<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 001-13279
UNOVA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4647021
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
21900 BURBANK BLVD.
WOODLAND HILLS, CALIFORNIA 91367-7418
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (818) 992-3000
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. Yes [X] No [ ]
On July 30, 1999 there were 55,181,907 shares of Common Stock outstanding,
exclusive of treasury shares.
Page 1 of 14
<PAGE>
UNOVA, INC.
INDEX
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
<S> <C> <C> <C>
Consolidated Statements of Operations
Six Months Ended June 30, 1999 (unaudited)
and June 30, 1998 (unaudited) 3
Consolidated Statements of Operations
Three Months Ended June 30, 1999 (unaudited)
and June 30, 1998 (unaudited) 4
Consolidated Balance Sheets
June 30, 1999 (unaudited) and December 31, 1998 (unaudited) 5
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1999 (unaudited)
and June 30, 1998 (unaudited) 6
Notes to Consolidated Financial Statements (unaudited) 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNOVA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
Sales and Service Revenues $ 987,831 $ 678,627
------------ ------------
Costs and Expenses
Cost of sales 703,335 440,079
Selling, general and administrative 221,436 175,098
Depreciation and amortization 32,714 24,569
Interest, net 19,005 9,774
------------ ------------
Total Costs and Expenses 976,490 649,520
------------ ------------
Earnings before Taxes on Income 11,341 29,107
Taxes on Income (4,536) (12,109)
------------ ------------
Net Earnings $ 6,805 $ 16,998
------------ ------------
------------ ------------
Basic and Diluted Earnings per Share $ 0.12 $ 0.31
------------ ------------
------------ ------------
Shares Used in Computing Basic
Earnings per Share 54,944,359 54,511,388
Shares Used in Computing Diluted
Earnings per Share 54,947,033 54,672,525
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
UNOVA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
---------------------------
1999 1998
------------ ------------
<S> <C> <C>
Sales and Service Revenues $ 494,431 $ 345,222
------------ ------------
Costs and Expenses
Cost of sales 351,026 221,780
Selling, general and administrative 111,768 89,352
Depreciation and amortization 16,131 12,929
Interest, net 9,923 5,337
------------ ------------
Total Costs and Expenses 488,848 329,398
------------ ------------
Earnings before Taxes on Income 5,583 15,824
Taxes on Income (2,233) (6,583)
------------ ------------
Net Earnings $ 3,350 $ 9,241
------------ ------------
------------ ------------
Basic and Diluted Earnings per Share $ 0.06 $ 0.17
------------ ------------
------------ ------------
Shares Used in Computing Basic
Earnings per Share 54,945,613 54,512,570
Shares Used in Computing Diluted
Earnings per Share 54,950,064 54,832,912
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
UNOVA, INC.
CONSOLIDATED BALANCE SHEETS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------ --------------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 11,273 $ 17,708
Accounts receivable, net 591,664 662,885
Inventories, net of progress billings 304,120 336,005
Deferred tax assets 163,392 141,773
Other current assets 16,209 21,129
----------- -----------
Total Current Assets 1,086,658 1,179,500
----------- -----------
Property, Plant and Equipment, at Cost 482,500 464,387
Less Accumulated Depreciation (189,891) (178,216)
----------- -----------
Property, Plant and Equipment, Net 292,609 286,171
----------- -----------
Goodwill and Other Intangibles, Net 415,383 400,164
----------- -----------
Other Assets 119,691 113,381
----------- -----------
Total Assets $ 1,914,341 $ 1,979,216
----------- -----------
----------- -----------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Accounts payable and accrued expenses $ 382,784 $ 456,812
Payroll and related expenses 92,888 93,199
Notes payable and current portion of long-term obligations 220,787 237,276
----------- -----------
Total Current Liabilities 696,459 787,287
----------- -----------
Long-term Obligations 366,332 366,487
----------- -----------
Deferred Tax Liabilities 52,397 42,154
----------- -----------
Other Long-term Liabilities 95,076 81,863
----------- -----------
Commitments and Contingencies
Shareholders' Investment
Common stock 552 549
Additional paid-in capital 648,863 645,054
Retained earnings 68,477 61,672
