, revenues or rights which (i) involve
this Agreement, any of the other Transaction Documents to which such
Servicing Party is a party or any of the transactions contemplated hereby or
thereby or (ii) which could reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect.
III.6. REQUIREMENTS OF LAW. Such Servicing Party is not in default
under or with respect to any Requirement of Law applicable to the collection and
servicing of Receivables and the transactions contemplated by the Transaction
Documents where such default would be reasonably likely to have a Material
Adverse Effect with respect to such Servicing Party or the Servicer. The
transactions hereunder and the use of the proceeds thereof will not violate any
Requirement of Law.
III.7. NO DEFAULT. Such Servicing Party is not in default under or
with respect to any of its Contractual Obligations applicable to the collection
and servicing of Receivables and the transactions contemplated by the
Transaction Documents in any respect which would be reasonably likely to have a
Material Adverse Effect with respect to such Servicing Party or the Servicer.
No Servicer Default or Potential Servicer Default has occurred and is
continuing.
III.8. SERVICING ABILITY. As of the related Issuance Date, there has
not been since the date of this Agreement any material adverse change in the
ability of such Servicing Party to perform its obligations as Servicer under any
Transaction Document.
III.9. LOCATION OF RECORDS. The offices at which such Servicing Party
keeps its records concerning the Receivables serviced by it either (i) are
located at the addresses set forth on Schedule 2 to the Receivables Sale
Agreement or (ii) have been notified to the Company and the Trustee in
accordance with the provisions of Section 4.9. The chief executive office of
such Servicing Party is located at one of such locations and is the place where
such Servicing Party is "located" for the purposes of Section 9-103(3)(d) of the
UCC as in effect in the State of New York.
ARTICLE IV
COVENANTS OF THE SERVICER AND THE SUB-SERVICERS
IV.1. DELIVERY OF DAILY REPORTS. Unless otherwise specified in the
Supplement with respect to any Series, for each Business Day (a "REPORTED DAY")
and with respect to each Outstanding Series, the Servicer shall submit to the
Trustee and the relevant Agent, if any, no later than 2:00 p.m., New York City
time, on the Business Day following each Reported Day, a written report
substantially in the form attached to the related Supplement of each such Series
(the "DAILY REPORT") setting forth for the Reported Day total Collections,
Receivables and Eligible Receivables created, and such other information as the
Trustee or such Agent may reasonably request. The Daily Report may be delivered
in an electronic format mutually agreed upon by the Servicer and the Trustee, or
pending such agreement, by
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facsimile. By delivery of a Daily Report, the Servicer shall be deemed to
have made a representation and warranty that all information set forth
therein is true and correct in all material respects.
IV.2. DELIVERY OF MONTHLY SETTLEMENT STATEMENT. Unless otherwise
specified in the Supplement with respect to any Outstanding Series, the
Servicer hereby covenants and agrees that it shall deliver to the Trustee,
each Agent and each Rating Agency by 11:00 a.m., New York City time, on each
Settlement Report Date, a certificate of a Responsible Officer of the
Servicer substantially in the form attached to the related Supplement of each
such Series (a "MONTHLY SETTLEMENT STATEMENT") setting forth, as of the last
day of the Settlement Period most recently ended and for such Settlement
Period,(a) the information described in the form of such Monthly Settlement
Statement, with such changes as may be agreed to by the Servicer and the
Trustee, subject to satisfaction of the Rating Agency Condition (unless a
Responsible Officer of the Servicer certifies that such changes could not
reasonably be expected to have a materially adverse effect on the interests
of the Trust or the Investor Certificateholders for the applicable Series
under the Transaction Documents) and (b) such other information as the
Trustee may reasonably request. Such certificate shall include a
certification by a Responsible Officer of the Servicer that, to the best of
such Responsible Officer's knowledge, the information contained therein is
true and correct and the Servicer has performed in all material respects all
of its obligations under each Transaction Document throughout such preceding
Settlement Period (or, if there has been a material default in the
performance of any such obligation, specifying each such default known to
such officer and the nature and status thereof). A copy of each Monthly
Settlement Statement may be obtained by any Investor Certificateholder upon a
request in writing to the Trustee addressed to the Corporate Trust Office.
IV.3. DELIVERY OF QUARTERLY SERVICER'S CERTIFICATE. The Servicer
agrees that it shall deliver to the Trustee, each Agent and each Rating Agency,
a certificate of a Responsible Officer of the Servicer, substantially in the
form of Exhibit A hereto, stating that:
(a) a review of the activities of each of the Company and the
Servicer during the preceding calendar quarter (or in the case of the first
such certificate issued after the Initial Closing Date, during the period
from the Initial Closing Date) and of its performance under each
Transaction Document was made under the supervision of such Responsible
Officer; and
(b) to the best of such Responsible Officer's knowledge, based on
such review, (i) each of the Company and the Servicer has performed in all
material respects its obligations under each Transaction Document
throughout the period covered by such certificate (or, if there has been a
material default in the performance of any such obligation, specifying each
such default known to such Responsible Officer and the nature and status
thereof) and (ii) each Daily Report and Monthly Settlement Statement
delivered during such period was accurate and correct in all material
respects, except as specified in such certificate.
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Such certificate shall be delivered by the Servicer within 45 days after the end
of each calendar quarter commencing with the quarter ending on or about June 30,
1998. A copy of such certificate may be obtained by any Investor
Certificateholder by a request in writing to the Trustee addressed to the
Corporate Trust Office.
IV.4. DELIVERY OF INDEPENDENT PUBLIC ACCOUNTANTS' SERVICING REPORTS.
The Servicer shall cause Independent Public Accountants to furnish to the
Company, the Trustee and each Rating Agency within 120 days following December
31 of each year (beginning December 31, 1998) a letter to the effect that such
firm has performed certain agreed upon procedures (as set forth in Exhibit B
hereto) relating to the Receivables, the Servicer and each Sub-Servicer with
respect to the Receivables and each such Person's performance hereunder during
the preceding fiscal year and describing such firm's findings with respect to
such procedures. A copy of such report may be obtained by any Investor
Certificateholder upon a request in writing to the Trustee addressed to the
Corporate Trust Office.
IV.5. NO GUARANTEE OR ASSUMPTION OF COMPANY'S LIABILITIES. Each
Servicing Party hereby covenants and agrees that it will not guarantee or
assume the obligations or liabilities of the Company under the Pooling and
Servicing Agreements, or any other obligations or liabilities of the Company.
IV.6. EXTENSION, AMENDMENT AND ADJUSTMENT OF RECEIVABLES; AMENDMENT OF
AND COMPLIANCE WITH POLICIES. (a) Each Servicing Party hereby covenants and
agrees with the Trustee that it shall not extend, rescind, cancel, amend or
otherwise modify, or attempt or purport to extend, rescind, cancel, amend or
otherwise modify, the terms of, or grant any Dilution Adjustment to, any
Receivable, or otherwise take any action which is intended to cause or permit an
Eligible Receivable to cease to be an Eligible Receivable, except in any such
case (i) in accordance with the terms of the Policies, (ii) as required by any
Requirement of Law or (iii) in the case of any Dilution Adjustments (whether or
not permitted by any other clause of this sentence), upon the payment by or on
behalf of the applicable Seller of a Seller Adjustment Payment pursuant to
Section 2.05 of the Receivables Sale Agreement. Any Dilution Adjustment
authorized to be made pursuant to the preceding sentence shall result in the
reduction, on the Business Day on which such Dilution Adjustment arises or is
identified, in the aggregate Principal Amount of Receivables used to calculate
the Aggregate Receivables Amount. If, as a result of such a reduction, the
Aggregate Receivables Amount is less than the Aggregate Target Receivables
Amount, the Company (in addition to but without duplication of the obligation of
the applicable Seller under the Receivables Sale Agreement in respect of such
Dilution Adjustment) shall be required to pay into the Series Principal
Collection Sub-subaccount with respect to each Outstanding Series in immediately
available funds within one Business Day of such determination such Series' PRO
RATA share of the amount (the "CASH DILUTION PAYMENT") by which the Aggregate
Target Receivables Amount exceeds the Aggregate Receivables Amount.
(b) No Servicing Party shall make or permit to be made any change or
modification to the Policies in any material respect, except (i) if such changes
or modifications are necessary under any Requirement of Law, (ii) if such
changes or
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14
modifications would not reasonably be expected to have a Material
Adverse Effect or (iii) if the Rating Agency Condition is satisfied with respect
thereto. The Servicer shall provide notice to the Company, the Trustee and each
Rating Agency of any modification of the Policies; PROVIDED; HOWEVER, that if
any change or modification, other than a change or modification permitted
pursuant to clause (i) or (ii) above, would be reasonably likely to have a
Material Adverse Effect on the interests of the Investor Certificateholders of a
Series which is not rated by a Rating Agency, the consent of the applicable
Agent (or as specified in the related Supplement) shall be required to effect
such a change or modification.
(c) Each Servicing Party shall perform its obligations in accordance
with and comply in all material respects with the Policies.
IV.7. SERVICER'S CONDUCT. Each Servicing Party hereby agrees with the
Trustee that as Servicer or Sub-servicer it shall exercise the same degree of
skill and care in managing the administration and servicing of the Receivables,
and performing its obligations hereunder, as it would exercise if it were the
beneficial owner of all of such Receivables.
IV.8. SECURITY INTEREST. Each Servicing Party hereby covenants and
agrees that it shall not sell, pledge, assign or transfer to any other
Person, or grant, create, incur, assume or suffer to exist any Lien on, any
Receivable sold and assigned to the Company or the Trust, whether now
existing or hereafter created, or any interest therein, and such Servicing
Party shall defend the right, title and interest of the Company and the Trust
in, to and under any Receivable sold and assigned to the Company or the
Trust, whether now existing or hereafter created, against all claims of third
parties claiming through or under such Servicing Party or the Company;
PROVIDED, HOWEVER, that nothing in this Section 4.8 shall prevent or be
deemed to prohibit any Servicing Party from suffering to exist upon any of
the Receivables any Permitted Liens described in clauses (i) and (iv) of the
definition thereof.
IV.9. LOCATION OF RECORDS. Each Servicing Party hereby covenants and
agrees that it (a) shall not move its chief executive office or any of the
offices where it keeps its records with respect to the Receivables outside of
the location specified in respect thereof on Schedule 2 to the Receivables Sale
Agreement, in any such case, without giving 30 days' prior written notice to the
Company, the Trustee and the Rating Agencies and (b) shall promptly take all
actions reasonably required (including but not limited to all filings and other
acts necessary or reasonably requested by the Trustee as being advisable under
the UCC) in order to continue the valid and enforceable interest of the Company
and the Trust in all Receivables now owned or hereafter created.
IV.10. VISITATION RIGHTS. (a) Each Servicing Party shall, at any
reasonable time during normal business hours on any Business Day and from time
to time, upon reasonable prior notice, according to such Servicing Party's
normal security and confidentiality requirements, permit (i) the Company, the
Trustee, any Agent or any of their respective agents or representatives (A) to
examine and make copies of and abstracts from the records, books of account and
documents (including computer tapes and disks) of such Servicing Party relating
to the Receivables and (B) following the occurrence of a Servicer Default or the
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15
termination of the appointment of such Servicing Party, to be present at the
offices and properties of such Servicing Party to administer and control the
Collection of the Receivables and (ii) the Company, the Trustee, any Agent or
any of their respective agents or representatives to visit the properties of
such Servicing Party to discuss the affairs, finances and accounts of such
Servicing Party relating to the Receivables or such Servicing Party's
performance hereunder or under any of the other Transaction Documents to which
it is a party with any of its officers or directors and with its independent
certified public accountants; PROVIDED that the Company, the Trustee or such
Agent, as the case may be, shall notify such Servicing Party prior to any
contact with such accountants and shall give such Servicing Party the
opportunity to participate in such discussions.
(b) Each Servicing Party shall provide the Trustee with such other
information as the Trustee may reasonably request in connection with the
fulfillment of the Trustee's obligations under any Pooling and Servicing
Agreement.
IV.11. LOCKBOX AGREEMENT; LOCKBOX ACCOUNTS; ELIGIBLE SEGREGATED
ACCOUNTS. The Servicer shall (a) maintain, and keep in full force and effect,
each Lockbox Agreement, and Eligible Segregated Account Agreement, except to the
extent otherwise permitted under the terms of the Transaction Documents, and (b)
ensure that each related Lockbox Account and any Eligible Segregated Account
shall be free and clear of, and defend each such Lockbox Account and Eligible
Segregated Account against, any writ, order, stay, judgment, warrant of
attachment or execution or similar process.
IV.12. DELIVERY OF FINANCIAL STATEMENTS. The Servicer shall furnish
to the Trustee and the Rating Agencies:
(a) as soon as available, but in any event not later than 90 days
after the end of each fiscal year of Core-Mark, and so long as Core-Mark is
the Servicer, a copy of the audited consolidated balance sheets of Core-
Mark and its Subsidiaries as at the end of such fiscal year and the related
consolidated statements of income, shareholders' equity and cash flows of
Core-Mark and its Subsidiaries for such fiscal year, setting forth in each
case in comparative form the figures for the previous fiscal year, and
accompanied by the opinion of Deloitte & Touche LLP or another nationally-
recognized independent public accounting firm, together with a certificate
of a Responsible Officer of Core-Mark, in each case stating that such
consolidated financial statements present fairly the financial position and
results of operations and changes in cash flow for the periods indicated in
conformity with GAAP applied on a basis consistent with prior years. Such
opinion shall not be qualified or limited because of a restricted or
limited examination by such accountant of any material portion of Core-
Mark's or any of its Subsidiaries' records; and
(b) as soon as practicable, but in any event not later than 45 days
after the end of the first three fiscal quarters, a copy of the unaudited
consolidated balance sheets of Core-Mark and its Subsidiaries as at the end
of such quarter and the related consolidated statements of income,
shareholders' equity and cash flows of Core-Mark
<PAGE>
16
and its Subsidiaries for such fiscal quarter, and for the elapsed
portion of the fiscal year then ended, certified by an appropriate
Responsible Officer as being complete and correct and fairly presenting
the financial position and the results of operations of Core-Mark and
its Subsidiaries, setting forth in each case in comparative form the
figures as of and for the corresponding dates and periods in the
previous fiscal year.
All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with
GAAP applied consistently throughout the periods reflected therein and with
prior periods (except as approved by such accountants or officer, as the
case may be, and disclosed therein).
IV.13. NOTICES. The Servicer shall furnish to the Company, the
Trustee and each Rating Agency, promptly upon a Responsible Officer of the
Servicer obtaining knowledge of the occurrence of any Purchase Termination
Event, Potential Purchase Termination Event (each as defined in the Receivables
Sale Agreement), Early Amortization Event, Potential Early Amortization Event,
Servicer Default or Potential Servicer Default, written notice thereof.
ARTICLE V
OTHER MATTERS RELATING TO THE SERVICER AND THE SUB-SERVICERS
V.1. MERGER, CONSOLIDATION, ETC. No Servicing Party shall consolidate
with or merge into any other corporation or convey or transfer its properties
and assets substantially as an entirety to any Person (other than the Servicer
or another Servicing Party), unless:
(a) the corporation formed by such consolidation or into which such
Servicing Party is merged or the Person which acquires by conveyance or
transfer the properties and assets of such Servicing Party substantially as
an entirety shall be a corporation organized and existing under the laws of
the United States of America or any State thereof or the District of
Columbia, and, if such Servicing Party is not the surviving entity, such
corporation shall assume, without the execution or filing of any paper or
any further act on the part of any of the parties hereto (except as may be
required in the context of an acquisition by conveyance or transfer of the
properties and assets of such Servicing Party substantially as an entirety
to such other Person), the performance of every covenant and obligation of
such Servicing Party hereunder; and
(b) such Servicing Party has delivered to the Trustee an officer's
certificate executed by a Vice President or more senior officer and an
Opinion of Counsel addressed to the Trust and the Trustee, each stating (i)
that such consolidation, merger, conveyance or transfer complies with this
Section 5.1 and (ii) that all conditions precedent herein provided for
relating to such transaction have been complied with; PROVIDED that such
Opinion of Counsel, in the case of clause (ii) above, may, to the
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17
extent that such opinion concerns questions of fact, rely on such
officer's certificate with respect to such questions of fact.
V.2. INDEMNIFICATION OF THE TRUST AND THE TRUSTEE. (a) The
Servicer hereby agrees to indemnify and hold harmless the Trust and the
Trustee, for the benefit of the Investor Certificateholders and the Trustee
and its directors, officers, agents and employees (each of the foregoing, an
"INDEMNIFIED PERSON"), from and against any loss, liability, expense, damage
or injury suffered or sustained by reason of any acts, omissions or alleged
acts or omissions arising out of, or relating to, activities of the Servicer
pursuant to the Pooling and Servicing Agreements, including but not limited
to any judgment, award, settlement, reasonable attorneys' fees and other
reasonable costs or expenses incurred in connection with the defense of any
actual or threatened action, proceeding or claim; PROVIDED that the Servicer
shall not so indemnify any Indemnified Person for any loss, liability,
damage, injury, cost or expense of such Indemnified Person (i) arising solely
from a default by an Obligor with respect to any Receivable (other than
arising out of (A) any discharge, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment of any
Purchased Receivable (as defined in the Receivables Sale Agreement) arising
from the actions of the Servicer (including, without limitation, a defense
based on such Purchased Receivable's not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with its
terms as a result of such actions), or (B) a failure by the Servicer to
perform its duties or obligations under this Agreement), or (ii) to the
extent that such liability, cost or expense arises from the gross negligence
(or, in the case of the Trustee, negligence), bad faith or wilful misconduct
of such Indemnified Person or any other Indemnified Person (or any of their
respective directors, officers, agents or employees). The provisions of this
indemnity shall run directly to, and be enforceable by, an injured party and
shall survive the termination of this Agreement and the resignation of the
Servicer.
(b) In addition to and without giving effect to any limitations set
forth in subsection (a) above, the Servicer agrees to pay, indemnify and hold
each Indemnified Person harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may at any time
be imposed on, incurred by or asserted against such Indemnified Person in any
way relating to or arising out of any Servicing Party's breach of any covenant
contained in subsections 2.2(f), 2.2(g), 4.6, 4.7 or 4.8 with respect to any
Receivable which materially and adversely affects the interest of the Trust or
the Investor Certificateholders pursuant to the Transaction Documents in any
Receivable or the collectibility of any Receivable (an "INDEMNIFICATION EVENT").
(c) The Servicer shall indemnify and hold harmless the relevant
Indemnified Person for such affected Receivable pursuant to subsection 5.2(b) by
depositing into the Collection Account in immediately available funds no later
than the next Settlement Report Date occurring at least 30 days after receipt by
the Servicer of written notice of an Indemnification Event given by the
applicable Seller, the Company or the Trustee or upon a Responsible Officer of
the Servicer obtaining knowledge of an Indemnification Event, an amount equal to
the outstanding Principal Amount of such Receivable (the "SERVICER
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18
INDEMNIFICATION AMOUNT"). Upon each such indemnification by the Servicer, the
Trust shall automatically and without further action be deemed to transfer,
assign, and set over, and otherwise convey to the Servicer, without recourse,
representation or warranty, all right, title and interest of the Trust in and to
such Receivable, all monies due or to become due with respect thereto and all
proceeds thereof; and such Receivable shall be treated by the Trust as collected
in full as of the date on which it was transferred. The Trustee shall execute
such documents and instruments of transfer or assignment and take such other
actions as shall be reasonably requested by the Servicer to effect the
conveyance of any Receivable pursuant to this subsection. The obligation of the
Servicer to indemnify the Trust for any such Receivables shall constitute the
sole remedy respecting any breach of the covenants set forth in subsection
2.2(f), 2.2(g), 4.6, 4.7 or 4.8 with respect to such Receivables available to
Investor Certificateholders.
V.3. SERVICER NOT TO RESIGN. The Servicer shall not resign from the
obligations and duties hereby imposed on it except (a) upon determination that
(i) the performance of its duties hereunder is no longer permissible under
applicable law and (ii) there is no reasonable action which the Servicer could
take to make the performance of its duties hereunder permissible under
applicable law or (b) if the Servicer is terminated as Servicer pursuant to
Section 6.1. Any such determination permitting the resignation of the Servicer
shall be evidenced as to clause (a)(i) above by an Opinion of Counsel to such
effect delivered to the Trustee. No such resignation shall become effective
until a Successor Servicer or the Trustee shall have assumed the
responsibilities and obligations of the Servicer in accordance with Section 6.2.