Accumulated other comprehensive income -
cumulative currency translation adjustment (13,815) (5,850)
----------- -----------
Total Shareholders' Investment 704,077 701,425
----------- -----------
Total Liabilities and Shareholders' Investment $ 1,914,341 $ 1,979,216
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
UNOVA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(THOUSANDS OF DOLLARS)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
1999 1998
-------- --------
<S> <C> <C>
Cash and Cash Equivalents at Beginning of Period $ 17,708 $ 13,685
-------- --------
Cash Flows from Operating Activities:
Net earnings 6,805 16,998
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 32,714 24,569
Proceeds from sale of accounts receivable 82,000
Deferred taxes (10,326) 8,716
Change in accounts receivable (13,530) (30,625)
Change in inventories 30,342 (31,937)
Change in other current assets 2,645 7,560
Change in accounts payable and accrued expenses (87,814) (1,947)
Change in payroll and related expenses (6,721) 103
Change in prepaid pension costs, net (8,554) (7,369)
Other operating activities 5,722 1,440
-------- --------
Net Cash Provided by (Used in) Operating Activities 33,283 (12,492)
-------- --------
Cash Flows from Investing Activities:
Capital expenditures (35,220) (30,777)
Acquisition of businesses, net of cash acquired (20,100)
Proceeds from sale of property, plant and equipment 1,348 5,180
Other investing activities 7,696 (3,296)
-------- --------
Net Cash Used in Investing Activities (26,176) (48,993)
-------- --------
Cash Flows from Financing Activities:
Proceeds from borrowings 108,360 289,507
Repayment of borrowings (125,091) (223,611)
Other financing activities 3,189 3,255
-------- --------
Net Cash Provided by (Used in) Financing Activities (13,542) 69,151
-------- --------
Resulting in Increase (Decrease) in Cash and Cash Equivalents (6,435) 7,666
-------- --------
Cash and Cash Equivalents at End of Period $ 11,273 $ 21,351
-------- --------
-------- --------
Supplemental disclosure of cash flow information
Interest paid $ 19,885 $ 6,900
Income taxes refunded $ 274 $ 6,863
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
UNOVA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1999
(UNAUDITED)
1. UNOVA, Inc. ("UNOVA" or the "Company") became an independent public
company on October 31, 1997, when all of the UNOVA common stock was
distributed to holders of common stock of Western Atlas Inc. ("WAI") in
the form of a dividend. Every WAI shareholder of record on October 24,
1997 was entitled to receive one share of UNOVA common stock for each WAI
share of common stock held.
The amounts included in this report are unaudited; however in the opinion
of management, all adjustments necessary for a fair presentation of
results of operations, financial position and cash flows for the stated
periods have been included. These adjustments are of a normal recurring
nature. It is suggested that these consolidated financial statements be
read in conjunction with the audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998. The results of operations for the interim
periods presented are not necessarily indicative of operating results for
the entire year.
2. Inventories, net of progress billings consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
---------- -----------
(THOUSANDS OF DOLLARS)
<S> <C> <C>
Raw materials and work in process $ 299,830 $ 285,470
Finished goods 53,797 85,797
Less progress billings (49,507) (35,262)
---------- ----------
Inventories, net of progress billings $ 304,120 $ 336,005
---------- ----------
---------- ----------
</TABLE>
3. Interest, net was composed of the following:
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
---------------------- ----------------------
(THOUSANDS OF DOLLARS) (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Interest expense $ 19,519 $ 11,022 $ 9,931 $ 5,905
Interest income (514) (1,248) (8) (568)
-------- -------- -------- --------
Interest, net $ 19,005 $ 9,774 $ 9,923 $ 5,337
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
4. For the six and three months ended June 30, 1999, basic earnings per
share was calculated using the weighted average number of common shares
outstanding for the periods while diluted earnings per share was
computed on the basis of the weighted average number of common shares
outstanding plus the weighted average dilutive effect of stock options
outstanding during the period using the "treasury stock" method.
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. (continued)
Shares used for basic and diluted earnings per share were computed as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
Weighted average common shares-Basic 54,944,359 54,511,388 54,945,613 54,512,570
Dilutive effect of stock options 2,674 161,137 4,451 320,342
---------- ---------- ---------- ----------
Weighted average shares - Diluted 54,947,033 54,672,525 54,950,064 54,832,912
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
At June 30, 1999, UNOVA employees and directors held options to purchase
3,957,100 shares of Company common stock that were antidilutive to the
diluted earnings per share computation. These options could become
dilutive in future periods if the average market price of the Company's
common stock exceeds the exercise price of the outstanding options.
5. The Company's comprehensive income (loss) was computed as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
----------------------- -------------------------
(THOUSANDS OF DOLLARS) (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
Net earnings $ 6,805 $16,998 $ 3,350 $ 9,241
Foreign currency translation
adjustments (7,965) 2,392 (3,854) 643
--------- ------- ------- -------
Comprehensive income (loss) $(1,160) $19,390 $ (504) $ 9,884
--------- ------- ------- -------
--------- ------- ------- -------
</TABLE>
6. The Company manages and reports its operations in two business
segments: the Automated Data Systems segment and the Industrial
Automation Systems segment. The Company uses operating profit, which is
defined as earnings before taxes on income, net interest expense, and
corporate and other amounts, to evaluate performance. Corporate and
other amounts include corporate operating costs and currency
transaction gains and losses. There were no material intersegment
transactions.
OPERATIONS BY BUSINESS SEGMENT
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
SIX MONTHS INDUSTRIAL AUTOMATED CORPORATE
ENDED AUTOMATION DATA AND OTHER
JUNE 30, SYSTEMS SYSTEMS AMOUNTS TOTAL
---------- ---------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
Sales 1999 $ 569.4 $ 418.4 $ 987.8
1998 296.6 382.0 678.6
Operating profit (loss) 1999 34.2 10.3 $ (14.2) 30.3
1998 26.1 25.5 (12.7) 38.9
</TABLE>
8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. (continued)
<TABLE>
<CAPTION>
THREE MONTHS INDUSTRIAL AUTOMATED CORPORATE
ENDED AUTOMATION DATA AND OTHER
JUNE 30, SYSTEMS SYSTEMS AMOUNTS TOTAL
----------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Sales 1999 $ 284.0 $ 210.4 $ 494.4
1998 150.1 195.1 345.2
Operating profit (loss) 1999 20.3 2.7 $ (7.5) 15.5
1998 15.0 13.9 (7.7) 21.2
</TABLE>
7. In June 1999, a financing subsidiary of UNOVA sold undivided
interests in a revolving pool of the Company's trade accounts
receivable to a financial institution which issues its short-term
debt backed by receivables acquired in similar transactions.
Proceeds from the sale, which totaled approximately $82.0 million,
were used to reduce debt and the sold receivables have been excluded
from the June 30, 1999, consolidated balance sheet. Under the terms
of the agreement with the financial institution ("Receivable
Agreement"), the financing subsidiary of UNOVA is eligible to
receive additional proceeds totaling approximately $20.0 million
from the future sale of undivided interests in the trade accounts
receivable.