The Trustee, the Company, each Agent and each Rating Agency shall be notified of
such resignation in writing by the Servicer.
V.4. ACCESS TO CERTAIN DOCUMENTATION AND INFORMATION REGARDING THE
RECEIVABLES. The Servicer and the other Servicing Parties will hold in trust
for the Trustee at their respective offices such computer programs, books of
account and other records as are reasonably necessary to enable the Trustee to
determine at any time the status of the Receivables and all collections and
payments in respect thereof (including, without limitation, an ability to
recreate records evidencing Receivables in the event of the destruction of the
originals thereof).
ARTICLE VI
SERVICER DEFAULTS
VI.1. SERVICER DEFAULTS. If, with respect to any Servicing Party, any
one of the following events (a "SERVICER DEFAULT") shall occur and be
continuing:
(a) failure by the Servicer to deliver, within two Business Days of
when due, any Daily Report or, within three Business Days of when due, any
Monthly Settlement Statement, in each case conforming in all material
respects to the requirements of Section 4.1 or 4.2;
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19
(b) failure by such Servicing Party to pay any amount required to be
paid by it under the Agreement or to give any direction with respect to the
allocation or transfer of funds under any Pooling and Servicing Agreement,
in each case on or before the date occurring five Business Days after the
date such payment is due or such allocation or transfer is required to be
made;
(c) failure on the part of such Servicing Party duly to observe or
perform in any material respect any other covenants or agreements of such
Servicing Party set forth in any Pooling and Servicing Agreement, which
failure has a material adverse effect on the holders of any Outstanding
Series or on the collectibility of the Receivables as a whole and which
material adverse effect continues unremedied for 30 days after the earlier
to occur of (i) the date upon which a Responsible Officer of such Servicing
Party obtains knowledge of such failure or (ii) the date on which written
notice of such failure, requiring the same to be remedied, shall have been
given to the Company and the Servicer by the Trustee, or to the Company,
the Servicer and the Trustee by holders of Investor Certificates evidencing
25% or more of the Invested Amount of any Outstanding Series or by any
Agent; PROVIDED that no Servicer Default shall be deemed to occur under
this subsection (c) if, to the extent applicable, any Servicing Party shall
have complied with the provisions of subsections 5.2(b) and (c) with
respect thereto;
(d) any representation, warranty or certification made by such
Servicing Party in any Pooling and Servicing Agreement or in any
certificate delivered pursuant thereto shall prove to have been incorrect
when made or deemed made, which incorrectness has a material adverse effect
on the holders of any Outstanding Series or on the collectibility of the
Receivables as a whole and which material adverse effect continues
unremedied for 30 days after the earlier to occur of (i) the date upon
which a Responsible Officer of such Servicing Party obtains knowledge of
such failure or (ii) the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Company
and the Servicer by the Trustee, or to the Company, the Servicer and the
Trustee by holders of Investor Certificates evidencing 25% or more of the
Invested Amount of any Outstanding Series or by any Agent; PROVIDED that no
Servicer Default shall be deemed to occur under this subsection (d) if, to
the extent applicable, any Servicing Party shall have complied with the
provisions of subsections 5.2(b) and (c) with respect thereto;
(e) (i) such Servicing Party shall commence any case, proceeding or
other action (A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief entered with respect
to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets,
or such Servicing Party shall make a general assignment for the benefit of
its creditors; or (ii) there shall be commenced against
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such Servicing Party any case, proceeding or other action of a nature
referred to in clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment or (B) remains
undismissed, undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against such Servicing Party any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial
part of its assets which results in the entry of an order for any such
relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within 60 such days from the entry thereof; or
(iv) such Servicing Party shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clauses (i), (ii), or (iii) above; or (v) such
Servicing Party shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as they become due; or
(f) there shall have occurred and be continuing an Early Amortization
Event under Sections (a), (b), (h) or (l) of the Supplement for Series
1998-1, or such similar provisions as may be applicable to any other Series
of Investor Certificates issued by the Trust;
then, in the event of any Servicer Default, so long as the Servicer Default
shall not have been remedied (or waived in accordance with the terms of the
Transaction Documents), the Trustee may, and at the written direction of the
holders of Investor Certificates evidencing more than 50% of the Aggregate
Invested Amount voting as a single class, the Trustee shall, by notice then
given in writing to such Servicing Party, each Agent and each Rating Agency
(a "TERMINATION NOTICE"), terminate all or any part of the rights and
obligations of such Servicing Party as Servicer or as a Sub-Servicer, as the
case may be, under the Pooling and Servicing Agreements. Notwithstanding
anything to the contrary in this Section 6.1, a delay in or failure of
performance referred to under clause (a) or (b) above for a period of 10
Business Days after the applicable grace period or a delay in or failure of
performance referred to under clause (c) above for a period of 30 Business
Days after the applicable grace period shall not constitute a Servicer
Default, if such delay or failure could not have been prevented by the
exercise of reasonable diligence by such Servicing Party and such delay or
failure was caused by a Force Majeure Delay. After receipt by a Servicing
Party of a Termination Notice, and on the date that a Successor Servicer
shall have been appointed by the Trustee pursuant to Section 6.2, all
authority and power of such Servicing Party under any Pooling and Servicing
Agreement to the extent specified in such Termination Notice shall pass to
and be vested in a Successor Servicer (a "SERVICE TRANSFER"); and, without
limitation, the Trustee is hereby authorized and empowered (upon the failure
of a Servicing Party to cooperate) to execute and deliver, on behalf of such
Servicing Party, as attorney-in-fact or otherwise, all documents and other
instruments upon the failure of such Servicing Party to execute or deliver
such documents or instruments, and to do and accomplish all other acts or
things necessary or appropriate to effect the purposes of such Service
Transfer. Each Servicing Party agrees to cooperate with the Trustee and such
Successor Servicer in effecting the termination of the responsibilities and
rights of a Servicing Party to conduct servicing hereunder, including,
without limitation, the transfer to such Successor Servicer of all
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21
authority of a Servicing Party to service the Receivables provided for under
the Pooling and Servicing Agreements, including, without limitation, all
authority over all Collections which shall on the date of transfer be held by
a Servicing Party for deposit, or which have been deposited by a Servicing
Party, in the Collection Account, or which shall thereafter be received with
respect to the Receivables, and in assisting the Successor Servicer. Upon a
Service Transfer, the relevant Servicing Party shall promptly (x) assemble
all of its documents, instruments and other records (including credit files,
licenses, rights, copies of all relevant computer programs and any necessary
licenses for the use thereof, related material, computer tapes, disks,
cassettes and data) that (i) evidence or will evidence or record Receivables
sold and assigned to the Trust and (ii) are otherwise necessary or desirable
to enable a Successor Servicer to effect the immediate Collection of such
Receivables, with or without the participation of the applicable Seller and
Servicing Party or the Servicer and (y) deliver or license the use of all of
the foregoing documents, instruments and other records to the Successor
Servicer at a place designated thereby. In recognition of such Servicing
Party's need to have access to any such documents, instruments and other
records which may be transferred to such Successor Servicer hereunder,
whether as a result of its continuing responsibility as a servicer of
accounts receivable which are not sold and assigned to the Trust or
otherwise, such Successor Servicer shall provide to such Servicing Party
reasonable access to such documents, instruments and other records
transferred by such Servicing Party to it in connection with any activity
arising in the ordinary course of such Servicing Party's business; PROVIDED
that such Servicing Party shall not disrupt or otherwise interfere with the
Successor Servicer's use of and access to such documents, instruments and
other records. To the extent that compliance with this Section 6.1 shall
require a Servicing Party to disclose to the Successor Servicer information
of any kind which such Servicing Party reasonably deems to be confidential,
the Successor Servicer shall be required to enter into such customary
licensing and confidentiality agreements as such Servicing Party shall deem
necessary to protect its interest. All costs and expenses incurred by the
defaulting Servicing Party, the Successor Servicer and the Trustee in
connection with any Service Transfer shall be for the account of such
defaulting Servicing Party.
VI.2. TRUSTEE TO ACT; APPOINTMENT OF SUCCESSOR. (a) On and after (i)
the receipt by a Servicing Party of a Termination Notice pursuant to Section 6.1
or (ii) the date on which
such Servicing Party notifies the Trustee, the Company, each Agent and each
Rating Agency in writing of its resignation pursuant to Section 5.3 (the
"RESIGNATION NOTICE"), such Servicing Party shall continue to perform (and
shall continue to receive its Servicing Fee) all servicing functions under
the Pooling and Servicing Agreements until the earlier of (x) the date on
which a Successor Servicer is appointed and (y) 60 days after the delivery of
such Termination Notice or Resignation Notice, as the case may be. The
Trustee shall, as promptly as reasonably possible after the giving of or
receipt of a Termination Notice or Resignation Notice, as the case may be,
appoint an Eligible Successor Servicer as successor servicer (the "SUCCESSOR
SERVICER"); PROVIDED that in the event that any Sub-Servicer shall cease to
be a Servicing Party for any reason, the Servicer shall be the Successor
Servicer with respect to such terminated Sub-Servicer for so long as the
Servicer shall continue to serve in its capacity as Servicer under the
Pooling and Servicing Agreements. The Successor Servicer shall accept its
appointment by a written assumption in a form acceptable to the Trustee.
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(b) In the event that a Successor Servicer has not been appointed or
has not accepted its appointment at the time that the relevant Servicing Party
ceases to act as such, the Trustee without further action shall be appointed
Successor Servicer, PROVIDED that the Trustee shall only be responsible for the
duties and liabilities of such Successor Servicer which are consistent with an
orderly collection of the Receivables and other Trust Assets, in each case in
accordance with the Pooling and Servicing Agreements and, to the extent
applicable, the liquidation of the Receivables and the other Trust Assets. in
the manner contemplated for such liquidations in Section 7.2 of the Pooling
Agreement and the application of such funds in accordance with the Pooling and
Servicing Agreements. Consistent with the foregoing, in the event that the
Trustee becomes Successor Servicer, the Successor Servicer shall take such
collection actions as are commercially reasonable under the circumstances,
including, without limitation, electing not to pursue legal collection efforts
with respect to Receivables that it reasonably determines to be uncollectible.
The Trustee, as Successor Servicer, shall have no liability to the Investor
Certificateholders, the Company or the predecessor Servicer in electing such
actions. The Trustee may delegate any of its servicing obligations to an
affiliate or agent in accordance with subsection 2.2(c). Notwithstanding the
above, the Trustee shall, if the Trustee is legally unable so to act, petition a
court of competent jurisdiction to appoint any Person qualifying as an Eligible
Successor Servicer as the Successor Servicer hereunder. The Servicer shall
immediately give notice to each Rating Agency of the receipt of any Termination
Notice and the appointment of a Successor Servicer. The Successor Servicer and
any director or officer or employee or agent of the Successor Servicer may rely
in good faith on any document delivered hereunder believed by it to be genuine.
The Successor Servicer shall not be under any obligation to appear in, prosecute
or defend any legal action which is not incidental to its duties to service the
Receivables in accordance with this Agreement or any other Pooling and Servicing
Agreement, PROVIDED, HOWEVER, that this provision shall not protect the
Successor Servicer or any such Person against any liability which would
otherwise be imposed by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties or by reason of reckless disregard
of its obligations and duties hereunder. The Successor Servicer may undertake
any legal action which it may deem necessary or desirable for the benefit of
Investor Certificate Holders with respect to this Agreement and any other
Pooling and Servicing Agreement and the rights and duties of the parties thereto
and the interest of the Investor Certificate Holders thereunder.
(c) Upon its appointment, the Successor Servicer shall be the
successor in all respects to the Servicing Party to which it is successor with
respect to servicing functions under the Pooling and Servicing Agreements (with
such changes as are agreed to between such Successor Servicer and the Trustee)
and shall be subject to all the responsibilities, duties and liabilities
relating thereto placed on such Servicing Party by the terms and provisions
hereof, and all references in any Pooling and Servicing Agreement to the
Servicer or the Sub-Servicer, as the case may be, shall be deemed to refer to
the Successor Servicer. The Successor Servicer shall manage the servicing and
administration of the Receivables, the collection of payments due under the
Receivables and the charging off of any Receivables as uncollectible, with
reasonable care, using that degree of skill and attention that is the customary
and usual standard of practice of prudent receivables servicers with respect to
all
<PAGE>
23
comparable receivables serviced for itself or others. The Successor Servicer
shall not be liable for, and the Servicer shall indemnify the Successor
Servicer against costs incurred by the Successor Servicer as a result of, any
acts or omissions of any Servicing Party or any events or occurrences
occurring prior to the Successor Servicer's acceptance of its appointment as
Successor Servicer.
(d) The Company and the Trustee will review any bids obtained from
Eligible Successor Servicers and the Company and the Trustee, or the Company
(with the consent of the Trustee), may appoint any Eligible Successor Servicer
submitting such a bid as a Successor Servicer for servicing compensation not in
excess of the Servicing Fee.
(e) All authority and power granted to the Successor Servicer under
any Pooling and Servicing Agreement shall automatically cease and terminate on
the Trust Termination Date, and shall pass to and be vested in the Company and,
without limitation, the Company is hereby authorized and empowered to execute
and deliver, on behalf of the Successor Servicer, as attorney-in-fact or
otherwise, all documents and other instruments, and to do and accomplish all
other acts or things necessary or appropriate to effect the purposes of such
transfer of servicing rights from and after the Trust Termination Date. The
Successor Servicer agrees to cooperate with the Company in effecting the
termination of the responsibilities and rights of the Successor Servicer to
conduct servicing on the Receivables. The Successor Servicer shall transfer all
of its records relating to the Receivables to the Company in such form as the
Company may reasonably request and shall transfer all other records,
correspondence and documents to the Company in the manner and at such times as
the Company shall reasonably request. To the extent that compliance with this
Section 6.2 shall require the Successor Servicer to disclose to the Company
information of any kind which the Successor Servicer deems to be confidential,
the Company shall be required to enter into such customary licensing and
confidentiality agreements as the Successor Servicer shall reasonably deem
necessary to protect its interests.
VI.3. WAIVER OF PAST DEFAULTS. Holders of Investor Certificates
evidencing more than 50% of the Aggregate Invested Amount may waive any
continuing default by any Servicing Party or the Company in the performance
of their respective obligations hereunder and its consequences, except a
default in the failure to make any required deposits or payments in respect
of any Series of Certificates, which shall require a waiver by the holders of
all of the affected Investor Certificates. Upon any such waiver of a past
default, such default shall cease to exist, and any default arising therefrom
shall be deemed to have been remedied for every purpose of the Pooling and
Servicing Agreements. No such waiver shall extend to any subsequent or other
default or impair any right consequent thereon except to the extent expressly
so waived. Either the Company or the Servicer shall provide notice to each
Rating Agency of any such waiver.
<PAGE>
24
ARTICLE VII
MISCELLANEOUS PROVISIONS
VII.1. AMENDMENT. This Agreement may only be amended, supplemented or
otherwise modified from time to time if such amendment, supplement or
modification is effected in accordance with the provisions of Section 10.1 of
the Pooling Agreement.
VII.2. TERMINATION. The respective obligations and responsibilities
of the parties hereto shall terminate on the Trust Termination Date (unless such
obligations or responsibilities are expressly stated to survive the termination
of this Agreement).
VII.3. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (WITHOUT
REFERENCE TO THE CONFLICTS OF LAWS PROVISIONS THEREOF), AND THE RIGHTS,
OBLIGATIONS AND REMEDIES OF EACH OF THE PARTIES HERETO SHALL BE DETERMINED IN
ACCORDANCE WITH SUCH LAWS.
VII.4. NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
deposited in the mail, postage prepaid, or, in the case of facsimile notice,
when received, addressed as set forth in Section 10.5 of the Pooling Agreement,
or to such other address as may be hereafter notified by the respective parties
hereto.
VII.5. COUNTERPARTS. This Agreement may be executed in two or more
counterparts (and by different parties on separate counterparts), each of which
shall be an original, but all of which together shall constitute one and the
same instrument. Delivery of an executed counterpart of a signature page to
this Agreement by facsimile transmission shall be effective as delivery of a
manually executed counterpart of this Agreement.
VII.6. THIRD-PARTY BENEFICIARIES. This Agreement will inure to the
benefit of and be binding upon the parties hereto and the Investor
Certificateholders and their respective successors and permitted assigns.
Except as otherwise provided in this Article VII, no other person will have any
right or obligation hereunder.
VII.7. MERGER AND INTEGRATION. Except as specifically stated
otherwise herein, this Agreement and the other Transaction Documents set
forth the entire understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are superseded by this
Agreement and the other Transaction Documents. This Agreement may not be
modified, amended, waived, or supplemented except as provided herein.
<PAGE>
25
VII.8. HEADINGS. The headings herein are for purposes of reference
only and shall not otherwise affect the meaning or interpretation of any
provision hereof.
VII.9. NO SET-OFF. Except as expressly provided in this Agreement or
any other Transaction Document, each Servicing Party agrees that it shall have
no right of set-off or banker's lien against, and no right to otherwise deduct
from, any funds held in the Collection Account for any amount owed to it by the
Company, the Trust, the Trustee or any Investor Certificateholder.
VII.10. NO BANKRUPTCY PETITION. Each Servicing Party hereby covenants
and agrees that, prior to the date which is one year and one day after the Trust
Termination Date, it will not institute against, or join any other Person in
instituting against, the Company any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings under any federal or
state bankruptcy or similar law.
VII.11. CONSEQUENTIAL DAMAGES. In no event shall The Chase Manhattan
Bank, in its capacity as Successor Servicer (if applicable), be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including, but not limited to, lost profits), even if it has been advised of
the likelihood of such loss or damage and regardless of the form of action.
<PAGE>
26
IN WITNESS WHEREOF, the Company, the Servicer, the Sub-Servicers and
the Trustee have caused this Agreement to be duly executed by their respective
officers as of the day and year first above written.
CM CAPITAL CORPORATION, as Company
By: /s/ ROBERT A. ALLEN
-------------------------
Name: Robert A. Allen
Title: President & CEO
CORE-MARK INTERNATIONAL, INC., as
Servicer
By: /s/ LEO F. KORMAN
-------------------------
Name: Leo F. Korman
Title: Sr. VP & CFO
CORE-MARK MIDCONTINENT, INC., as a Sub-
Servicer
By: /s/ LEO F. KORMAN
-------------------------
Name: Leo F. Korman
Title: Sr. VP & CFO
CORE-MARK INTERRELATED COMPANIES, INC.,
as a Sub-Servicer
By: /s/ LEO F. KORMAN
-------------------------
Name: Leo F. Korman
Title: Sr. VP & CFO
THE CHASE MANHATTAN BANK, not in its
individual capacity but solely as
Trustee
By: /s/ KIMBERLY K. COSTA
-------------------------
Name: Kimberly K. Costa
Title: Second Vice President
<PAGE>
EXECUTION COPY
Exhibit 10.22
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CM CAPITAL CORPORATION
AND
CORE-MARK INTERNATIONAL, INC.
CORE-MARK MIDCONTINENT, INC.
CORE-MARK INTERRELATED COMPANIES, INC.