8. In October 1998, UNOVA acquired the machine tool business of Cincinnati
Milacron, which was renamed Cincinnati Machine, a UNOVA Company
("Cincinnati Machine") for approximately $187.3 million in cash. During
the second quarter of 1999, the Company recorded adjustments to the
preliminary allocation of the purchase price among the fair value of
the acquired assets and liabilities. These adjustments, which were
offset to goodwill, included approximately $19.8 million of additional
liabilities for costs to exit certain activities and to terminate
employees at Cincinnati Machine's domestic and foreign locations and
$4.1 million for additional postretirement obligation and pension
liabilities. Cincinnati Machine is currently in the process of exiting
these activities and terminating employees and expects to substantially
complete this process in the third quarter of 1999. At June 30, 1999,
accounts payable and accrued expenses included approximately $9.3
million of these additional exit and termination costs. All of the
$4.1 million of additional postretirement obligation and pension
liabilities remained on the June 30, 1999, consolidated balance sheet.
The Company is continuing to assess the valuation of the acquired
assets and liabilities and may revise these amounts in the third
quarter of 1999.
9. In 1999, UNOVA moved its executive offices to a leased facility that
is owned by the UNOVA Master Trust, a vehicle which holds the assets
of the Company's major U.S. pension plans ("UNOVA Master Trust").
The Company is currently awaiting Department of Labor approval of
the lease agreement under provisions of the Employee Retirement
Income Security Act of 1974 governing transactions between pension
plans and related parties. The lease agreement between the Company
and the UNOVA Master Trust was consummated on terms equivalent to an
arm's-length transaction. Rental expense under the provisions of this
lease was not material.
9
<PAGE>
UNOVA, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales and service revenues and segment operating profit for the six and three
months ended June 30, 1999 and 1998 are summarized below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
---------------------------- -------------------------
(THOUSANDS OF DOLLARS) (THOUSANDS OF DOLLARS)
<S> <C> <C> <C> <C>
SALES AND SERVICE REVENUES
Industrial Automation Systems $569,405 $296,644 $283,990 $150,105
Automated Data Systems 418,426 381,983 210,441 195,117
-------- -------- -------- --------
Total Sales and Service Revenues $987,831 $678,627 $494,431 $345,222
-------- -------- -------- --------
-------- -------- -------- --------
SEGMENT OPERATING PROFIT
Industrial Automation Systems $ 34,178 $ 26,103 $ 20,296 $ 14,982
Automated Data Systems 10,315 25,539 2,665 13,892
-------- -------- -------- --------
Total Segment Operating Profit $ 44,493 $ 51,642 $ 22,961 $ 28,874
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
Total sales and service revenues increased $309.2 million or 46% for the six
months ended June 30, 1999 compared with the corresponding prior period.
Total segment operating profit decreased $7.1 million or 14% for the six
months ended June 30, 1999 compared with the corresponding prior period.
Total sales and service revenues increased $149.2 million or 43% for the
three months ended June 30, 1999 compared with the corresponding prior
period. Total segment operating profit decreased $5.9 million or 20% for the
three months ended June 30, 1999 compared with the corresponding prior period.
IAS segment sales increased $272.8 million or 92% and related operating
profit increased $8.1 million or 31% for the six months ended June 30, 1999
compared with the corresponding prior period. For the three months ended June
30, 1999, IAS revenues increased $133.9 million or 89% while related
operating profit increased $5.3 million or 35%, compared with the
corresponding prior period. The increase in revenues is primarily due to the
acquisitions of Cincinnati Machine and R&B Machine Tool and the increase in
activity at the automotive-related manufacturing systems operations. The
increase in operating profit was due to the increase in activity for the
automotive-related manufacturing systems offset by costs associated with
product and operational process problems at Lamb Honsberg in Germany. IAS
backlog was $861.1 million at June 30, 1999.
In October 1998, UNOVA acquired the machine tool business of Cincinnati
Milacron, which was renamed Cincinnati Machine, a UNOVA Company ("Cincinnati
Machine") for approximately $187.3 million in cash. During the second quarter
of 1999, the Company recorded adjustments to the preliminary allocation of
the purchase price among the fair value of the acquired assets and
liabilities. These adjustments, which were offset to goodwill, included
approximately $19.8 million of additional liabilities for costs to exit
certain activities and to terminate employees at Cincinnati Machine's
domestic and foreign locations and $4.1 million for additional postretirement
obligation and pension liabilities. Cincinnati Machine is currently in the
process of exiting these activities and terminating employees and expects to
substantially complete this process in the third quarter of 1999. At June 30,
1999, accounts payable and accrued expenses included approximately $9.3
million of these additional exit and termination costs. All of the $4.1
million of additional postretirement obligation and pension liabilities
remained on the June 30, 1999, consolidated balance sheet. The Company is
continuing to assess the valuation of the acquired assets and liabilities and
may revise these amounts in the third quarter of 1999.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
ADS segment sales increased $36.4 million or 10% and related operating profit
decreased $15.2 million or 60% for the six months ended June 30, 1999
compared with the corresponding prior period. For the three months ended June
30, 1999, ADS revenues increased $15.3 million or 8% while related operating
profit decreased $11.2 million or 81%, compared with the corresponding prior
period. The sales increase is due primarily to the acquisition of Amtech
Systems in May 1998. The decrease in operating profit was the result of
additional operating expenses related to the implementation of a new
management information system at Intermec's main production facility.
Cost of sales as a percentage of sales increased from 65% to 71% from the six
months ended June 30, 1998 to the six months ended June 30, 1999, while
selling, general and administrative expense as a percentage of sales
decreased from 26% to 22% for the same periods. For the three months ended
June 30, cost of sales as a percentage of sales increased from 64% to 71%
from 1998 to 1999, while selling, general and administrative expense as a
percentage of sales decreased from 26% to 23% for the same periods. These
fluctuations are attributable to the change in the business mix of the
Company that resulted from the acquisitions in the IAS segment and an
increase in the activity of this segment. IAS sales increased as a percentage
of total Company sales from 44% for the six months ended June 30, 1998 to 58%
for the six months ended June 30, 1999, while ADS sales decreased from 56% to
42% for the same periods. For the three months ended June 30, IAS sales
increased as a percentage of total Company sales from 43% to 57% from 1998 to
1999, while ADS sales decreased from 57% to 43% for the same periods. The IAS
businesses typically carry higher cost of sales ratios and lower selling,
general and administrative expense ratios compared to the ADS businesses.
Depreciation and amortization increased from $24.6 million to $32.7 million
from the six months ended June 30, 1998 to the six months ended June 30, 1999
and from $12.9 million to $16.1 million from the three months ended June 30,
1998 to the three months ended June 30, 1999. This increase is primarily due
to additional depreciation from acquisitions and an increase in the level of
fixed assets over the prior year periods.
Net interest expense increased from $9.8 million to $19.0 million from the
six months ended June 30, 1998 to the six months ended June 30, 1999 and from
$5.3 million to $9.9 million from the three months ended June 30, 1998 to the
three months ended June 30, 1999. The increase is attributable to an increase
in outstanding debt incurred to finance the 1998 acquisitions of Cincinnati
Machine, R&B Machine Tool, and Amtech Systems and the normal capital
expenditures and working capital needs of the operations.
LIQUIDITY AND CAPITAL RESOURCES
Cash and marketable securities decreased from $17.7 million at December 31,
1998 to $11.3 million at June 30, 1999.
Total debt decreased from $603.8 million at December 31, 1998 to $587.1
million at June 30, 1999. In June 1999, a financing subsidiary of UNOVA sold
undivided interests in the Company's trade accounts receivable with proceeds
totaling approximately $82.0 million. The proceeds were used to reduce
outstanding debt incurred for the normal capital expenditures and working
capital needs of the operations. Under the terms of the Receivable Agreement,
the financing subsidiary of the Company is eligible to receive additional
proceeds totaling approximately $20.0 million from the future sale of
undivided interests in the trade accounts receivable.