AND
THE OTHER SELLERS NAMED HEREIN
----------------------------------------
RECEIVABLES SALE AND CONTRIBUTION AGREEMENT
----------------------------------------
Dated as of April 1, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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----
<S> <C>
ARTICLE I
DEFINITIONS . . . . . . . . . . . . . . . . . 1
Section 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitional Provisions . . . . . . . . . . . . . . . . . . . 6
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
Section 2.01. Purchase and Sale of Receivables. . . . . . . . . . . . . . . . . . 7
Section 2.02. Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 2.03. Payment of Purchase Price.. . . . . . . . . . . . . . . . . . . . . 10
Section 2.04. No Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.05. Rebates, Adjustments, Returns and Reductions; Modifications . . . . 11
Section 2.06. Limited Repurchase Obligation . . . . . . . . . . . . . . . . . . . 12
Section 2.07. Obligations Unaffected. . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.08. Certain Charges . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.09. Certain Allocations . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.10. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.11. Purchase of Sellers' Interest in Receivables and Receivables
Property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE III
CONDITIONS TO PURCHASES
Section 3.01. Conditions Precedent to Company's Initial Purchase. . . . . . . . . 14
Section 3.02. Conditions Precedent to the Addition of a Seller. . . . . . . . . . 17
Section 3.03. Conditions Precedent to All the Company's Purchases of
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 3.04. Condition Precedent to Each Seller's Obligations. . . . . . . . . . 20
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of the Company . . . . . . . . . . . 20
Section 4.02. Representations and Warranties of the Sellers . . . . . . . . . . . 21
ARTICLE V
GENERAL COVENANTS
Section 5.01. Affirmative Covenants of the Sellers. . . . . . . . . . . . . . . . 28
Section 5.02. Reporting Requirements. . . . . . . . . . . . . . . . . . . . . . . 33
Section 5.03. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VI
PURCHASE TERMINATION EVENTS
Section 6.01. Purchase Termination Events . . . . . . . . . . . . . . . . . . . . 36
Section 6.02. Additional Remedies . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE VII
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEMNIFICATION; EXPENSES; COSTS
Section 7.01. Indemnities by the Sellers. . . . . . . . . . . . . . . . . . . . . 39
Section 7.02. Indemnities by the Company. . . . . . . . . . . . . . . . . . . . . 41
ARTICLE VIII
SUBORDINATED NOTE
Section 8.01. Subordinated Note . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 8.02. Restrictions on Transfer of Subordinated Note . . . . . . . . . . . 42
Section 8.03. Aggregate Amount. . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX
MISCELLANEOUS
Section 9.01. Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 9.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.04. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.05. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.06. Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . 43
Section 9.07. Jurisdiction; Consent to Service of Process . . . . . . . . . . . . 44
Section 9.08. Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 9.09. Captions and Cross References . . . . . . . . . . . . . . . . . . . 44
Section 9.10. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . 44
Section 9.11. No Petition in Bankruptcy . . . . . . . . . . . . . . . . . . . . . 45
Section 9.12. Addition of Sellers . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.13. Treatment of Sellers other than Core-Mark; Termination
Thereof . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.14. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
</TABLE>
EXHIBIT A Form of Subordinated Note
EXHIBIT B Form of Additional Seller Supplement
EXHIBIT C Form of UCC Certificate
SCHEDULE 1 Sellers' Authorized Officers
SCHEDULE 2 Location of Each Seller's Chief Executive Office
SCHEDULE 3 Lockbox Processors, Eligible Segregated Account Banks and Accounts
SCHEDULE 4 Address for Notice to Servicer
SCHEDULE 5 Seller Trade Names
SCHEDULE 6 Definition of Discounted Percentage
SCHEDULE 7 ERISA Matters
SCHEDULE 8 Form of Financial Statement Note
SCHEDULE 9 Form of General Legend
-ii-
<PAGE>
RECEIVABLES SALE AND CONTRIBUTION AGREEMENT
This RECEIVABLES SALE AND CONTRIBUTION AGREEMENT dated as of April 1,
1998 (this "AGREEMENT"), is among CORE-MARK INTERNATIONAL, INC., a Delaware
corporation ("CORE-MARK"), CORE-MARK INTERRELATED COMPANIES, INC., a California
corporation ("CORE-MARK INTERRELATED"), CORE-MARK MIDCONTINENT, INC., an
Arkansas corporation ("CORE-MARK MIDCONTINENT"; Core-Mark, Core-Mark
Interrelated and Core-Mark Midcontinent, being collectively referred to herein
as the "SELLERS" and individually as a "SELLER"), CM CAPITAL CORPORATION, a
Delaware corporation (the "COMPANY") and Core-Mark, in its capacity as servicer
(the "SERVICER").
W I T N E S S E T H:
WHEREAS, the Sellers intend to sell and/or, in the case of Core-Mark
only, in its capacity as a Seller, contribute Receivables and Receivables
Property (both as hereinafter defined) to the Company on the terms and subject
to the conditions set forth in this Agreement;
WHEREAS, the Company desires to purchase and/or accept Receivables and
Receivables Property from the Sellers on the terms and subject to the conditions
set forth in this Agreement;
WHEREAS, the Sellers and the Company desire the transfer of
Receivables and Receivables Property from the Sellers to the Company to be a
true sale or other absolute transfer providing the Company with the full
benefits of ownership of the Receivables; and
WHEREAS, to obtain the necessary funds to purchase such Receivables
and Receivables Property, the Company has entered into the Pooling Agreement (as
hereinafter defined);
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 1.01. CERTAIN DEFINED TERMS. Unless otherwise defined
herein, capitalized terms which are used herein shall have the meanings assigned
to such terms in Section 1.1 of the Pooling Agreement and each Supplement
thereto, among the Company, the Servicer and the Trustee. As used in this
Agreement, the following terms shall have the
<PAGE>
2
following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"ADDITIONAL SELLER SUPPLEMENT" means an instrument substantially in
the form of EXHIBIT B hereto pursuant to which a Subsidiary of Core-Mark
becomes a Seller party hereto.
"AUTHORIZED OFFICERS" means those officers of the Sellers designated
in SCHEDULE 1 hereto (or in such other Schedule as may be delivered by the
Sellers to the other 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 Sellers and to take, from time to time, all
other actions on behalf of the Sellers in connection herewith.
"CLOSING DATE" means the date of the initial issuance of the Investor
Certificates.
"CODE" shall mean the Internal Revenue Code of 1986, and regulations
promulgated thereunder or any successor statute and related regulations.
"COLLECTIONS" shall mean all collections, including the Aggregate
Uncleared Funds Amount, and all amounts received in respect of the Receivables,
including Recoveries, Seller Repurchase Payments, Seller Adjustment Payments,
Servicer Indemnification Amounts paid by the Servicer and any other payments
received in respect of Dilution Adjustments, together with all collections
received in respect of the Related Property in the form of cash, checks, wire
transfers or any other form of cash payment, and all proceeds of Receivables and
collections thereof (including, without limitation, collections constituting an
account or general intangible or evidenced by a note, instrument, letter of
credit, security, contract, security agreement, chattel paper or other evidence
of indebtedness or security, whatever is received upon the sale, exchange,
collection or other disposition of, or any indemnity, warranty or guaranty
payable in respect of, the foregoing and all "proceeds", as defined in Section
9-306 of the UCC as in effect in the State of New York, of the foregoing).
"CONTRACT" means a contract between any Seller and any Person pursuant
to or under which such Person shall be obligated to make payments to such
Seller.
"CORE-MARK PERSONS" means each Seller and each of its Affiliates other
than the Company.
"DISCOUNTED PERCENTAGE" has the meaning specified in SCHEDULE 6
hereto.
"EARLY TERMINATION" shall have the meaning specified in Section 6.01.
"EFFECTIVE DATE" means (i) with respect to each Seller on the date
hereof, the date hereof and (ii) with respect to each Subsidiary of Core-Mark
added as a Seller pursuant to Section 9.12, the Seller Addition Date with
respect to each such Subsidiary.
<PAGE>
3
"EXCLUDED RECEIVABLE" means Receivables (without giving effect to the
proviso in the definition thereof) (i) owed by Canadian Obligors, which are
denominated in Canadian currency, (ii) owed by other Obligors not resident in
the United States, which are denominated in a currency other than U.S. dollars,
or (iii) owed to a Seller by a vendor of merchandise to such Seller, which
relates to the merchandise sold by such vendor or promotional programs of such
vendor.
"ERISA AFFILIATE" shall mean, with respect to any Person, any trade
or business (whether or not incorporated) that is a member of a group of
which such Person is a member and which is treated as a single employer under
Section 414 of the Internal Revenue Code.
"INSOLVENCY EVENT" with respect to the Seller, shall mean the
occurrence of any one or more of the Purchase Termination Events specified in
subsection 6.01(g).
"LIEN" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset and
(c) in the case of securities, any purchase option, call or other similar right
of a third party with respect to such securities; PROVIDED, HOWEVER, that if a
lien is imposed under Section 412(n) of the Internal Revenue Code or Section
302(f) of ERISA for a failure to make a required installment or other payment to
a plan to which Section 412(n) of the Internal Revenue Code or Section 302(f) of
ERISA applies, then such lien shall not be treated as a "Lien" from and after
the time any Person who is obligated to make such payment pays to such plan the
amount of such lien determined under Section 412(n)(3) of the Internal Revenue
Code or Section 302(f)(3) of ERISA, as the case may be, and provides to the
Trustee, any Agent and each Rating Agency a written statement of the amount of
such lien together with written evidence of payment of such amount, or such lien
expires pursuant to Section 412(n)(4)(B) of the Internal Revenue Code or Section
302(f)(4)(B) of ERISA.
"MATERIAL ADVERSE EFFECT" shall mean, with respect to any Seller, (a)
a material impairment of the ability of such Seller to perform its obligations
under the Transaction Documents, (b) a material impairment of the validity or
enforceability of any of the Transaction Documents against such Seller, (c) a
material impairment of the collectibility of the Receivables originated by such
Seller taken as a whole or (d) a material impairment of the interests, rights or
remedies of the Company under the Transaction Documents or the Receivables taken
as a whole.
"MULTIEMPLOYER PLAN" shall mean, with respect to any Person, a
"multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA) as to
which such Person or any ERISA Affiliate of such Person (other than one
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Internal Revenue Code) is making or accruing an obligation to make
contributions, or has within any of the preceding five years made or accrued an
obligation to make contributions.
"PAYMENT DATE" has the meaning specified in subsection 2.03(a).
<PAGE>
4
"PLAN" shall mean, with respect to any Person, any pension plan (other
than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or
Section 412 of the Internal Revenue Code which is maintained for employees of
such Person or any ERISA Affiliate of such Person.
"POOLING AGREEMENT" means the Pooling Agreement dated as of the date
hereof, among the Company, the Servicer and the Trustee on behalf of the
Certificateholders, as such agreement may be amended, supplemented, waived, or
otherwise modified from time to time, including without limitation the Series
1998-1 Supplement dated as of the date hereof among the Company, the Servicer
and the Trustee.
"POTENTIAL PURCHASE TERMINATION EVENT" means any condition or act
specified in Section 6.01 that, with the giving of notice or the lapse of time
or both, would become a Purchase Termination Event.
"PURCHASED RECEIVABLE" means, at any time, any Receivable sold and/or
contributed to the Company by any Seller pursuant to, and in accordance with the
terms of, this Agreement and not theretofore resold to such Seller pursuant to
subsection 2.01(b) or Section 2.06.
"PURCHASED RECEIVABLES PERCENTAGE" means, with respect to any Seller
as to which Core-Mark has submitted a Seller Termination Request, the percentage
equivalent of a fraction, the numerator of which is an amount equal to the
aggregate outstanding Principal Amount of Purchased Receivables sold by such
Seller as of the applicable Seller Termination Request Date, and the denominator
of which is an amount equal to the aggregate outstanding Principal Amount of all
Purchased Receivables as of such date.
"PURCHASE PRICE" has the meaning specified in Section 2.02.
"PURCHASE TERMINATION DATE" means, with respect to any Seller, the
date on which the Company's obligation to purchase Receivables from such Seller
shall terminate, which shall be the date on which an Early Termination occurs
with respect to such Seller.
"PURCHASE TERMINATION EVENT" has the meaning specified in
Section 6.01.
"RECEIVABLE" shall mean the indebtedness and payment obligations of
any Person to a Seller or acquired by a Seller (including, without limitation,
obligations constituting an account or general intangible or evidenced by a
note, instrument, contract, security agreement, chattel paper or other evidence
of indebtedness or security) arising from a sale of merchandise or the provision
of services by such Seller or the Person from whom such indebtedness and payment
obligation was acquired by a Seller, including, without limitation, any right to
payment for goods sold or for services rendered, and including the right to
payment of any interest, sales taxes, finance charges, returned check or late
charges and other obligations of such Person with respect thereto other than
Excluded Receivables; PROVIDED that for purposes of Article 2 hereof in the
event that an Excluded Receivable is included on any Daily Report, such Excluded
Receivable shall be deemed to be a Receivable but not an Eligible Receivable.
<PAGE>
5
"RECEIVABLES PROPERTY" has the meaning specified in Section 2.01.
"REFERENCE RATE" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greater of (a) the
Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. If The Chase Manhattan Bank shall have
determined (which determination shall be conclusive absent manifest error) that
it is unable to ascertain the Federal Funds Effective Rate for any reason,
including the failure of the Federal Reserve Bank of New York to publish rates
or the inability of The Chase Manhattan Bank to obtain quotations in accordance
with the terms of the definition thereof, the Reference Rate shall be determined
without regard to clause (b) of the immediately preceding sentence, as
appropriate, until the circumstances giving rise to such inability no longer
exist. Any change in the Reference Rate due to a change in the Prime Rate or
the Federal Funds Effective Rate shall be effective on the effective date of
such change in the Prime Rate or the Federal Funds Effective Rate,
respectively. The term "Prime Rate" shall mean the rate of interest per annum
publicly announced from time to time by The Chase Manhattan Bank as its prime
rate in effect at its principal office in New York City; each change in the
Prime Rate shall be effective on the date such change is publicly announced
as being effective. The term "Federal Funds Effective Rate" shall mean, for
any day, the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published on the next succeeding Business Day by the
Federal Reserve Bank of New York, or, if such rate is not so published for
any day that is a Business Day, the average of the quotations for the day for
such transactions received by The Chase Manhattan Bank from three Federal
funds brokers of recognized standing selected by it.
"RELATED PROPERTY" shall mean, with respect to each Receivable:
(a) all of the applicable Seller's interest in the goods (other
than returned goods), if any, sold and delivered to an Obligor which gave
rise to such Receivable;
(b) all other security interests or Liens purporting to secure
payment of such Receivable, together with all financing statements signed
by an Obligor describing any collateral securing such Receivable; and
(c) all guarantees, credit or similar types of insurance,
letters of credit and other agreements or arrangements of whatever
character from time to time supporting or securing payment of such
Receivable;
in the case of clauses (b) and (c), whether pursuant to the contract related to
such Receivable or otherwise or including without limitation, pursuant to any
obligations evidenced by a note, instrument, contract, security agreement,
chattel paper or other evidence of indebtedness or security and the proceeds
thereof.
"RELEVANT UCC STATE" means each jurisdiction in which the filing of a
UCC financing statement is necessary or desirable to perfect the Company's
interest in the Receivables.
<PAGE>
6
"REPORTABLE EVENT" shall mean any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect to a
Plan (other than a Plan maintained by an ERISA Affiliate which is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the
Internal Revenue Code).
"SEC" means the United States Securities and Exchange Commission.
"SELLER ADDITION DATE" has the meaning specified in Section 3.02.
"SELLER ADJUSTMENT PAYMENT" has the meaning specified in Section 2.05.
"SELLER REPURCHASE PAYMENT" has the meaning specified in Section 2.06.
"SELLER TERMINATION REQUEST" has the meaning specified in subsection
9.13(b).
"SELLER TERMINATION REQUEST DATE" has the meaning specified in
subsection 9.13(b).
"SUBORDINATED NOTE" has the meaning specified in Section 8.01.
"WITHDRAWAL LIABILITIES" shall mean liability to a Multiemployer Plan
as a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
Section 1.02. OTHER DEFINITIONAL PROVISIONS. (a) All terms defined
herein or in the Pooling Agreement or any Supplement shall have their defined
meanings when used in any certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As used herein and in any certificate or other document made or
delivered pursuant hereto or thereto, accounting terms not defined in Section
1.1 of the Pooling Agreement or any Supplement, and accounting terms partly
defined in Section 1.1 of the Pooling Agreement or any Supplement to the extent
not defined, shall have the respective meanings given to them under GAAP. To
the extent that the definitions of accounting terms herein are inconsistent with
the meanings of such terms under GAAP, the definitions contained herein shall
control. All terms used in Article 9 of the UCC that are used but not
specifically defined herein are used herein as defined therein.
(c) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section, subsection,
Schedule and Exhibit references contained in this agreement are references to
Sections, subsections, Schedules and Exhibits in or to this Agreement unless
otherwise specified.
(d) The definitions contained in Section 1.01 of this Agreement are
applicable to the singular as well as the plural forms of such terms and to the
masculine, the feminine and the neuter genders of such terms.
<PAGE>
7
(e) Any reference herein or in any other Transaction Document to a
provision of the Internal Revenue Code or ERISA shall be deemed a reference to
any successor provision thereto.
(f) All references herein to any agreement or instrument shall be
deemed references to such agreement or instrument as amended, supplemented or
otherwise modified from time to time, subject to compliance with any
restrictions herein on the amendment, supplementation or modification of such
agreement or instrument.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
Section 2.01. PURCHASE AND SALE OF RECEIVABLES. (a) Upon the terms
set forth herein, each of the Sellers hereby sells, assigns, transfers and
conveys to the Company, without recourse (except to the limited extent provided
herein), all its respective present and future right, title and interest in, to
and under:
(i) all Receivables now existing and hereafter arising from time to
time;
(ii) all Related Property in respect of such Receivables;
(iii) all Collections;
(iv) all payment, enforcement and other rights (including rescission,
replevin or reclamation), but none of the obligations, relating to any
Receivable or arising therefrom; and
(v) all monies due or to become due and all amounts received with
respect to the items listed in clauses (i), (ii), (iii) and (iv) and all
proceeds (including, without limitation, whatever is received upon the sale,
exchange, collection or other disposition of the foregoing and all "proceeds" as
defined in Section 9-306 of the UCC as in effect in the State of New York)
thereof, including all Recoveries relating thereto (the property described in
the foregoing clauses (ii) through (v) are hereinafter collectively referred to
as the "RECEIVABLES PROPERTY").
Subject to the terms and conditions set forth herein, the Company
hereby agrees to purchase the Receivables and Receivables Property of each
Seller.
(b) On each applicable Effective Date and on the date of creation of
each newly created Receivable, all of the applicable Seller's right, title and
interest in, to and under (i) in the case of each such Effective Date, all then
existing Receivables and all Receivables Property in respect of such Receivables
and (ii) in the case of each such date of creation, all such newly created
Receivables and all Receivables Property in respect of such Receivables, shall
be immediately and automatically sold, assigned, transferred and conveyed to the
Company pursuant to paragraph (a) above without any further action by such
Seller or any other Person. If any Seller shall not have received payment
(including as a result of the failure to satisfy the conditions set forth in
Section 3.03) from the Company of the Purchase
<PAGE>
8
Price for any newly created Receivable and the related Receivables Property
on the Payment Date therefor in accordance with the terms of subsection
2.03(c), unless such Seller has elected to contribute such Receivables to the
Company in accordance with subsection 2.03(b), such newly created Receivable
and the Receivables Property with respect thereto shall, upon receipt of
notice by the Company and the Trustee from the applicable Seller of such
failure to receive payment, immediately and automatically be sold, assigned,
transferred and reconveyed by the Company to such Seller without any further
action by the Company or any other Person.
(c) The parties to this Agreement intend that the transactions
contemplated by subsections 2.01(a) and (b) hereby shall be, and shall be
treated as, a purchase and receipt by the Company and a sale and/or contribution
by the applicable Seller of the Purchased Receivables and the Receivables
Property in respect thereof and not a lending transaction. All transfers of
Receivables and Receivables Property by any Seller hereunder shall be without
recourse to, or representation or warranty of any kind (express or implied) by,
any Seller, except as otherwise specifically provided herein. The foregoing
sale, assignment, transfer and conveyance does not constitute and is not
intended to result in a creation or assumption by the Company of any obligation
of any Seller or any other Person in connection with the Receivables, the
Receivables Property or any agreement or instrument relating thereto, including
any obligation to any Obligor. If, and to the extent, this Agreement does not
constitute a valid sale, assignment, transfer and conveyance of all right, title
and interest of each Seller in, to and under the Purchased Receivables and the
Receivables Property in respect thereof despite the intent of the parties
hereto, such Seller hereby grants a "security interest" (as defined in the UCC
as in effect in the State of New York) in the Purchased Receivables, the
Receivables Property in respect thereof and all proceeds thereof to the Company,
and the parties agree that this Agreement shall constitute a security agreement
under the UCC in effect in New York.
(d) In connection with the foregoing conveyances, each Seller agrees
to record and file, at its own expense, financing statements (and continuation
statements with respect to such financing statements when applicable) or, where
applicable, registrations in the appropriate records, with respect to the
Receivables and Receivables Property now existing and hereafter acquired by the
Company from the Sellers meeting the requirements of applicable state law in
such manner and in such jurisdictions as are necessary to perfect the Company's
purchases of ownership interests in the Receivables and Receivables Property
from the Sellers, and to deliver a file-stamped copy or certified statement of
such financing statement or registration or other evidence of such filing or
registration to the Company and the Trustee on or prior to the Effective Date.
(e) In connection with the foregoing conveyances, each Seller agrees
at its own expense, as agent of the Company on or prior to the Effective Date,
(i) to indicate or cause to be indicated on the computer files (but not on
individual invoices or individual collection files) relating to such Receivables
(by means of a general legend, substantially in the form described on SCHEDULE 9
hereto, that will automatically appear each time a Person enters the Sellers'
Receivables program) that, unless otherwise specifically identified as a
receivable not so sold, transferred, assigned and conveyed, all Receivables (and
any such other receivables) included therein and all other Receivables Property
(and any other similar
<PAGE>
9
related property) have been sold, transferred, assigned and conveyed to the
Company in accordance with this Agreement and (ii) to deliver to the Company
computer files, microfiche lists or typed or printed lists (the "RECEIVABLES
LISTS") containing true and complete lists of all such Receivables,
identified by Obligor and setting forth the Receivables balance for each
Receivable as of the Cut-Off Date.
(f) As further confirmation of the sale of the Receivables, it is
understood and agreed that the Company shall have the following rights:
(A) the Company (and its assignees) shall have the right at any
time to (I) notify, or require that such Seller at its own expense
notify, the respective Obligors of the Company's ownership of the
Purchased Receivables and Receivables Property, (II) direct that
payment of all amounts due or to become due under the Purchased
Receivables be made directly to the Company or its designee (III) sue
for collection on any Purchased Receivable or (IV) sell any Purchased
Receivables to any Person for a price that is acceptable to the
Company (or its assignee);
(B) Such Seller shall, upon written request of the Company, and
at such Seller expense (I) deliver to the Company or a party
designated by the Company all documents, instruments and other records
(including credit files) that evidence or Record the Receivables sold
by such Seller and all licenses, rights, computer programs, related
material, computer tapes, disks, cassettes and data necessary to the
immediate collection of the Purchased Receivables by the Company, with
or without the participation of such Seller and (II) make such
arrangements with respect to the collection of the Purchased
Receivables as may be reasonably required by the Company. In
recognition of such Seller's need to have access to any Documents
which may be transferred to the Company hereunder, whether as a result
of its continuing business relationship with any Obligor for
Receivables purchased hereunder or as a result of its responsibilities
as a Sub-Servicer, the Company hereby grants to such Seller an
irrevocable license to access the Documents transferred by such Seller
to the Company and to access any such transferred computer software in
connection with any activity arising in the ordinary course of such
Seller's business or in performance of such Seller's duties as a
Servicing Party, PROVIDED that such Seller shall not disrupt or
otherwise interfere with the Company's use of and access to the
Documents and its computer software during such license period; and
(C) such Seller hereby grants to the Company an irrevocable
power of attorney (coupled with an interest) to take any and all steps
in such Seller's name necessary or desirable, in the reasonable
opinion of the Company, to collect all amounts due under the Purchased
Receivables, including without limitation, endorsing such Seller's
name on checks and other instruments representing Collections,
enforcing the Purchased Receivables and exercising all rights and
remedies in respect thereof; and
<PAGE>
10
Section 2.02. PURCHASE PRICE. The amount payable by the Company to a
Seller (the "PURCHASE PRICE") for Receivables and Receivables Property on any
Payment Date under this Agreement shall be equal to the product of (a) the
aggregate outstanding Principal Amount of such Receivables as set forth in the
applicable Daily Report TIMES (b) the Discounted Percentage with respect to such
Seller.
Section 2.03. PAYMENT OF PURCHASE PRICE. (a) Upon the fulfillment of
the conditions set forth in Article III, the Purchase Price for Receivables and
the Receivables Property (other than Receivables contributed pursuant to
subsection 2.03(c) below) shall be paid or provided for by the Company in the
manner provided below on each day for which a Daily Report is delivered to the
Company (each such day, a "PAYMENT DATE") in respect of a Reported Day (which
Daily Report shall specify, by Seller, the Principal Amount of Receivables being
sold on such Payment Date, the aggregate Purchase Price for such Receivables and
the components of payment as provided in paragraph (b) below).
(b) The Purchase Price for Receivables and Receivables Property shall
be paid by the Company on each Payment Date (including the initial Payment Date)
as follows:
(i) by netting the amount of any Seller Adjustment Payments or
Seller Repurchase Payments pursuant to Section 2.05 or 2.06 against such
Purchase Price;
(ii) to the extent available for such purpose, in cash from
Collections released to the Company pursuant to the Pooling Agreement;
(iii) to the extent available for such purpose, in cash from the
net proceeds of a transfer of interests in Purchased Receivables by the
Company to other Persons;
(iv) at the option of the Company (subject to the provisions of
Section 8.01), by means of an addition to the principal amount of the
Subordinated Note in an aggregate amount equal to the remaining portion of
the Purchase Price; PROVIDED, HOWEVER, that on the initial Payment Date,
amounts available pursuant to clause (v) below shall be used prior to
making any payments of the Purchase Price by means of an addition to the
Subordinated Note. Any such addition to the principal amount of the
Subordinated Note shall be allocated among the Sellers (PRO RATA according
to the Principal Amount of Receivables sold by each Seller) by the Servicer
in accordance with the provisions of this subsection 2.03(b)(iv) and
Section 8.01. The Servicer may evidence such additional principal amounts
by recording the date and amount thereof on the grid attached to such
Subordinated Note; PROVIDED that the failure to make any such recordation
or any error in such grid shall not adversely affect any Seller's rights;
and
(v) in cash from the proceeds of capital contributed by Core-
Mark to the Company, if any, in respect of its equity interest in the
Company.
(c) On the Initial Closing Date, in consideration of the capital
stock of the Company issued to Core-Mark, Core-Mark hereby agrees to contribute
and does hereby contribute pursuant to the terms of the Agreement (including
without limitation Section 2.01)
<PAGE>
11
to the Company, and the Company hereby agrees to accept and does hereby
accept from Core-Mark, Receivables and the Receivables Property with respect
thereto existing on the date hereof, starting with the oldest of such
Receivables such that the aggregate Principal Amount of all such Receivables
shall be as close as possible to, but not less than, $10,000,000. After the
Initial Closing Date, Core-Mark may elect to contribute pursuant to the terms
of the Agreement (including without limitation Section 2.01) additional
Receivables and the Receivables Property with respect thereto to the Company,
and the Company agrees to accept each such contribution; provided that
Receivables may only be contributed on any Business Day after all amounts
available on such day to pay the Purchase Price of Receivables pursuant to
clauses (i), (ii), (iii) and (v) of paragraph (b) above have been applied.
Each such contribution shall be evidenced by a notation to the effect that
such Receivables shall have been contributed in the Daily Report delivered by
the Servicer with respect to the date of such contribution.
(d) The Servicer shall be responsible, in its sole discretion but in
accordance with the preceding subsection 2.03(b), for allocating among the
Sellers the payment of the Purchase Price for Receivables and any amounts netted
therefrom pursuant to subsection 2.03(c)(i), either in the form of cash received
from the Company or as an addition to the principal amount of a Seller's
interest in the Subordinated Note. The Company shall be entitled to pay all
amounts in respect of the Purchase Price of Receivables and Receivables Property
to an account of the Servicer for allocation by the Servicer to the Sellers, and
the Sellers hereby appoint the Servicer as their agent for purposes of receiving
such payments and making such allocations and hereby authorizes the Company to
make all payments due to such Seller directly to, or as directed by, the
Servicer. The Servicer hereby accepts and agrees to such appointment. All
payments under this Agreement shall be made not later than 3:00 p.m (New York
City time) on the date specified therefor in Dollars in same day funds or by
check, as the Servicer shall elect and to the bank account designated in writing
by the Servicer to the Company.
(e) Whenever any payment to be made under this Agreement 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. Amounts not paid when due in accordance
with the terms of this Agreement shall bear interest at a rate equal at all
times to the Reference Rate PLUS 2%, payable on demand.
Section 2.04. NO REPURCHASE. Except to the extent expressly set
forth herein, no Seller shall have any right or obligation under this Agreement,
by implication or otherwise, to repurchase from the Company any Purchased
Receivables or Receivables Property or to rescind or otherwise retroactively
affect any purchase of any Purchased Receivables or Receivables Property after
the Payment Date relating thereto.
Section 2.05. REBATES, ADJUSTMENTS, RETURNS AND REDUCTIONS;
MODIFICATIONS. From time to time, a Seller may make Dilution Adjustments to
Receivables in accordance with this subsection 2.05 and subsection 5.03(c). The
Sellers (other than those Sellers from which the Company has no Receivables
outstanding at such time), jointly and severally, agree to pay to the Company,
on the first Business Day immediately succeeding the date of the grant of any
Dilution Adjustment (regardless of which Seller shall have granted such Dilution
<PAGE>
12
Adjustment), the amount of any such Dilution Adjustment (a "SELLER ADJUSTMENT
PAYMENT"); PROVIDED that, prior to the occurrence of any Early Termination with
respect to all Sellers, any such Seller Adjustment Payment due to the Company on
any Payment Date shall, on such Payment Date, be netted against the Purchase
Price of newly created Receivables in accordance with subsection 2.03(c)(i) to
the extent of such Principal Amount and the remaining amount of such Seller
Adjustment Payment due to the Company after such netting, if any, shall be paid
to the Company on such date in cash. The amount of any Dilution Adjustment made
on any Reported Day shall be set forth on the Daily Report prepared with respect
to such Reported Day.
Section 2.06. LIMITED REPURCHASE OBLIGATION. In the event that (i)
any representation or warranty contained in Section 4.02(c)(i), (d)(i), (h),
(i), (n) and (x) in respect of any Receivable transferred to the Company is not
true and correct in any material respect on the applicable Payment Date, or (ii)
there is a breach of any covenant contained in subsection 5.01(c), (f), (k) or
(n) or Section 5.03 with respect to any Receivable in any material respect or
(iii) the Company's interest in any Receivable is not a first priority perfected
ownership or security interest at any time as a result of any action taken by,
or any failure to take action by, any Seller, then the Sellers (other than those
Sellers from which the Company has no Receivables outstanding at such time),
jointly and severally, agree to pay to the Company an amount equal to the
Principal Amount (determined as of the Payment Date or Contribution Date for
such Receivable) of such Receivable (whether the Company paid such Purchase
Price in cash or otherwise) less Collections received by the Company in respect
of such Receivable, regardless of which Seller shall have been responsible for
such incorrectness or breach, such payment to occur no later than the Payment
Date occurring on the 30th day (or, if such 30th day is not a Payment Date,
on the Payment Date immediately succeeding such 30th day) after the day such
breach or incorrectness becomes known (or should have become known with due
diligence) to any Seller (unless such breach or incorrectness shall have been
cured on or before such day); PROVIDED that, prior to any Early Termination
with respect to all Sellers, any such payment due and owing to the Company on
such Payment Date shall be netted against the Purchase Price of newly created
Receivables in accordance with subsection 2.03(c)(i) to the extent of such
Principal Amount and the remaining amount of such payment due to the Company
after such netting, if any, (or following an Early Termination with respect
to all Sellers, the full amount) shall be paid to the Company in cash to the
extent still unpaid on such Payment Date. Any payment by any Seller pursuant
to this Section 2.06 is referred to as a "SELLER REPURCHASE PAYMENT". The
obligation to reacquire any Receivable shall, upon satisfaction thereof,
constitute the sole remedy respecting the event giving rise to such
obligation available to the Company. Simultaneously with any Seller
Repurchase Payment with respect to any Receivable, such Receivable and the
Receivables Property with respect thereto shall immediately and automatically
be sold, assigned, transferred and conveyed by the Company to the applicable
Seller without any further action by the Company or any other Person.
Section 2.07. OBLIGATIONS UNAFFECTED. The obligations of the Sellers
to the Company under this Agreement shall not be affected by reason of any
invalidity or illegality of any Receivable or any sale of a Receivable.
<PAGE>
13
Section 2.08. CERTAIN CHARGES. Each Seller and the Company agree
that late charge revenue, reversals of discounts, other fees and charges and
other similar items, whenever created, accrued in respect of Purchased
Receivables shall be the property of the Company notwithstanding the occurrence
of an Early Termination and all Collections with respect thereto shall continue
to be allocated and treated as Collections in respect of Purchased Receivables.
Section 2.09. CERTAIN ALLOCATIONS. The Sellers hereby agree that,
following the occurrence of an Early Termination, all Collections and other
proceeds received in respect of Receivables generated by the Sellers shall be
applied, FIRST, to pay the outstanding Principal Amount of Purchased Receivables
(as of the date of such Early Termination) of the Obligor to whom such
Collections are attributable until such Purchased Receivables are paid in full
and, SECOND, to the related Seller to pay Receivables of such Obligor not sold
to the Company; PROVIDED, HOWEVER, that notwithstanding the foregoing, if the
Seller can attribute a Collection to a specific Obligor and a specific
Receivable, then such Collection shall be applied to pay such Receivable of such
Obligor. The Company and the Servicer shall take such action as the Seller may
reasonably request, at the expense of the Seller, to assure that any Receivable
not sold to the Company, the Related Property and Collections with respect
thereto do not remain commingled with other Collections hereunder and are
immediately paid to the Seller.
Section 2.10. FURTHER ASSURANCES. From time to time at the request
of a Seller, the Company shall deliver to such Seller such documents,
assignments, releases and instruments of termination as such Seller may
reasonably request to evidence the reconveyance by the Company to such Seller of
a Receivable pursuant to the terms of Section 2.01(b), 2.06 or 2.11(b), PROVIDED
that the Company shall have been paid all amounts due thereunder; and the
Company and the Servicer shall take such action as such Seller may reasonably
request, at the expense of such Seller, to assure that any such Receivable, the
Related Property and Collections with respect thereto do not remain commingled
with other Collections hereunder.
Section 2.11. PURCHASE OF SELLERS' INTEREST IN RECEIVABLES AND
RECEIVABLES PROPERTY. (a) In the event of any breach of any of the
representations and warranties set forth in subsection 4.02(a), (b), (c), (e),
(f) or (g), as of the date made, which breach has a material adverse effect on
the interests of the Company in the Receivables or the Receivables Property,
then the Company, by notice then given in writing to the Sellers, may direct the
Sellers to purchase all Receivables and Receivables Property and the Sellers
(other than those Sellers from which the Company has no Receivables outstanding
at such time), jointly and severally, shall be obligated to make such purchase
30 days after receipt of such notice on the terms and conditions set forth in
subsection 2.11(b) below; PROVIDED, HOWEVER, that no such purchase shall be
required to made if, by such date, the representations and warranties contained
in subsections 4.02(a), (b), (c), (e), (f) or (g) shall be satisfied in all
material respects, and any material adverse effect on the Company caused thereby
has been cured.
(b) The Sellers (other than those Sellers from which the Company has
no Receivables outstanding at such time), jointly and severally, shall, as the
purchase price for the Receivables and Receivables Property to be purchased
pursuant to subsection 2.11(a)
<PAGE>
14
above, pay to the Company, on the Business Day preceding such Distribution
Date, an amount equal to the Principal Amount of the Purchased Receivables
(determined as of the Payment Date or contribution date for such Purchased
Receivables), less Collections received by the Company in respect of such
Purchased Receivables, as of such Distribution Date. Upon payment of such
amount, in immediately available funds, to the Company, the Company's rights
with respect to the Purchased Receivables shall terminate and such interest
therein shall immediately and automatically be sold, assigned, transferred
and conveyed by the Company to the Sellers without any further action by the
Company or any other Person and the Company shall have no further rights with
respect thereto. If the Company gives notice directing the Sellers to
purchase the Purchased Receivables as provided above, the obligation of the
Sellers to purchase the Purchased Receivables pursuant to this Section 2.11
shall, upon satisfaction thereof, constitute the sole remedy respecting an
event of the type specified in the first sentence of this Section 2.11
available to the Company.
ARTICLE III
CONDITIONS TO PURCHASES
Section 3.01. CONDITIONS PRECEDENT TO COMPANY'S INITIAL PURCHASE.
The obligation of the Company to purchase Receivables and Receivables Property
hereunder on the Effective Date from the Sellers is subject to the conditions
precedent that the Company shall have received on or before the date of such
purchase the following, each (unless otherwise indicated) dated the day of such
sale and in form and substance satisfactory to the Company:
(a) SECRETARY'S CERTIFICATE. A certificate of the Secretary or an
Assistant Secretary of each Seller, dated the Closing Date, and certifying
(i) that attached thereto is a true and complete copy of the by-laws of
such Seller, as in effect on the Effective Date and at all times since a
date prior to the date of the resolutions described in clause (ii) below,
(ii) that attached thereto is a true and complete copy of the resolutions,
in form and substance reasonably satisfactory to the Company, of the Board
of Directors of such Seller or committees thereof authorizing the
execution, delivery and performance of this Agreement and the other
Transaction Documents to which it is a party and the transactions
contemplated hereby and thereby, and that such resolutions have not been
amended, modified, revoked or rescinded and are in full force and effect,
(iii) that the certificate of incorporation of such Person has not been
amended since the date of the last amendment thereto shown on the
certificate of good standing (or its equivalent) furnished pursuant to
subsection (b) below and (iv) as to the incumbency and specimen signature
of each officer executing this Agreement and any other Transaction
Documents or any other document delivered in connection herewith or
therewith on behalf of such Seller (on which certificates the Company may
conclusively rely until such time as the Company shall receive from such
Seller a revised certificate with respect to such Seller meeting the
requirements of this subsection (a));
<PAGE>
15
(b) CORPORATE DOCUMENTS. The certificate of incorporation, including
all amendments thereto, of the Seller, certified as of a recent date by the
Secretary of State or other appropriate authority of the state of
incorporation, as the case may be;
(c) GOOD STANDING CERTIFICATES. Certificates of compliance, of
status or of good standing, dated as of a recent date, from the Secretary
of State or other appropriate authority of such jurisdiction, with respect
to each Seller in California, Oregon, Nevada, Arizona and each other State
from which the Sellers generate at least 10% of their gross sales;
(d) CONSENTS, LICENSES, APPROVALS, ETC. A Certificate dated the
Closing Date of a Responsible Officer of each Seller either (i) attaching
copies of all consents (including without limitation consents under loan
agreements and indentures to which any Seller or its Affiliates are
parties), licenses and approvals required in connection with the execution,
delivery and performance by such Seller of this Agreement and the validity
and enforceability of this Agreement against such Seller, and such
consents, licenses and approvals shall be in full force and effect or (ii)
stating that no such consents, licenses or approvals are so required;
(e) NO LITIGATION. Confirmation that there is no pending or, to its
knowledge after due inquiry, threatened action or proceeding affecting such
Seller or any of its Subsidiaries before any Governmental Authority that
could reasonably be expected to have a Material Adverse Effect;
(f) UCC CERTIFICATE; UCC FINANCING STATEMENTS. (i) A UCC
Certificate, substantially in the form of EXHIBIT C hereto, duly executed
by a Responsible Officer of the applicable Seller and dated such date of
purchase and (ii) executed copies of such proper financing statements,
filed and recorded at such Seller's expense prior to the Closing Date,
naming the applicable Seller as the seller and the Company as the purchaser
of the Receivables and the Receivables Property, in proper form for filing
in each jurisdiction in which the Company (or any of its assignees) deems
it necessary or desirable to perfect the Company's ownership interest in
all Receivables and Receivables Property under the UCC or any comparable
law of such jurisdiction;
(g) UCC SEARCHES. Written search reports, listing all effective
financing statements that name the applicable Seller as debtor or assignor
and that are filed in the jurisdictions in which filings were made pursuant
to subsection (f) above and in any other jurisdictions that the Company
determines are necessary or appropriate, together with copies of such
financing statements (none of which, except for those described in
subsection (f) above, shall cover any Receivables or Receivables Property),
and tax and judgment lien searches showing no such liens that are not
permitted by the Transaction Documents;
(h) OTHER TRANSACTION DOCUMENTS. Original copies, executed by each
of the parties thereto, of each of the other Transaction Documents to be
executed and delivered in connection herewith;
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16
(i) BACK-UP SERVICING ARRANGEMENTS. Evidence that each Seller
maintains disaster recovery systems and back-up computer and other
information management systems that, in the Company's reasonable judgment
as of the date hereof, are sufficient to protect such Seller's business
against material interruption or loss or destruction of its primary
computer and information management systems;
(j) LEGAL OPINIONS. (i) One or more legal opinions from counsel to
the Sellers and counsel to the Company to the effect that:
(A) the sales of Receivables by each Seller to the Company
pursuant to this Agreement are true sales or other absolute transfers
and that such Receivables would not be property of such Seller's
bankruptcy estate; and
(B) a court would not order the substantive consolidation of the
assets and liabilities of the Company with those of any Seller.
(ii) One or more legal opinions from counsel to the Sellers and
counsel to the Company:
(A) to the effect that each Seller and the Company, as
applicable, has all approvals, judicial, regulatory, legal or
otherwise, needed to execute, deliver and perform each Transaction
Document to which it is a party and that no conflict or default will
occur as a result of the execution, delivery and performance thereof;
(B) to the effect that the Company has a perfected, first
priority, security interest in the Receivables and Receivables
Property; and
(C) addressing other customary matters.
(iii) Each such legal opinion shall also be addressed to the
Rating Agencies, the Initial Purchaser and the Trustee;
(k) LOCK-BOX AGREEMENT. Lockbox Agreements signed by the Servicer,
each Seller (if necessary), the Company, each Lockbox Processor and the
Trustee and Eligible Segregated Account Bank Acknowledgements with respect
to each Eligible Segregated Accounts;
(l) POLICIES. A copy of the Policies, which shall be satisfactory in
form and substance to the Company;
(m) LIST OF OBLIGORS. The Receivables List of each Seller showing,
as of the Cut-Off Date, the Obligors whose Receivables are to be
transferred to the Company on the Effective Date and the balance of the
Receivables with respect to each such Obligor as of such prior date; and
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17
(n) SYSTEMS. Evidence, reasonably satisfactory to the Company, the
Trustee and the Agents that such Seller's systems, procedures and record
keeping relating to the Purchased Receivables is in all material respects
sufficient and satisfactory in order to permit the purchase and
administration of the Purchased Receivables in accordance with the terms
and intent of this Agreement.
Section 3.02. CONDITIONS PRECEDENT TO THE ADDITION OF A SELLER. The
obligation of the Company to purchase Receivables and Receivables Property
hereunder from a Subsidiary of Core-Mark approved by the Company as an
additional Seller pursuant to Section 9.12 is subject to the conditions
precedent that the Company shall have received on or before the date designated
for the addition of such Seller (the "SELLER ADDITION DATE") and in form and
substance satisfactory to the Company:
(a) ADDITIONAL SELLER SUPPLEMENT; UCC CERTIFICATE. (i) an Additional
Seller Supplement (with a copy for the Trustee and each Agent) duly
executed and delivered by such Seller and (ii) a UCC Certificate duly
executed by a Responsible Officer of such Seller and dated the related
Seller Addition Date.
(b) SECRETARY'S CERTIFICATE. A certificate of the Secretary or
an Assistant Secretary of such Seller, dated the Effective Date, and
certifying (i) that attached thereto is a true and complete copy of the
by-laws of such Seller, as in effect on the Seller Addition Date and at
all times since a date prior to the date of the resolutions described in
clause (ii) below, (ii) that attached thereto is a true and complete
copy of the resolutions, in form and substance reasonably satisfactory
to the Company, of the Board of Directors of such Seller or committees
thereof authorizing the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party and
the transactions contemplated hereby and thereby, and that such
resolutions have not been amended, modified, revoked or rescinded and
are in full force and effect, (iii) that the certificate of
incorporation of such Seller has not been amended since the date of the
last amendment thereto shown on the certificate of good standing (or its
equivalent) furnished pursuant to subsection (d) below and (iv) as to
the incumbency and specimen signature of each officer executing the
Additional Seller Supplement and any other Transaction Documents or any
other document delivered in connection therewith on behalf of such
Seller (on which certificates the Company may conclusively rely until
such time as the Company shall receive from such Seller a revised
certificate with respect to such Seller meeting the requirements of this
subsection (b));
(c) CORPORATE DOCUMENTS. The certificate of incorporation, including
all amendments thereto, of such Seller, certified as of a recent date by
the Secretary of State or other appropriate authority of the state of
incorporation, as the case may be;
(d) GOOD STANDING CERTIFICATES. Certificates of compliance, of
status or of good standing, dated as of a recent date, from the Secretary
of State or other appropriate authority of such jurisdiction, with respect
to such Seller in each State where the ownership, lease or operation of
property or the conduct of business requires
<PAGE>
18
it to qualify as a foreign corporation, except where the failure to so
qualify would not have a Material Adverse Effect;
(e) CONSENTS, LICENSES, APPROVALS, ETC. A Certificate dated the
related Seller Addition Date of a Responsible Officer of such Seller either
(i) attaching copies of all consents (including without limitation consents
under loan agreements and indentures to which any Seller or its Affiliates
are parties), licenses and approvals required in connection with the
execution, delivery and performance by such Seller of the Additional Seller
Supplement and the validity and enforceability of the Additional Seller
Supplement against such Seller, and such consents, licenses and approvals
shall be in full force and effect or (ii) stating that no such consents,
licenses or approvals are so required;
(f) NO LITIGATION. Confirmation that there is no pending or, to its
knowledge after due inquiry, threatened action or proceeding affecting such
Seller or any of its Subsidiaries before any Governmental Authority that
could reasonably be expected to have a Material Adverse Effect;
(g) LOCKBOXES; ELIGIBLE SEGREGATED ACCOUNTS. A Lockbox Account with
respect to Receivables to be sold by such Seller shall have been
established in the name of the Company, and the Servicer shall have
delivered with respect to such Lockbox Account a Lockbox Agreement signed
by it, the Company, the Trustee and applicable Lockbox Processor or an
Eligible Segregated Account Bank Acknowledgement, as the case may be.
(f) UCC CERTIFICATE; UCC FINANCING STATEMENTS. (i) A UCC Certificate
duly executed by a Responsible Officer of such Seller and dated the related
Seller Addition Date and (ii) executed copies of such proper financing
statements, filed and recorded at such Seller's expense prior to the
related Seller Addition Date, naming such Seller as the seller and the
Company as the purchaser of the Receivables and the Receivables Property,
in proper form for filing in each jurisdiction in which the Company (or any
of its assignees) deems it necessary or desirable to perfect the Company's
ownership interest in all Receivables and Receivables Property under the
UCC or any comparable law of such jurisdiction;
(g) UCC SEARCHES. Written search reports, listing all effective
financing statements that name such Seller as debtor or assignor and that
are filed in the jurisdictions in which filings were made pursuant to
subsection (f) above and in any other jurisdictions that the Company
determines are necessary or appropriate, together with copies of such
financing statements (none of which, except for those described in
subsection (f) above, shall cover any Receivables or Receivables Property),
and tax and judgment lien searches showing no such liens that are not
permitted by the Transaction Documents;
(h) LIST OF OBLIGORS. A microfiche, typed or printed list or other
tangible evidence reasonably acceptable to the Company showing as of a date
acceptable to the Company prior to the related Seller Addition Date the
Obligors whose Receivables are
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19
to be transferred to the Company and the balance of the Receivables with
respect to each such Obligor as of such date.
(i) OPINIONS. Legal opinions with respect to such Seller conforming
to the requirements of Section 3.01(j).
(j) BACK-UP SERVICING ARRANGEMENTS. Evidence that such Seller
maintains disaster recovery systems and back-up computer and other
information management systems that, in the Company's reasonable judgment,
are sufficient to protect such Seller's business against material
interruption or loss or destruction of its primary computer and information
management systems.
(k) PARTY TO SERVICING AGREEMENT. Evidence that such additional
Seller shall have become a party to the Servicing Agreement in its capacity
as a Sub-Servicer thereunder.
(l) SYSTEMS. Evidence, reasonably satisfactory to the Company, the
Trustee and the Agents, that such additional Seller's systems, procedures
and record keeping relating to the Purchased Receivables remain in all
material respects sufficient and satisfactory in order to permit the
purchase and administration of the Purchased Receivables in accordance with
the terms and intent of this Agreement.
Section 3.03. CONDITIONS PRECEDENT TO ALL THE COMPANY'S PURCHASES OF
RECEIVABLES. The obligation of the Company to pay for any Receivable and the
Receivables Property with respect thereto on each Payment Date (including the
Effective Date) shall be subject to the further conditions precedent that, on
and as of such Payment Date:
(a) the following statements shall be true (and the acceptance by the
relevant Seller of the Purchase Price for such Receivable on such Payment
Date shall constitute a representation and warranty by such Seller that on
such Payment Date such statements are true):
(i) the representation and warranties of such Seller contained
in Section 4.02 shall be true and correct in all material respects on
and as of such Payment Date as though made on and as of such date
except to the extent any such representation or warranty is expressly
made only as of another date (in which case it shall be true and
correct in all material respects on and as of such other date);
(ii) after giving effect to such purchase, no (A) Early
Termination with respect to such Seller or (B) Potential Purchase
Termination Event with respect to a Purchase Termination Event set
forth in clause (g)(ii) of Section 6.01 shall have occurred and be
continuing; and
(iii) there has been no material adverse change since the date of
this Agreement in the collectibility of the Receivables taken as a
whole (other than due to a change in the creditworthiness of the
Obligors);
<PAGE>
20
(b) the Company shall have received (after giving effect to
subsection 2.03(c)(i)) payment in full of all amounts for which payment is
due from such Seller pursuant to Sections 2.05, 2.06 or 7.01;
(c) the Company shall have received such other approvals, opinions or
documents as the Company may reasonably request; and
(d) such Seller shall have complied with all of its covenants in all
material respects and satisfied all of its obligations in all material
respects under this Agreement required to be complied with or satisfied as
of such date;
PROVIDED, HOWEVER, that the failure of such Seller to satisfy any of the
foregoing conditions shall not prevent such Seller from subsequently selling
Receivables upon satisfaction of all such conditions or exercising its rights
under subsection 2.01(b).
Section 3.04. CONDITION PRECEDENT TO EACH SELLER'S OBLIGATIONS. The
obligation of a Seller to sell any Receivable generated by it on any date
(including on the Effective Date) shall be subject to the condition precedent
that, on the related Payment Date, the following statement shall be true (and
the payment by the Company of the Purchase Price for such Receivable on such
date shall constitute a representation and warranty by the Company that on such
Payment Date the statements in clause (ii) are true): (i) no Purchase
Termination Event set forth in paragraph (g) (other than clause (v) thereof) of
Section 6.01 shall have occurred and be continuing and (ii) no Early
Amortization Event or Potential Early Amortization Event in each case of a type
set forth in paragraph (a) of (other than clause (v) thereof) Section 7.1 of the
Pooling Agreement shall have occurred and be continuing.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants as to itself for the benefit of the Sellers as
follows:
(a) It (i) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation, and
is duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which the failure to so qualify would have a Material
Adverse Effect, (ii) has all requisite corporate power and authority and
the legal right to own, pledge, mortgage and operate its properties, and to
conduct its business as now or currently proposed to be conducted and (iii)
is in compliance with all Requirements of Law.
(b) It has the corporate power and authority, and the legal right, to
execute, deliver and perform this Agreement and the other Transaction
Documents to which it is a party and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party.
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21
(c) The execution, delivery and performance by it of this Agreement
and the other Transaction Documents to which it is a party and all
instruments and documents to be delivered hereunder by it, and the
transactions contemplated hereby and thereby, (i) do not (A) violate its
certificate or articles of incorporation and by-laws or other
organizational or governing documents or, in any material respect, any
other Requirement of Law, (B) conflict with or result in the breach of, or
constitute a default under, any indenture, mortgage or deed of trust or any
material lease, agreement or other instrument binding on or affecting it or
any of its respective subsidiaries or any of its properties in any material
respect or (C) result in or require the creation or imposition of any Lien
EXCEPT as created or imposed hereunder or under the Pooling Agreement, and
no transaction contemplated hereby requires compliance on its part with any
bulk sales act or similar law, and (ii) do not require the consent of,
authorization by or approval of or notice to or filing or registration
with, any governmental body, agency, authority, regulatory body or any
other Person other than those which have been obtained or made EXCEPT for
the filing of the Financing Statements referred to in Article III hereof,
which filings the Sellers hereby represent shall have been duly made prior
to or substantially contemporaneously with any purchases of Receivables and
other Receivables Property and shall at all times be in full force and
effect (except as they may be terminated by the Company).
(d) This Agreement has been duly executed and delivered by the
Company and constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms except (A) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights in general, and (B) as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
Section 4.02. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each
Seller hereby represents and warrants, as to itself only, for the benefit of the
Company and its assigns (including the Trustee) on the applicable Effective Date
and on each Payment Date as follows:
(a) CORPORATE EXISTENCE. Such Seller (i) is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has all requisite corporate power
and authority, and all legal right, to own and operate its properties, to
lease the properties it operates as lessee and to conduct its business as
now conducted and (iii) is duly qualified as a foreign corporation to do
business and in good standing (or is exempt from such requirements) under
the laws of each jurisdiction in which the ownership or lease of property
or the conduct of its business requires such qualification, except, in the
case of clauses (ii) and (iii), to the extent that a failure to have such
power, authority or right or to qualify and be in good standing, as the
case may be, would not be reasonably likely to have a Material Adverse
Effect.
(b) CORPORATE POWER; AUTHORIZATION; CONSENTS. The Seller has the
corporate power and authority, and the legal right, to execute, deliver and
perform this
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22
Agreement and the other Transaction Documents to which it is a party and
has taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement and the other Transaction
Documents to which it is a party. No consent or authorization of, filing
with, notice to or other act by or in respect of, any Governmental
Authority or any other Person is required in connection with the
execution, delivery, performance, validity or enforceability of this
Agreement and the other Transaction Documents to which it is a party by
or against the Seller other than (i) those consents which have duly been
obtained or made and are in full force and effect on the Effective Date
or the relevant Payment Date, as the case may be, (ii) the filing of the
UCC financing statements referred to in Article III, all of which, at the
time required in Article III, shall have been duly made and shall be in
full force and effect, (iii) those that may be required under state
securities or "blue sky" laws in connection with the offering or sale of
Certificates and (iv) any such consent, authorization, filing, notice or
other act, the absence of which would not be reasonably likely to have a
Material Adverse Effect. This Agreement and each other Transaction
Document to which it is a party have been duly executed and delivered on
behalf of the Seller.
(c) NO DEFAULT. (i) Such Seller is not in default under or with
respect to any of its Contractual Obligations in any respect which would be
reasonably likely to have a Material Adverse Effect. (ii) No (A) Early
Termination or (B) Potential Purchase Termination Event with respect to a
Purchase Termination Event set forth in clause (g)(ii) of Section 6.01, in
each case with respect to such Seller, has occurred and is continuing.
(d) VALID SALE; BINDING OBLIGATIONS. (i) Each transfer of
Receivables and Receivables Property made pursuant to this Agreement shall
constitute a valid sale, transfer and assignment of the Receivables and the
Receivables Property to the Company which is perfected and of first
priority under applicable law, enforceable against creditors of, and
purchasers of Receivables from, such Seller. (ii) This Agreement
constitutes, and each other Transaction Document to be signed by such
Seller when duly executed and delivered will constitute, an enforceable
obligation of such Seller in accordance with its terms, except (A) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights in general, and (B) as such
enforceability may be limited by general principles of equity (whether
considered in a suit at law or in equity).
(e) NO VIOLATION. The execution, delivery and performance of, and
the consummation of the transactions contemplated by, this Agreement and
the other Transaction Documents and the fulfillment of the terms hereof and
thereof will not (i) conflict with, result in any breach of any of the
terms and provisions of, or constitute (with or without notice or lapse of
time or both) a default under, the Certificate of Incorporation or By-laws
of such Seller or any indenture, loan agreement, mortgage, deed of trust,
or other material contract, agreement or instrument to which such Seller is
a party or by which such Seller or any of its properties is bound
(ii) result in the creation or imposition of any Lien upon any of its
properties
<PAGE>
23
pursuant to the terms of any such contract, indenture, loan agreement,
mortgage, deed of trust, lease or other agreement or instrument, other than
this Agreement and the other Transaction Documents, or (iii) violate in any
material respect, any other Requirement of Law.
(f) NO PROCEEDINGS. There are no proceedings or investigations
pending or, to the knowledge of such Seller, threatened against such Seller
before any court, regulatory body, administrative agency, or other tribunal
or governmental instrumentality (i) asserting the invalidity or
unenforceability of this Agreement or any other Transaction Document,
(ii) seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or any other Transaction Document, or
(iii) seeking any determination or ruling that, in the reasonable judgment
of such Seller, would materially and adversely affect the performance by
such Seller of its obligations under this Agreement or any other
Transaction Document.
(g) BULK SALES ACT. No transaction contemplated by this Agreement or
any other Transaction Document with respect to such Seller requires
compliance with, or will be subject to avoidance under, any bulk sales act
or similar law.
(h) BONA FIDE RECEIVABLES; ELIGIBLE RECEIVABLES. Each Receivable of
such Seller is or will be an account receivable arising out of such
Seller's performance in accordance with the terms of the Contract, if any,
giving rise to such Receivable. Each Receivable sold by it hereunder,
other than Receivables which such Seller states in writing (in the
applicable Daily Report or otherwise) are not Eligible Receivables, is at
its respective Payment Date an Eligible Receivable. The aggregate
outstanding Principal Amount of Receivables so sold by it on any Payment
Date is correctly set forth on the Daily Report with respect to such
Payment Date.
(i) QUALITY OF TITLE. Each Receivable and all Receivables Property
which is to be transferred to the Company by such Seller shall be
transferred by such Seller free and clear of any Lien (other than any Lien
arising under any other Transaction Document or arising solely as the
result of any action taken by the Company hereunder or the Trustee);
immediately prior to such transfer such Seller shall have made all filings
under applicable law in each relevant jurisdiction in order to protect and
perfect the Company's ownership interest in all Receivables and Receivables
Property against all creditors of, and purchasers of Receivables from, such
Seller; and upon such transfer, the Company shall have acquired a valid and
perfected first priority ownership interest in each Receivable and the
Receivables Property free and clear of any Lien (other than Permitted Liens
described in clauses (i) and (iv) of the definition of Permitted Liens and
any Lien arising solely as the result of any action taken by the Company
hereunder or the Trustee); and no effective financing statement or other
instrument similar in effect covering any Receivable, any interest therein
or any Receivables Property with respect thereto is on file in any
recording office except such as may be filed in favor of the Company
pursuant to this Agreement, in favor of the Trustee.
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24
(j) LOCATION OF RECORDS; CHIEF EXECUTIVE OFFICE. The chief executive
office of such Seller is as indicated on SCHEDULE 2 hereto and is the place
where the Seller is "located" for the purposes of Section 9-103(3)(d) of
the UCC as in effect in the State of New York. The state and county where
the chief executive office of such Seller is "located" for the purposes of
Section 9-103(3)(d) of the UCC as in effect in the State of New York has
not changed in the past four months. The offices where such Seller keeps
its records concerning the Receivables and related Contracts and all other
agreements related to the Receivables are as indicated for such Seller on
SCHEDULE 2 hereto (or at such other locations, notified to the Company and
the Trustee in accordance with Section 5.01(h), in jurisdictions where all
action required by Section 9.2 has been taken and completed).
(k) MARGIN REGULATIONS. No use of any funds obtained by such Seller
under this Agreement or the other Transaction Documents will conflict with
or contravene any of Regulations G, T, U and X promulgated by the Board of
Governors of the Federal Reserve System from time to time.
(l) ACCURACY OF INFORMATION. All factual written information,
reports, financial statements, exhibits and schedules heretofore or
contemporaneously furnished by such Seller or its Affiliates (other than
the Company) to the Company or the Trustee for purposes of or in connection
with any Transaction Document or any transaction contemplated hereby or
thereby is, and all other such factual, written information hereafter
furnished (if prepared by such Seller or any Affiliate or, if not prepared
by such Seller or any Affiliate, to the extent that information contained
therein was supplied by such Seller or any Affiliate) by such Seller or any
Affiliate (other than the Company) to the Company or the Trustee pursuant
to or in connection with any Transaction Document shall be, true and
accurate in every material respect on the date as of which such information
is or will be furnished (unless such information relates to another date,
in which case as of such other date), and such information is not, and
shall not be (as the case may be) incomplete by omitting to state a
material fact or any fact necessary to make the statements contained
therein not misleading as of such date.
(m) PROCEEDS BANKS; PAYMENT INSTRUCTIONS. The names and addresses of
all the Lockbox Banks, the Lockbox Processors, the Collection P.O. Boxes
and Eligible Segregated Account Banks, together with the account numbers of
the Lockbox Accounts and the Eligible Segregated Accounts into which
Collections are deposited at such institutions, are specified in SCHEDULE
3. The Sellers have transferred all of their right, title and interest in
each Lockbox Account and Eligible Segregated Account to the Company. Each
Lockbox Bank or Lockbox Processor has executed and delivered to the Company
and the Trustee a Lockbox Agreement. Each Eligible Segregated Account Bank
has executed and delivered to the Company and the Trustee an Eligible
Segregated Account Bank Agreement. With respect to any payments in respect
of Receivables and Related Property that are made directly to any Seller
(including without limitation, any Collectors, other employees thereof or
independent contractors employed thereby), such Seller agrees to deposit
payments in the form received within one Business Day of receipt directly
to one of the Lockbox Accounts, or Eligible
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25
Segregated Accounts. Each Seller has instructed all Obligors to submit
all payments on Receivables and Related Property directly to one of the
Lockbox Accounts, Collection P.O. Boxes or Eligible Segregated Accounts
or as otherwise provided in Section 2.3 of the Servicing Agreement.
(n) VALID TRANSFERS. No transfer of any Receivables or any
Receivables Property to the Company by such Seller constitutes a fraudulent
transfer or fraudulent conveyance or is otherwise void or voidable under
similar laws or principles, the doctrine of equitable subordination or
for any other reason. The transfers of Receivables and Receivables
Property by such Seller to the Company pursuant to this Agreement, and
all other transactions between such Seller and the Company, have been and
will be made in good faith and without intent to hinder, delay or defraud
creditors of such Seller, and such Seller acknowledges that it has
received and will receive fair consideration and reasonably equivalent
value for the purchases by the Company of Receivables and Receivables
Property hereunder. The purchase of Receivables and Receivables Property
by the Company from such Seller constitutes a true sale or other absolute
transfer of such Receivables and Receivables Property under applicable
state law.
(o) TRADE NAMES. Such Seller uses no trade name in the furnishing
of its products or services which generate Receivables other than its
actual corporate name and the trade names set forth for such Seller in
SCHEDULE 5. During the five years preceding the date hereof, except as
set forth in SCHEDULE 5, (i) such Seller has not been known by any legal
name or trade name other than its corporate name, (ii) nor has such
Seller been the subject of any merger or other corporate reorganization
within the last five years, other than mergers occurring more than one
year prior to the date hereof in which the Seller was the surviving
company and the merged entity did not include in its name the name
"Core-Mark".
(p) LITIGATION; COMPLIANCE WITH APPLICABLE LAWS. There are no
actions, suits or proceedings at law or in equity or by or before any
governmental authorities (federal, state, local or foreign) now pending or,
to the knowledge of such Seller, threatened against or affecting such
Seller or any business, property or rights of such Seller (A) that involve
any Transaction Documents or the transactions contemplated thereby or (B)
as to which there is a reasonable possibility of an adverse determination
and that, if adversely determined, could reasonably be expected,
individually or in the aggregate, to result in a Material Adverse Effect.
Such Seller is in compliance with the requirements of all applicable laws,
rules, regulations, and orders of all governmental authorities (federal,
state, local or foreign, and including, without limitation, environmental
laws), a breach of any of which, individually or in the aggregate, would be
reasonably likely to have a Material Adverse Effect.
(q) TAXES. Such Seller has filed all tax returns (federal, state
and local) required by law to be filed and has paid or made adequate
provision for the payment of all taxes, assessments and other
governmental charges due from such Seller or is contesting any such tax,
assessment or other governmental charge in good faith through
appropriate proceedings. No tax Lien has been filed with respect to
taxes
<PAGE>
26
exceeding in the aggregate $2,500,000, and, to the best knowledge of the
Seller, no claim is presently being asserted with respect to taxes
exceeding in the aggregate $2,500,000. For purposes of this paragraph,
"taxes" shall mean any present or future tax, levy, impost, duty, charge,
assessment or fee of any nature (including interest, penalties and
additions thereto) that is imposed by any Governmental Authority. Such
Seller knows of no basis for any material additional tax assessment for any
fiscal year for which adequate reserves have not been established.
(r) ERISA MATTERS.
(i) Except as specifically disclosed in SCHEDULE 7 hereto,
such Seller and each of its ERISA Affiliates is in compliance in all
material respects with the applicable provisions of ERISA and the
regulations and published interpretations thereunder with respect to
each Plan of such Seller or any of its ERISA Affiliates, except for
such noncompliance which could not reasonably be expected to result
in a Material Adverse Effect.
(ii) No Reportable Event has occurred as to which such
Seller or any of its ERISA Affiliates was required to file a report
with the PBGC, other than reports for which the 30-day notice
requirement is waived, reports that have been filed and reports the
failure of which to file would not reasonably be expected to result
in a Material Adverse Effect.
(iii) Except as specifically disclosed in SCHEDULE 7
hereto, as of the Effective Date, the present value of all benefit
liabilities under each Plan of such Seller or any of its ERISA
Affiliates (on an ongoing basis and based on those assumptions used
to fund such Plan) did not, as of the last valuation report
applicable thereto, exceed the value of the assets of such Plan.
(iv) Neither such Seller nor any of its ERISA Affiliates has
incurred any Withdrawal Liability that could reasonably be expected to
result in a Material Adverse Effect.
(v) Neither such Seller nor any of its ERISA Affiliates has
received any notification that any Multiemployer Plan is in
reorganization or has been terminated within the meaning of Title IV
of ERISA, or that a reorganization or termination has resulted or
could reasonably be expected to result, through increases in the
contributions required to be made to such Plan or otherwise, in a
Material Adverse Effect.
(s) SOLVENCY. Both prior to and after giving effect to the
transactions occurring on each Payment Date, (i) the fair value of the
assets of the Seller at a fair valuation will exceed the debts and
liabilities, subordinated, contingent or otherwise, of the Seller; (ii) the
present fair salable value of the property of such Seller will be greater
than the amount that will be required to pay the probable liability of such
Seller on its debts and other liabilities, subordinated, contingent or
otherwise, as such debts and liabilities become absolute and matured; (iii)
such Seller will be able to pay
<PAGE>
27
its debts and liabilities, subordinated, contingent or otherwise, as such
debts and liabilities become absolute and matured; and (iv) such Seller
will not have unreasonably small capital with which to conduct the
business in which it is engaged as such business is now conducted and is
proposed to be conducted. For all purposes of clauses (i) through (iv)
above, the amount of contingent liabilities at any time shall be computed
as the amount that, in the light of all the facts and circumstances
existing at such time, represents the amount that can reasonably be
expected to become an actual or matured liability. Such Seller does not
intend to, nor does it believe that it will, incur debts beyond its
ability to pay such debts as they mature, taking into account the timing
of and amounts of cash to be received by it and the timing of and amounts
of cash to be payable in respect of its debt.
(t) INVESTMENT COMPANY ACT. Neither such Seller nor any of such
Seller's Subsidiaries is (i) an "investment company" registered or required
to be registered under the 1940 Act, or (ii) a "holding company", or a
"subsidiary company" or an "affiliate" of a "holding company" within the
meaning of the Public Utility Holding Company Act of 1935, as amended.
(u) OWNERSHIP. All of the issued and outstanding capital stock of
such Seller (other than Core-Mark) is owned, directly or indirectly, by
Core-Mark.
(v) INDEBTEDNESS TO COMPANY. Such Seller had no outstanding
Indebtedness to the Company other than amounts permitted by this Agreement
or amounts outstanding under the Subordinated Note.
(w) RECEIVABLES DOCUMENTS. Upon the delivery, if any, by such
Seller to the Company of licenses, rights, computer programs, related
materials, computer tapes, disks, cassettes and data relating to the
administration of the Purchased Receivables pursuant to subsection 5.01(p),
the Company shall have been furnished with all materials and data necessary
to permit orderly collection of the Purchased Receivables without the
participation of such Seller in such collection.
(x) RECEIVABLES LISTS. The Receivables Lists set forth in all
material respects an accurate and complete listing as of the Cut-Off Date
of all Receivables to be transferred to the Company on the Effective Date
and the information contained therein with respect to the identity and
Principal Amount of each such Receivable is true and correct in all
material respects as of the Cut-Off Date.
The representations and warranties set forth in this Section 4.02
shall survive the transfer and assignment of the respective Receivables to the
Company pursuant to this Agreement. Upon discovery by any Seller or the Company
of a breach of any of the foregoing representations and warranties, the party
discovering such breach shall give prompt written notice to the other.
<PAGE>
28
ARTICLE V
GENERAL COVENANTS
Section 5.01. AFFIRMATIVE COVENANTS OF THE SELLERS. Each Seller
covenants that, until the Purchase Termination Date shall have occurred with
respect to such Seller and there are no amounts outstanding with respect to the
Purchased Receivables previously sold by such Seller to the Company (other than
Charged-off Receivables):
(a) PRESERVATION OF CORPORATE EXISTENCE AND NAME. Such Seller will
preserve and maintain in all material respects its corporate existence,
rights, franchises and privileges in the jurisdiction of its incorporation,
and qualify and remain qualified in good standing as a foreign corporation
in each jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualification could have a
Material Adverse Effect.
(b) MAINTENANCE OF PROPERTY. Such Seller will keep all property and
assets useful and necessary to permit the origination, monitoring and
collection of Receivables.
(c) COMPLIANCE WITH LAWS, ETC. Such Seller shall comply in all
material respects with all applicable laws, rules, regulations and orders
applicable to the Receivables and the Receivables Property, including,
without limitation, rules and regulations relating to truth in lending,
fair credit billing, fair credit reporting, equal credit opportunity, fair
debt collection practices and privacy, where failure to so comply could
reasonably be expected to have a materially adverse impact on the amount of
Collections thereunder.
(d) VISITATION RIGHTS. At any reasonable time during normal business
hours and from time to time upon reasonable notice, according to the
Seller's normal security and confidentiality provisions with respect to
customer lists, such Seller shall permit (i) the Company, the Trustee or
any of its agents or representatives, (A) to examine and make copies of and
abstracts from the records, books of account and documents (including,
without limitation, computer tapes and disks) of such Seller relating to
Receivables and Related Property owned or to be purchased by the Company
hereunder, including without limitation, the related Contracts and purchase
orders and other agreements and (B) following the termination of the
appointment of Core-Mark as Servicer or of such Seller as a Servicing Party
with respect to the Receivables, to be present at the offices and
properties of such Seller to administer and control the collection of
amounts owing on the Purchased Receivables and (ii) the Company, the
Trustee or any of its agents or representatives, or the Trustee (upon the
giving of appropriate notice to the Company) to visit the properties of
such Seller for the purpose of examining such records, books of account and
documents, and to discuss the affairs, finances and accounts of such Seller
relating to the Receivables or such Seller's performance hereunder with any
of its officers or directors and with its independent certified public
accountants; PROVIDED, that the Company, the Trustee or such agents or
representatives, as the case may be, shall notify such Seller prior to any
<PAGE>
29
contact with such accountants and permit representatives of the Seller to
participate in such discussions.
(e) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Such Seller will
maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing Receivables
and the Receivables Property in the event of the destruction of the
originals thereof), and keep and maintain all documents, books, records and
other information which, in each case, in the reasonable discretion of the
Company, are necessary or advisable for the collection of all Receivables
and the Receivables Property (including, without limitation, records
adequate to permit the daily identification of each new Receivable and all
Collections of and adjustments to each existing Receivable). Upon the
request of the Company, such Seller will deliver copies of all books and
records maintained pursuant to this Section 5.01(e) to the Trustee.
(f) PERFORMANCE AND COMPLIANCE WITH POLICIES, RECEIVABLES AND
CONTRACTS. Such Seller will (i) perform its obligations in accordance with
and comply in all material respects with the Policies, as amended from time
to time in accordance with the Transaction Documents and (ii) at its
expense, timely and fully perform and comply with all material provisions,
covenants and other promises required to be observed by it under the
Receivables and the Contracts related to the Receivables and Related
Property and all purchase orders and other agreements related to such
Receivables and Related Property.
(g) OBLIGATIONS. Seller shall pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be,
all its other obligations of whatever nature, except where (i) the amount
of validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on its books, or (ii) the failure to so pay,
discharge or satisfy all such obligations would not, in the aggregate, be
reasonably likely to have a Material Adverse Effect and would not subject
any of its properties to any Lien prohibited by subsection 5.03(b).
(h) LOCATION OF RECORDS. Such Seller will keep its principal place
of business and chief executive office, and the offices where it keeps its
records concerning the Receivables, all Receivables Property, all Contracts
and purchase orders and other agreements related to such Receivables (and
all original documents relating thereto), at the address(es) of such Seller
referred to in SCHEDULE 2 or, upon 30 days' prior written notice to the
Company and the Agents, at such other locations in jurisdictions where all
action required by Section 5.01(m) shall have been taken and completed;
PROVIDED, HOWEVER, that the Rating Agency Condition shall have been
satisfied with respect to any changes in location if such location is not
in a state which is within the Tenth Circuit unless it delivers an opinion
of counsel reasonably acceptable to the Rating Agencies to the effect that
OCTAGON GAS SYSTEMS, INC. V. RIMMER, 995 F.2d 948 (10th Cir. 1993) (other
than for records maintained by the Denver, Colorado division of Core-Mark,
the Salt Lake City, Utah division of Core-
<PAGE>
30
Mark and the Albuquerque, New Mexico division of Core-Mark Midcontinent),
is no longer controlling precedent in the Tenth Circuit.
(i) OBLIGATION TO RECORD AND REPORT. Such Seller shall to the
fullest extent permitted by GAAP and by applicable law, record each
purchase of the Purchased Receivables as a sale on its books and records,
reflect each purchase of Purchased Receivables in its financial statements
as a sale.
(j) COLLECTIONS. Instruct each Obligor to make payments in respect
of its Receivables to a Lockbox or a Collection P.O. Box or a Lockbox
Account or an Eligible Segregated Account or by wire transfer or other
electronic payment to a Lockbox Account an Eligible Segregated Account or
the Collection Account or as otherwise provided in Section 2.3 of the
Servicing Agreement and to comply in all material respects with procedures
with respect to Collections reasonably specified from time to time by the
Company; including, without limitation, the procedures specified in the
Servicing Agreement. In the event that any payments in respect of any such
Receivables are made directly to the Seller (including, without limitation,
any Collector, any other employees thereof or independent contractors
employed thereby), the Seller shall, within one Business Day (except as
provided in the Servicing Agreement) of receipt thereof, deposit such
amounts to a Lockbox, a Lockbox Account, an Eligible Segregated Account or
the Collection Account and, prior to forwarding such amounts, the Seller
shall hold such payments in trust as custodian for the Company and the
Trustee.
(k) TAXES. Such Seller will file all tax returns and reports
required by law to be filed by it and will pay all taxes and governmental
charges thereby shown to be owing, except any such taxes or charges which
are being diligently contested in good faith by appropriate proceedings
and for which adequate reserves in accordance with GAAP have been set
aside on its books.
(l) SEPARATE CORPORATE EXISTENCE OF THE COMPANY. Such Seller hereby
acknowledges that the Trustee and the Investor Certificateholders are
entering into the transactions contemplated by the Transaction Documents in
reliance upon the Company's identity as a legal entity separate from the
Sellers and all other Core-Mark Persons. Therefore, from and after the
date hereof, such Seller will take (or refrain from taking, as the case may
be) such actions and will cause each other Core-Mark Person to take (or
refrain from taking, as the case may be) such actions, as shall be required
in order that:
(i) No Core-Mark Person will pay the Company's operating
expenses and liabilities, recognizing, however, that certain
organizational expenses of the Company and expenses relating to
creation and initial implementation of the securitization program
contemplated by the Transaction Documents have been or shall be paid
by such Seller.
(ii) Each Core-Mark Person will conduct its business in a
separate space within, but segregated from, the Company's offices.
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31
(iii) Each Core-Mark Person will maintain corporate
records and books of account separate from those of the Company and
telephone numbers, mailing addresses, stationery and other business
forms that are separate and distinct from those of the Company.
(iv) Any financial statements of any Core-Mark Person
which are consolidated to include the Company will contain a
detailed note substantially in the form, and to the effect, of the
note set forth on SCHEDULE 8.
(v) The Company's assets will be maintained in a manner
that facilitates their identification and segregation from those of
such Seller and the other Core-Mark Persons.
(vi) Each Core-Mark Person will strictly observe
corporate formalities in its dealings with the Company, and no
material amount of funds or other assets of the Company will be
commingled or pooled with those of any Core-Mark Person. No
Core-Mark Person will maintain joint bank accounts with the Company
or other depository accounts with the Company to which any
Core-Mark Person has independent access.
(vii) Any transaction between the Company and any
Core-Mark Person will be fair and equitable to the Company, will be
the type of transaction which would be entered into by a prudent
Person in the position of the Company with an Core-Mark Person, and
will be on terms which are at least as favorable to the Company as
may be obtained from a Person which is not an Core-Mark Person, it
being understood and agreed that the transactions contemplated in
the Transaction Documents meet the requirements of this clause (vii).
(viii) No Core-Mark Person will hold itself out, or permit
itself to be held out, as having agreed to pay or be liable for the
debts of the Company.
(ix) The duly elected Board of Directors of the Company
and the Company's duly appointed officers shall at all times have
sole authority to control decisions and actions with respect to the
daily business affairs of the Company.
(x) Such Seller will comply in all material respects with
the assumptions and factual recitations set forth in the Specified
Bankruptcy Opinion Provisions which are applicable to such Seller,
except, in each case above, for such failure to take actions or
refrain from taking actions that are in the aggregate, not material.
(m) FURTHER ACTION EVIDENCING PURCHASES.
(i) Such Seller agrees that from time to time, at its
expense, it will promptly execute and deliver all further
instruments and documents, and take
<PAGE>
32
all further action, that may be necessary or desirable or that the
Company may reasonably request, to protect or more fully evidence
the Company's ownership, right, title and interest in the
Receivables and Receivables Property sold by such Seller and its
rights under the Contracts with respect thereto, or to enable the
Company to exercise or enforce any of its rights hereunder or under
any other Transaction Document. Without limiting the generality of
the foregoing, such Seller will upon the request of the Company (A)
execute and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be
necessary or, in the reasonable opinion of the Company or the
Agents, desirable, (B) indicate on its books and records (including,
without limitation, master data processing records) that the
Receivables and Receivables Property have been sold and assigned to
the Company and, in turn, the Company has sold and assigned its
interest therein to the Trustee, and provide to the Company, upon
request, copies of any such records, (C) after the occurrence of a
Purchase Termination Event, contact customers to confirm and verify
Receivables and (D) obtain the agreement of any Person having a Lien
on any Receivables owned by such Seller (other than any Lien created
or imposed hereunder or under the Pooling Agreement or any Permitted
Lien) to release such Lien upon the purchase of any such Receivables
by the Company.
(ii) Such Seller hereby irrevocably authorizes the
Company and the Trustee to file one or more financing or
continuation statements substantially in the form of the originally
agreed upon financing statements, and amendments thereto, relative
to all or any part of the Receivables and Receivables Property sold
or to be sold by such Seller, without the signature of such Seller
where permitted by law.
(iii) If such Seller fails to perform any of its agreements
or obligations under this Agreement, the Company or its assignees may
(but shall not be required to) perform, or cause performance of, such
agreements or obligations, and the expenses of the Company incurred in
connection therewith shall be payable by such Seller as provided in
Section 9.06.
(n) LEGEND REQUIREMENT FOR CHATTEL PAPER. Such Seller agrees (i) at
all times to comply with the terms and provisions set forth in Schedule 3
to the Pooling Agreement and (ii) that any Receivable that constitutes or
is evidenced by "chattel paper" as defined in Article 9 of the UCC as in
effect in the Relevant UCC State shall bear a legend stating that such
Receivable has been conveyed to the Trust.
(o) COMPUTER FILES. At its own cost and expense, each Seller shall
retain the ledger used by such Seller as a master record of the Obligors
and retain copies of all documents relating to each Obligor as custodian
and agent for the Company and other Persons with interests in the Purchased
Receivables, and each Seller shall assure continued compliance with Section
2.01(e).
<PAGE>
33
Section 5.02. REPORTING REQUIREMENTS. Each Seller shall furnish to
the Company and its assigns (including the Trustee) from the date hereof until
the Purchase Termination Date shall have occurred with respect to such Seller
and until there are no amounts outstanding with respect to Purchased Receivables
previously sold by such Seller to the Company:
(a) COMPLIANCE CERTIFICATE. Not later than 90 days after the end of
each fiscal year and not later than 45 days after the end of each of the
first three fiscal quarters of each fiscal year, a certificate of a
Responsible Officer of such Seller stating that, to the best of such
Responsible Officer's knowledge, such Seller during such period, has
observed or performed all of its covenants and other agreements, and
satisfied every condition, contained in the Transaction Documents to which
it is a party to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Purchase Termination
Event or Potential Purchase Termination Event except as specified in such
certificate;
(b) ERISA. Promptly after the filing or receiving thereof, copies of
all reports and notices with respect to any Reportable Event defined in
Title of ERISA which such Seller files under ERISA with the Internal
Revenue Service, the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor or which such Seller receives from the Pension Benefit
Guaranty Corporation if, in each case, such report or notice relates to an
event or condition that could reasonably be expected to give rise to a
Purchase Termination Event, Amortization Event or a Material Adverse
Effect;
(c) TERMINATION EVENTS: OTHER MATERIAL EVENTS. Such Seller shall
furnish to the Company (i) upon the Company's request, a certificate of a
Responsible Officer of such Seller certifying, as of the date thereof, that
no Purchase Termination Event has occurred and is continuing and setting
forth the computations used by the chief financial officer of such Seller
in making such determination; (ii) as soon as possible and in any event
within two Business Days after a Responsible Officer of such Seller obtains
knowledge of the occurrence of any Purchase Termination Event, Potential
Purchase Termination Event, Servicer Default, Potential Servicer Default
or a written statement of a Responsible Officer of such Seller setting
forth details of such event and the action that such Seller proposes to
take or has taken with respect thereto; (iii) promptly after obtaining
knowledge that a Receivable was, at the time of the Company's purchase
thereof, not an Eligible Receivable, notice thereof; (iv) promptly after
obtaining knowledge of any threatened action or proceeding affecting such
Seller or its Subsidiaries before any court, governmental agency or
arbitrator that may reasonably be expected to materially and adversely
affect the enforceability of this Agreement and the other Transaction
Documents, notice of such action or proceeding; (v) by June 1999, a
certificate of a Responsible Officer of such Seller (with a copy to each
Rating Agency) certifying, as of the date thereof, that such Seller's
computer systems shall be "year 2000 compliant" by September 1999; and
(vi) promptly following the Company's request therefor, such other
information, documents, records or reports with respect to the
Receivables or the related Contracts;
<PAGE>
34
(d) INELIGIBLE RECEIVABLE. Promptly upon determining that any
Purchased Receivable originated by it designated as an Eligible Receivable
on the applicable Daily Report or Monthly Settlement Statement was not an
Eligible Receivable as of the date provided therefor, written notice of
such determination; and
(e) OTHER. Promptly, from time to time, such other information,
documents, records or reports respecting the Receivables or the condition
or operations, financial or otherwise, of such Seller as the Company or the
Agents may from time to time reasonably request in order to protect the
interests of the Company and the Agents under or as contemplated by the
Transaction Documents.
Section 5.03. NEGATIVE COVENANTS. Each Seller covenants that, until
the Purchase Termination Date shall have occurred with respect to such Seller
and there are no amounts outstanding with respect to Purchased Receivables
previously sold by such Seller to the Company:
(a) RECEIVABLES TO BE ACCOUNTS, GENERAL INTANGIBLES OR CHATTEL PAPER.
Such Seller will take no action to cause any Receivable to be evidenced by
any "instrument" other than in compliance with Section 2.2(g) of the
Servicing Agreement or, provided that the procedures set forth in Schedule
3 to the Pooling Agreement are fully implemented with respect thereto, an
instrument which together with a security agreement constitutes "chattel
paper" (each as defined in the UCC as in effect in the Relevant UCC State).
Such Seller will take no action to cause any Receivable to be anything
other than an "account", "general intangible" or "chattel paper" (each as
defined in the UCC as in effect in the Relevant UCC State).
(b) SECURITY INTERESTS; SALE OF RECEIVABLES. Except for the
conveyances hereunder and as provided below, such Seller will not sell,
pledge, assign or transfer to any other Person, or grant, create, incur,
assume or suffer to exist any other Lien on any Receivable or Receivables
Property, whether now existing or hereafter created, or any interest
therein; such Seller will immediately notify the Company of the existence
of any other Lien on any Receivable or Receivables Property; and such
Seller shall defend the right, title and interest of the Company in, to and
under the Receivables or Receivables Property, whether now existing or
hereafter created, against all claims of third parties claiming through
or under such Seller; PROVIDED, HOWEVER, that nothing in this subsection
5.03(b) shall prevent or be deemed to prohibit such Seller from suffering
to exist upon any of the Receivables any Permitted Lien.
(c) EXTENSION OR AMENDMENT OF RECEIVABLES. Such Seller will not
extend, rescind, cancel, make any Dilution Adjustment to, amend or
otherwise modify, or attempt or purport to extend, rescind, cancel, make
any Dilution Adjustment to, amend or otherwise modify, the terms of any
Purchased Receivables, except in any such case (i) in accordance with the
terms of the Policies, (ii) as required by any Requirement of Law or (iii)
in the case of Dilution Adjustments (whether or not permitted by any other
clause of this sentence), upon making a Seller Adjustment Payment pursuant
to Section 2.05.
<PAGE>
35
(d) CHANGE IN BUSINESS. Such Seller will not make or permit to be
made any change in the character of its business in any material respect if
such change could reasonably be expected to have a Material Adverse Effect.
(e) CHANGE IN POLICIES. Such Seller shall not make or permit to be
made any change in the Policies in any material respect, except (i) if such
changes or modifications are required under any Requirement of Law, (ii) if
such changes or modifications would not reasonably be expected to have a
Material Adverse Effect or (iii) if the Rating Agency Condition is
satisfied with respect thereto. The Seller shall provide notice to the
Company, the Trustee and each Rating Agency of any modification of the
Polices; PROVIDED, HOWEVER, that if any change or modification is to be
made, other than a change or modification permitted pursuant to clause (i)
or (ii) above, and any Investor Certificateholders of a Series are
outstanding which are not rated by a Rating Agency, the consent of the
applicable Agent (or as specified in the related Supplement) shall be
required to effect such change or modification.
(f) CHANGE IN NAME. Such Seller will not change its name, identity
or corporate structure in any manner including by way of any merger,
consolidation, amalgamation, liquidation, a winding up or dissolution which
would or might make any financing statement or continuation statement (or
other similar instrument) relating to this Agreement seriously misleading
within the meaning of Section 9-402(7) of the UCC, or impair the perfection
of the Company's interest in any Receivable under any other similar law,
without having (i) delivered 30 days' prior written notice to the Company,
the Servicer and the Trustee and (ii) taken all action required by
subsection 5.01(a).
(g) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Such Seller shall
not instruct any Obligor of any Purchased Receivables to make any payments
with respect to any Receivables other than to a Lockbox, a Lockbox Account,
a Collection P.O. Box, an Eligible Segregated Account or the Collection
Account or otherwise in accordance with the Servicing Agreement.
(h) ACCOUNTING CHANGES. Such Seller shall not (i) prepare any
financial statements which shall account for the transactions contemplated
hereby in any manner other than as a sale of the Purchased Receivables by
such Seller to the Company; nor (ii) in any other respect account for or
treat the transactions contemplated hereby (including for financial
accounting purposes, except as required by law) in any manner other than as
sales of the Purchased Receivables originated by such Seller to the
Company.
(i) INELIGIBLE RECEIVABLES. Such Seller shall not take any action to
cause an Eligible Receivable to cease to be an Eligible Receivable, except
in any such case upon making a Seller Repurchase Payment pursuant to
Section 2.06; PROVIDED that in no event shall an Eligible Receivable
becoming an Aged Receivable constitute a breach of this paragraph (i).
<PAGE>
36
ARTICLE VI
PURCHASE TERMINATION EVENTS
Section 6.01. PURCHASE TERMINATION EVENTS. If, with respect to any
Seller, any of the following events (each, a "PURCHASE TERMINATION EVENT" with
respect to such Seller) shall have occurred and be continuing:
(a) The Seller shall fail to make any payment or deposit to be made
by it hereunder when due and such failure shall remain unremedied for two
Business Days; or
(b) There shall have occurred (i) an Early Amortization Event set
forth in Section 7.1 of the Pooling Agreement or (ii) the Amortization
Period with respect to all Outstanding Series shall have occurred and be
continuing; or
(c) Any representation or warranty made or deemed to be made by such
Seller or any of its officers under or in connection with any Transaction
Document, Daily Report, Monthly Settlement Statement or other information,
statement, record, certificate, document or report delivered pursuant to a
Transaction Document shall prove to have been false or incorrect in any
material respect when made or deemed made (including in each case by
omission of material information necessary to make such representation,
warranty, certificate or statement not misleading); PROVIDED, that no such
event shall constitute a Purchase Termination Event unless such event shall
continue unremedied for a period of 30 days from the earlier of (A) the
date any Responsible Officer of such Seller obtains knowledge thereof and
(B) the date such Seller receives notice of the incorrectness of such
representation or warranty from the Company or the Trustee; PROVIDED,
FURTHER,that a Purchase Termination Event shall not be deemed to have
occurred under this paragraph (c) based upon a breach of any representation
or warranty set forth in Section 4.02 with respect to any Receivable if the
Sellers shall have complied with the provisions of subsection 2.06, as the
case may be; or
(d) Such Seller shall fail to perform or observe any other term,
covenant or agreement contained in subsection 5.01(c) or (i), subsections
5.02(b), (c) or (d) or Section 5.03 of this Agreement on its part to be
performed or observed and any such failure shall remain unremedied for five
Business Days; or such Seller shall fail to perform or observe any other
such term, covenant or agreement contained in Section 5.01 or 5.02 of this
Agreement; PROVIDED, that no failure to perform or observe any other term,
covenant or agreement contained in Section 5.01 or 5.02 of this Agreement
shall constitute a Purchase Termination Event unless such event shall
continue unremedied for a period of 30 days from the earlier of (A) the
date any Responsible Officer of such Seller obtains knowledge of such
failure and (B) the date such Seller receives notice of such failure from
the Company or the Trustee; PROVIDED, FURTHER, that a Purchase Termination
Event shall not be deemed to have occurred under this paragraph (d) based
upon a breach of any covenant set forth in subsection 5.01(c), (f) or (g)
or Section 5.03 with respect to any Receivable if the Sellers shall have
complied with the provisions of subsection 2.06, as the case may be; or
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37
(e) Such Seller shall fail to perform or observe any other term,
covenant or agreement contained in any Transaction Document on its part to
be performed or observed and any such failure shall remain unremedied for a
period of 30 days from the earlier of (A) the date any Responsible Officer
of such Seller obtains knowledge of such failure and (B) the date such
Seller receives notice thereof from the Company, the Servicer, the Trustee
or any Agent; or
(f) Any Transaction Document to which such Seller is a party shall
cease, for any reason, to be in full force and effect, or Core-Mark or such
Seller shall so assert in writing, or the Company shall fail to have a
valid and perfected first priority ownership interest in substantially all
of the Receivables and the Receivables Property; or
(g) (i) such Seller shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts,
or (B) seeking appointment of a receiver, trustee, custodian or other
similar official for it or for all or any substantial part of its assets,
or such Seller shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against such Seller any case,
proceeding or other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced against
such Seller or any of its Subsidiaries any case, proceeding or other action
seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60 days
from the entry thereof; or (iv) such Seller or any of its respective
Subsidiaries shall take any action in furtherance of any of the acts set
forth in clause (i), (ii), or (iii) above; or (v) such Seller shall
generally not, or shall be unable to, or shall admit in writing its
inability to, pay its debts as they become due; or
(h) Core-Mark has been terminated as Servicer following a Servicer
Default with respect to Core-Mark under the Servicing Agreement; or
(i) 15 days shall have elapsed after there shall be filed against
such Seller a (i) a notice of federal tax Lien from the Internal Revenue
Service with respect to taxes exceeding $100,000 or (ii) a notice of Lien
with respect to taxes exceeding $100,000 from the PBGC under Section 412(n)
of the Code or Section 302(f) of ERISA for a failure to make a required
installment or other payment to a plan to which Section 412(n) of the Code
or Section 302(f) of ERISA applies; or (iii) a notice of state tobacco
excise tax Lien with respect to taxes exceeding $100,000 in the aggregate
from any state Governmental Authority, unless in each case there shall have
been
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38
delivered to the Trustee and each Rating Agency proof of the release of, or
payment of amounts secured by, such Lien;
(j) there shall be filed against such Seller a notice of any other
Lien, the existence of which could reasonably be expected to have a
Material Adverse Effect unless there has been delivered to the Trustee
proof of release of, or payment of amounts secured by, such Lien; or
then, (x) in the case of any Purchase Termination Event described in
paragraph (b)(i) or (g) (other than clause (v) thereof), the obligation of
the Company to purchase Receivables shall thereupon automatically terminate
without further notice of any kind, which is hereby waived by such Seller,
(y) in the case of any Purchase Termination Event described in paragraph
(b)(ii) above, the obligation of the Company to purchase Receivables shall
thereupon terminate without notice of any kind, which is hereby waived by
such Seller, unless both the Company and such Seller agree in writing that
such event shall not trigger an Early Termination hereunder and (z) in the
case of any other Purchase Termination Event, so long as such Purchase
Termination Event shall be continuing, the Company may terminate its
obligation to purchase Receivables from such Seller by written notice to
such Seller (any termination with respect to any Seller pursuant to clause
(x), (y) or (z) of this Article VI is herein called an "EARLY TERMINATION"
with respect to such Seller); PROVIDED, HOWEVER, that in the event of (A)
the filing of any notice of Lien described in paragraph (i) above or (B) an
involuntary petition or proceeding as described in paragraphs (g)(ii) and
(g)(iii) above, the Company shall not purchase Receivables from such Seller
until such time, if any, as such Lien is released or paid (and evidence of
such release is received and verified by S&P) as described above or such
involuntary petition or proceeding has been dismissed, PROVIDED that such
dismissal shall have occurred within 60 days of the filing of such petition
or the commencement of such proceeding; PROVIDED, FURTHER, that upon the
occurrence of an Early Termination of a Seller, such the Seller shall have
no further obligation to sell any additional Receivables to the Company.
Notwithstanding anything to the contrary in this Section 6.01, a delay in
or failure of performance referred to under clause (a) above for a period
of 10 Business Days after the applicable grace period shall not constitute
a Purchase Termination Event, if such delay or failure could not have been
prevented by the exercise of reasonable diligence by such Seller and such
delay or failure was caused by a Force Majeure Delay.
Section 6.02. ADDITIONAL REMEDIES. Upon the occurrence of any
Purchase Termination Event, the Company shall have, in addition to all other
rights and remedies under this Agreement or otherwise all other rights and
remedies provided under the UCC of each applicable jurisdiction and other
applicable laws, which rights shall be cumulative. Without limiting the
foregoing, the occurrence of a Purchase Termination Event shall not deny to the
Company any remedy (in addition to termination of the Company's obligation to
purchase Receivables from any relevant Seller or Sellers) to which the Company
may be otherwise appropriately entitled, whether by statute or other applicable
law, at law or in equity.
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39
ARTICLE VII
INDEMNIFICATION; EXPENSES; COSTS
Section 7.01. INDEMNITIES BY THE SELLERS. Core-Mark and the other
Sellers (other than those Sellers from which the Company has no Receivables
outstanding at such time), jointly and severally, agree (i) to pay or reimburse
the Company for all its out-of-pocket costs and expenses incurred in connection
with the preparation and execution of, and any amendment, supplement or
modification to, this Agreement, the other Transaction Documents and any other
documents prepared in connection herewith and therewith, the consummation and
administration of the transactions contemplated hereby and thereby, including,
without limitation, all reasonable and documented fees and disbursements of
counsel, (ii) to pay or reimburse the Company for all its costs and expenses
incurred in connection with the enforcement or preservation of any rights under
this Agreement and any of the other Transaction Documents, including, without
limitation, the reasonable fees and disbursements of counsel to the Company,
(iii) to pay, indemnify and hold the Company harmless from, any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying stamp, excise and other similar taxes, if
any, which may be payable or determined to be payable in connection with the
execution and delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement and any such
other documents and (iv) to pay, indemnify and hold the Company harmless from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever (all such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements being
herein called "INDEMNIFIED LIABILITIES") (A) which may at any time be imposed
on, incurred by or asserted against the Company in any way relating to or
arising out of this Agreement or the Transaction Documents or the transactions
contemplated hereby and thereby or in connection herewith or any action taken or
omitted by the Company under or in connection with any of the foregoing or (B)
which would not have been imposed on, incurred by or asserted against the
Company but for its having purchased the Receivables hereunder; PROVIDED, that
such indemnity shall not be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of the Company; and PROVIDED, FURTHER, that the
Sellers shall have no obligation under this subsection 7.01 to the Company with
respect to Indemnified Liabilities arising from (1) any action taken, or omitted
to be taken, by a Servicer which is not an Affiliate of the Sellers, (2) any
action taken by the Trustee or the Company at the direction of the Trustee in
collecting from an Obligor or (3) a delay in payment, or a default, by an
Obligor with respect to any Purchased Receivable (other than arising out of (x)
any discharge, claim, offset or defense (other than discharge in bankruptcy of
the Obligor) of the Obligor to the payment of any Purchased Receivable
(including, without limitation, a defense based on such Purchased Receivable 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 Purchased Receivable or the
furnishing or failure to furnish such merchandise or services, (y) a failure by
any Seller to perform its duties or obligations under this Agreement or (z) the
sale of any Purchased Receivable that is designated on the applicable Daily
Report
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to be an Eligible Receivable and is determined to have been at the date of
such sale not an Eligible Receivable).
Without limiting or being limited by the foregoing, but subject to the
final proviso in the immediately preceding paragraph, the Sellers (other than
those Sellers from which the Company has no Receivables outstanding at such
time), jointly and severally, indemnify the Company from and against any and all
Indemnified Liabilities relating to or resulting from:
(a) the transfer by any Seller of any interest in any Receivable or
Receivables Property or proceeds thereof to any Person other than the
Company;
(b) reliance on any representation or warranty or statement made or
deemed made by any Seller (or any of its officers) under or in connection
with this Agreement or in any certificate or report delivered pursuant
hereto that, in either case, shall have been false or incorrect in any
material respect when made or deemed made;
(c) the failure by any Seller to comply with any applicable law, rule
or regulation of any governmental authority with respect to any Receivable
or Receivables Property, or the nonconformity of any Receivable or
Receivables Property with any such applicable law, rule or regulation;
(d) the failure to vest and maintain vested in the Company an
ownership interest in any Receivable or Receivables Property, free and
clear of any Lien, other than a Lien arising under the Transaction
Documents, whether existing at the time of the purchase of such Receivable
or Receivables Property or at any time thereafter;
(e) the failure to file, or any delay in filing, financing statements
or other similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws with respect to any Receivables or
Receivables Property of any Seller;
(f) any dispute, claim, offset or defense (other than discharge in
bankruptcy of a Seller) of the Obligor to the payment of any Receivable of
any Seller (including, without limitation, a defense based on such
Receivable or the related Contract not being fully enforceable against the
Obligor 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;
(g) any failure of any Seller to perform its duties or obligations
under this Agreement or the Transaction Documents;
(h) any products liability claim arising out of or in connection with
merchandise, insurance or services that are the subject of any Receivable
or Receivables Property;
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(i) the commingling of Collections of Receivables at any time with
other funds of any Seller;
(j) any claim involving environmental liability that relates to any
property that has been, is now or hereafter will be owned, leased, operated
or otherwise used by any Seller;
(k) any tax or governmental fee or charge (but not including
franchise taxes and taxes upon or measured by net income of the Company),
all interest and penalties thereon or with respect thereto, and all out-of-
pocket costs and expenses, including the reasonable fees and expenses of
counsel in defending against the same, which may arise by reason of the
purchase or ownership of any Receivable or Receivables Property, or any
interest therein or in any goods which secure any such Receivables, any
Receivables Property or any other rights or assets transferred hereunder;
or
(l) any investigation, litigation or proceeding related to this
Agreement or in respect of any Receivable or Receivables Property of any
Seller.
Section 7.02. INDEMNITIES BY THE COMPANY. Without limiting any other
rights that the Sellers may have hereunder or under applicable law, the Company
hereby agrees to indemnify each Seller from and against any and all claims,
losses and liabilities (including reasonable attorneys' fees) arising out of or
resulting from such Seller's reliance on any representation or warranty made by
the Company in this Agreement or in any certificate delivered pursuant hereto
that, in either case, shall have been false or incorrect in any material respect
when made or deemed made; PROVIDED that any payments made by the Company in
respect of any of the foregoing items shall be made solely from funds available
to the Company which are not otherwise required to be applied to the payment of
any amounts pursuant to any Pooling and Servicing Agreements (other than to the
Company), shall be non-recourse other than with respect to such funds and shall
not constitute a claim against the Company to the extent that insufficient funds
exist to make such payment.
ARTICLE VIII
SUBORDINATED NOTE
Section 8.01. SUBORDINATED NOTE. (a) On the initial Effective Date,
the Company shall issue to each Seller a subordinated note substantially in the
form of EXHIBIT A (as amended, supplemented or otherwise modified from time to
time, the "SUBORDINATED NOTE"). The aggregate principal amount of the
Subordinated Note at any time shall be equal to the difference between (a) the
aggregate principal amount on the issuance thereof and each addition to the
principal amount of such Subordinated Note with respect to each Seller pursuant
to the terms of Section 2.03 as of such time, MINUS (b) the aggregate amount of
all payments made in respect of the principal of such Subordinated Note as of
such time. All payments made in respect of the Subordinated Note shall be
allocated among the Sellers by the Servicer. Each Seller's interest in the
Subordinated Note shall equal the sum of each addition thereto allocated to such
Seller pursuant to subsection 2.03(d) less the sum of each repayment thereof
allocated to such Seller. Interest on the outstanding principal amount of
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42
the Subordinated Note shall accrue on the last day of each Settlement Period
at a rate per annum equal to the Reference Rate in effect from time to time
plus 2% from and including the initial Effective Date to but excluding the
last day of each Settlement Period and shall be paid (x) on each Distribution
Date with respect to the principal amount of the Subordinated Note
outstanding from time to time during the Settlement Period immediately
preceding such Distribution Date and/or (y) on the maturity date thereof.
Principal hereunder not paid or prepaid pursuant to the terms hereof shall be
payable on the maturity date of the Subordinated Note. Default in the
payment of principal or interest under the Subordinated Note shall not
constitute a Purchase Termination Event under this Agreement, a Servicer
Default under any Servicing Agreement or an Early Amortization Event under
the Pooling Agreement or any Supplement thereto.
Section 8.02. RESTRICTIONS ON TRANSFER OF SUBORDINATED NOTE. Neither
the Subordinated Note, nor any right of any Seller to receive payments
thereunder, shall be assigned, transferred, exchanged, pledged, hypothecated,
participated or otherwise conveyed.
Section 8.03. AGGREGATE AMOUNT. Anything herein to the contrary
notwithstanding, the Company may not make any payment of any Purchase Price in
the form of Indebtedness of the Company under the Subordinated Note unless the
aggregate principal amount of Indebtedness evidenced by the Subordinated Note,
incurred on or before such Payment Date and outstanding on such Payment Date
(after giving effect to all repayments thereof on or before such Payment Date)
would not exceed 25% of the outstanding balance of the Receivables on such
Payment Date, unless such Seller shall be satisfied (and for purposes hereof, in
the absence of notice to the contrary by such Seller to the Company and the
Trustee, such Seller shall be deemed satisfied) that, in the ordinary course of
its business, the Company will pay the principal of, and interest on, such
Indebtedness in accordance with the terms thereof.
ARTICLE IX
MISCELLANEOUS
Section 9.01. AMENDMENT. Neither this Agreement nor any of the terms
hereof may be amended, supplemented or modified except in a writing signed by
the Company and the Sellers. Any amendment, supplement or modification shall
not be effective until the Rating Agency Condition, if applicable, has been
satisfied.
Section 9.02. NOTICES, ETC. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by
certified mail, postage-prepaid, by facsimile or by overnight courier, to the
intended party at the address or facsimile number of such party set forth under
its name on the signature pages hereof or at such other address or facsimile
number as shall be designated by such party in a written notice to the other
parties hereto given in accordance with this Section 9.02. Copies of all
notices and other communications provided for hereunder shall be delivered, if
to the Trustee, at its address at 450 West 33rd Street, New York, New York
10001, Attention: Structured Finance Services, and if to the Servicer, at its
address set forth on SCHEDULE 4. All notices and communications
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43
provided for hereunder shall be effective, (a) if personally delivered by
express mail or courier, when received, (b) if sent by certified mail, three
Business Days after having been deposited in the mail, postage prepaid and
(c) if transmitted by facsimile, when sent, receipt confirmed by telephone or
electronic means.
Section 9.03. NO WAIVER; REMEDIES. No failure on the part of the
Company, the Sellers or the Agents 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 9.04. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the Sellers and the Company and their
respective successors (whether by merger, consolidation or otherwise) and
assigns. Each Seller agrees that it will not assign or transfer all or any
portion of its rights or obligations hereunder without the prior written consent
of the Company and the Trustee. Each Seller hereby acknowledges and consents to
the assignment by the Company of the Receivables and Receivables Property and
the rights of the Company under this Agreement pursuant to the Pooling and
Servicing Agreements. The Company may not otherwise assign or transfer all or
any portion of its rights or obligations hereunder without the prior written
consent of the Sellers, except rights relating to the Receivables and the
Receivables Property and the rights to receive payments hereunder. Each Seller
hereby acknowledges and consents that the Company will grant a security interest
in the Lockbox Accounts, the Collection Account and the Eligible Segregated
Accounts to the Trust for the benefit of the Certificateholders. Each Seller
agrees to take any action that the Company or the Trust may reasonably request
in connection with such assignment or security interest. Each Seller agrees
that the Trustee shall be entitled to enforce the terms of this Agreement and
the rights (including, without limitation, the right to grant or withhold any
consent or waiver or give any notice) of the Company directly against such
Seller, whether or not a Purchase Termination Event or a Termination Event has
occurred and that no consent, waiver or notice given hereunder by the Company
shall be effective unless the Trustee has given its written consent thereto.
Each of the Trustee and the Certificateholders shall have the rights of
third-party beneficiaries under this Agreement.
Section 9.05. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS
AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH
SUCH LAWS, EXCEPT AS REQUIRED BY MANDATORY PROVISIONS OF LAW AND EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PROTECTION OF THE COMPANY'S OWNERSHIP OF THE
RECEIVABLES AND RECEIVABLES PROPERTY, OR REMEDIES HEREUNDER IN RESPECT THEREOF,
MAY BE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Section 9.06. WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
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44
DEFEND ANY RIGHTS UNDER OR RELATING TO THIS AGREEMENT, ANY OTHER TRANSACTION
DOCUMENT, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR
ARISING FROM ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER
VERBAL OR WRITTEN), ACTIONS OF ANY OF THE PARTIES HERETO OR ANY OTHER
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
TRANSACTION DOCUMENT, AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.
Section 9.07. JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a)
Each party hereto hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Transaction Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of any
such action or proceeding may be heard and determined in such New York State or,
to the extent permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law. Nothing in this Agreement shall affect any
right that the Company may otherwise have to bring any action or proceeding
relating to this Agreement or the other Transaction Documents against any Seller
or its properties in the courts of any jurisdiction.
(b) Each party hereto hereby irrevocably and unconditionally waives,
to the fullest extent they may legally and effectively do so, any objection
which it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the other Transaction
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the defense
of an inconvenient forum to the maintenance of such action or proceeding in any
such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.02. Nothing in this
Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
Section 9.08. INTEGRATION. This Agreement and the other Transaction
Documents contain a final and complete integration of all prior expressions by
the parties hereto with respect to the subject matter hereof and thereof and
shall together constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and thereof, superseding all prior oral or
written understandings.
Section 9.09. CAPTIONS AND CROSS REFERENCES. The various captions
(including, without limitation, the table of contents) in this Agreement are
provided solely for convenience of reference and shall not affect the meaning or
interpretation of any provision of this Agreement. Unless otherwise provided
herein, references in this Agreement to any
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"Section," "EXHIBIT," "ANNEX" or "SCHEDULE" are to such Section of or Exhibit
or Annex or Schedule to this Agreement, as the case may be.
Section 9.10. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
Section 9.11. NO PETITION IN BANKRUPTCY. Each Seller covenants and
agrees that prior to the date which is one year and one day after the date of
termination of this Agreement pursuant to Section 9.14, it will not institute
against or join any other Person in instituting against the Company any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of the United States or any State of
the United States.
Section 9.12. ADDITION OF SELLERS. Subject to the terms and
conditions hereof, from time to time one or more wholly-owned Subsidiaries of
Core-Mark may become additional Sellers parties hereto. If any such Subsidiary
wishes to become an additional Seller, it shall submit a request to such effect
in writing to the Company. The Company, in its sole and absolute discretion,
may, subject to the terms and provisions of the Pooling and Servicing
Agreements, agree to or deny any such request, PROVIDED that, if the Company
shall have failed to respond to any such request within 30 days after receipt
thereof, such request shall be deemed to have been denied. If the Company shall
have agreed to any such request, such wholly-owned Subsidiary shall become an
additional Seller party hereto on the related Seller Addition Date upon
satisfaction of the conditions set forth in Section 3.02 and the conditions, if
any, set forth in the Pooling and Servicing Agreements.
Section 9.13. TREATMENT OF SELLERS OTHER THAN CORE-MARK;
TERMINATION THEREOF. (a) Core-Mark hereby covenants and agrees with the
Company that Core-Mark shall not permit any Seller (other than Core-Mark) at
any time to cease to be a wholly-owned Subsidiary of Core-Mark, except as
provided in the following paragraph (b).
(b) If Core-Mark wishes to permit any Seller (other than Core-Mark)
to cease to be a wholly-owned Subsidiary of Core-Mark, then Core-Mark shall
submit a request (a "SELLER TERMINATION REQUEST") to such effect in writing to
the Company, which request shall be accompanied by a certificate prepared by a
Responsible Officer of the Servicer indicating the Purchased Receivables
Percentage applicable to such Seller as of the date of submission of such
request (the "SELLER TERMINATION REQUEST DATE"). The Company, in its sole
and absolute discretion may, subject to the terms and provisions hereof and
of the Pooling and Servicing Agreements, consent to or deny any such Seller
Termination Request, PROVIDED that, if the Company shall have failed to
respond to any such Seller Termination Request within 30 days after receipt
thereof, such Seller Termination Request shall be deemed to have been denied.
If the Company shall have consented to any such Seller Termination Request,
and such consent shall not be in violation of any applicable provision of the
Pooling and Servicing Agreements, then the relevant Seller shall be
terminated as a Seller hereunder immediately upon the consummation of the
transaction in connection with which such Seller ceases to be a wholly-owned
Subsidiary of Core-Mark; PROVIDED that, if the Purchased Receivables
Percentage applicable to such Seller as of the relevant Seller Termination
Request
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46
Date is less than 10%, then the Company shall consent to such Seller
Termination Request unless such consent would violate the terms and
provisions of the Pooling and Servicing Agreements. From and after the date
any such Seller is terminated as a Seller pursuant to this subsection, the
Company shall cease buying Receivables and Receivables Property from such
Seller. Each such Seller shall be released as a Seller party hereto for all
other purposes and shall cease to be a party hereto on such termination date.
(c) A terminated Seller shall have no further obligation under any
Transaction Document, other than pursuant to Section 2.06, to repurchase
Receivables previously sold by it to the Company.
Section 9.14. TERMINATION. This Agreement will terminate at such
time as (a) an Early Termination shall have occurred with respect to all Sellers
herewith and (b) all Receivables purchased hereunder have been collected, and
the proceeds thereof turned over to the Company and all other amounts owing to
the Company hereunder shall have been paid in full or, if Receivables sold
hereunder have not been collected, such Receivables have become Defaulted
Receivables and the Company shall have completed its collection efforts with
respect thereto; PROVIDED, HOWEVER, that the indemnities of the Sellers to the
Company set forth in Article 7 of this Agreement shall survive such termination
and PROVIDED further that the Company shall remain entitled to receive any
Collections on Receivables sold hereunder which have become Defaulted
Receivables.
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47
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.
THE SELLERS:
Core-Mark International, Inc.
By: /s/ LEO F. KORMAN
------------------------------------
Name: Leo F. Korman
Title: Sr. VP & CFO
Address:
395 Oyster Point Blvd.
Suite 415
South San Francisco, CA 94080
Telephone: (650) 589-9445
Facsimile: (650) 589-4010
Core-Mark Midcontinent, Inc.
By: /s/ LEO F. KORMAN
------------------------------------
Name: Leo F. Korman
Title: Sr. VP & CFO
Address:
395 Oyster Point Blvd.
Suite 415
South San Francisco, CA 94080
Telephone: (650) 589-9445
Facsimile: (650) 589-4010
Core-Mark Interrelated Companies, Inc.
By: /s/ LEO F. KORMAN
------------------------------------
Name: Leo F. Korman
Title: Sr. VP & CFO
Address:
395 Oyster Point Blvd.
Suite 415
<PAGE>
48
South San Francisco, CA 94080
Telephone: (650) 589-9445
Facsimile: (650) 589-4010
THE COMPANY:
CM Capital Corporation
By: /s/ ROBERT A. ALLEN
------------------------------------
Name: Robert A. Allen
Title: President & CEO
Address:
395 Oyster Point Blvd.
Suite 415, Room A
South San Francisco, CA 94080
Telephone: (650) 589-9445
Facsimile: (650) 589-4010
THE SERVICER:
Core-Mark International, Inc.
By: /s/ LEO F. KORMAN
------------------------------------
Name: Leo F. Korman
Title: Sr. VP & CFO
Address:
395 Oyster Point Blvd.
Suite 415
South San Francisco, CA 94080
Telephone: (650) 589-9445
Facsimile: (650) 589-4010
<PAGE>
SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENTAGE
STATE OF DATE OF SHARE SHARES OF SHARES
NAME OF SUBSIDIARY INCORPORATION INCORPORATION AUTHORIZED OUTSTANDING OUTSTANDING
- ------------------ ------------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASI-OFFICE AUTOMATION, INC. California 5/26/78 C: 300,000 C: 75,000 25%
P: 150,000 P: 0 0%
Series A
Sole Shareholder:
Marquise Ventures Company, Inc.
BINGO CASH & CARRY, INC. California 2/26/81 C: 50,000 C: 25,000 50%
P: 5,000 P: 1,000 20%
Series A
Sole Shareholder:
Corae-Mark Interrelated
Companies, Inc.
C/M PRODUCTS, INC. California 7/19/98 C: 1,000 C: 100 10%
P: N/A P: N/A N/A
E.A. MORRIS DISTRIBUTORS, LIMITED Canada 1/20/82 C: 10,000 C: 1 less than .01%
P: N/A P: N/A N/A
Sole Shareholder:
Core-Mark International Inc.
</TABLE>
<PAGE>
SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENTAGE
STATE OF DATE OF SHARE SHARES OF SHARES
NAME OF SUBSIDIARY INCORPORATION INCORPORATION AUTHORIZED OUTSTANDING OUTSTANDING
- ------------------ ------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
CORE-MARK INTERRELATED California 4/14/75 C: 1,000,000 C: 1,000,000 100%
P: N/A P: N/A N/A
Sole Shareholder:
Core-Mark International Inc.
CORE-MARK MIDCONTINENT, INC. Arkansas 7/2/81 C: 2,000 C: 2,000 100%
P: N/A P: N/A N/A
Sole Shareholder:
Core-Mark International Inc.
CORE-MARK VIDEO, INC. California 11/5/80 C: 100,000 C: 100,000 100%
P: N/A P: N/A N/A
Sole Shareholder:
Core-Mark Interrelated
Companies, Inc.
CORE-MARK WOOD PRODUCTS, INC. California 12/15/87 C: 100,000 C: 100 .10%
P: N/A P: N/A N/A
Sole Shareholder:
Core-Mark Interrelated
Companies, Inc.
</TABLE>
<PAGE>
SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENTAGE
STATE OF DATE OF SHARE SHARES OF SHARES
NAME OF SUBSIDIARY INCORPORATION INCORPORATION AUTHORIZED OUTSTANDING OUTSTANDING
- ------------------ ------------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
FOAM MERCHANTS CORPORATION California 6/1/88 C: 1,000 C: 100 10%
P: N/A P: N/A N/A
Sole Shareholder:
Core-Mark Interrelated
Companies, Inc.
GENERAL ACCEPTANCE CORPORATION California 6/10/83 C: 400,000 C: 200 .05%
P: N/A P: N/A N/A
Sole Shareholder:
Core-Mark Interrelated
Companies, Inc.
LCLC ACQUISITION CORPORATION Delaware 10/25/88 C: 5,000 C: 1,000 20%
P: 5,000 P: 1,000 20%
Series A
Sole Shareholder:
Core-Mark Interrelated
Companies, Inc.
MARQUISE VENTURES COMPANY, INC. California 7/26/84 C: 75,000 C: 75,000 100%
P: N/A P: N/A N/A
Sole Shareholder:
Core-Mark International, Inc.
</TABLE>
<PAGE>
SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENTAGE
STATE OF DATE OF SHARE SHARES OF SHARES
NAME OF SUBSIDIARY INCORPORATION INCORPORATION AUTHORIZED OUTSTANDING OUTSTANDING
- ------------------ ------------- ------------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
RUSSELLVILLE TOBACCO COMPANY Arkansas 11/26/76 C: 1,000 C: 150 15%
P: N/A P: N/A N/A
Sole Shareholder:
Core-Mark International Inc.
SJL PRODUCTS, INC. California 3/4/83 C: 7,500 C: 300 4%
P: N/A P: N/A N/A
Sole Shareholder:
Core-Mark Interrelated Companies, Inc.
CM Capital Corporation Delaware 4/1/98 C: 1000 C: 1000 100%
Sole Shareholder:
Core-Mark International Inc.
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 12,971
<SECURITIES> 0
<RECEIVABLES> 111,339
<ALLOWANCES> 2,728
<INVENTORY> 77,394
<CURRENT-ASSETS> 206,259
<PP&E> 59,069
<DEPRECIATION> 31,241
<TOTAL-ASSETS> 307,990
<CURRENT-LIABILITIES> 136,096
<BONDS> 162,625
0
0
<COMMON> 55
<OTHER-SE> (50)
<TOTAL-LIABILITY-AND-EQUITY> 307,990
<SALES> 1,172,271
<TOTAL-REVENUES> 1,172,271
<CGS> 1,087,160
<TOTAL-COSTS> 73,050
<OTHER-EXPENSES> 1,573
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,988
<INCOME-PRETAX> 2,500
<INCOME-TAX> 1,149
<INCOME-CONTINUING> 1,351
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,351
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>