The Company has unsecured committed credit facilities with banks from which
it may borrow up to $500.0 million. Under these credit facilities, the
Company may borrow at the prime rate or at rates based on the London Inter
Bank Offered Rate, rates borne by certificates of deposit or other rates that
are mutually acceptable to the banks and the Company. At July 31, 1999,
$350.0 million of these credit facilities was available for the Company's
general use. In addition, the Company maintains other uncommitted credit
facilities and lines of credit of which $26.4 million was available to the
Company at July 31, 1999.
The Company expects that cash flow from operations, along with available
borrowing capacity, will be adequate to meet working capital and capital
expenditure requirements for the next twelve months.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
YEAR 2000
The Year 2000 issue is the result of computer programs designed to define a
year using two digits rather than four. As such, a date sensitive field using
"00" could be recognized as the year 1900 rather than the year 2000,
potentially causing a system failure or other business disruption.
The operating segments of the Company formed internal review teams to address
the Year 2000 issue. The teams were monitored on an ongoing basis by
executive management. As a result of these reviews, the Company has
identified its significant information technology and non-information
technology systems that will require modification to achieve Year 2000
compliance. Internal and external resources are being used to make the
required modifications and test Year 2000 compliance. Although there can be
no assurance that the Company will identify and correct every Year 2000
problem, the Company believes that it has in place a comprehensive program to
identify and correct any such problems. The Company plans to complete the
internal modification and testing process prior to December 31, 1999.
UNOVA is also actively working with its significant suppliers and customers
to assess their Year 2000 compliance efforts and the Company's exposure from
them. While the Company currently does not anticipate problems related to
third party Year 2000 issues, the Company will continue to assess potential
risk from third parties. However, there can be no assurance that Year 2000
problems originating with a supplier or other third party will not occur.
The Company has also assessed the capability of its products to determine
whether they are Year 2000 compliant. The Company believes that all of its
current products are Year 2000 compliant. UNOVA has not tested products that
are no longer sold by the Company and the Company does not believe it is
legally responsible for costs incurred by customers related to ensuring their
Year 2000 capability. However, the Company is providing customer support
services related to Year 2000 issues. UNOVA defines "Year 2000 compliant" as
a product that, when used properly and in conformity with the product
information provided by the Company, will accurately convey data between the
twentieth and twenty-first centuries, including leap year calculations,
provided that all other technology used in combination with the product
properly exchanges data with the UNOVA product.
In addition, the Company has begun internal discussions concerning
contingency planning to address potential problem areas with internal systems
and third parties. If deemed necessary, these contingency plans will be
developed prior to December 31, 1999.
The Company estimates that the total cost of these Year 2000 compliance
activities will be approximately $10.7 million. Of these costs, it is
estimated that approximately $2.1 million are expense items and the remaining
$8.6 million are capitalizable. As of June 30, 1999, the Company has incurred
approximately $7.2 million of Year 2000 cumulative costs of which
approximately $1.2 million was expensed and approximately $6.0 million was
capitalized. These costs and the date on which the Company plans to complete
the Year 2000 modifications are based on management's best estimates, which
were derived utilizing numerous assumptions of future events. However, there
can be no guarantee that these estimates will be achieved and actual results
could differ from those plans. Based on currently available information,
management does not believe that Year 2000 issues will have a material
adverse impact on the Company's financial condition or results of operations.
However, the Year 2000 problem has many aspects and potential consequences,
some of which are not reasonably foreseeable, and there can be no assurance
that unforeseen consequences will not arise.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Reports on Form 8-K: No reports on Form 8-K have been filed by the
Registrant during the quarter ended June 30, 1999.
(b) See Exhibit Index included herein on page E-1.
13
<PAGE>
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.
UNOVA, INC.
(Registrant)
By /s/ Michael E. Keane
-----------------------------
Michael E. Keane
Senior Vice President and
Chief Financial Officer
August 13, 1999
14
<PAGE>
UNOVA, INC.
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
<S> <C>
2.1 Amended and Restated Purchase and Sale Agreement dated August
20, 1998, between UNOVA, Inc., UNOVA Industrial Automation
Systems, Inc., and UNOVA UK Limited, on the one hand, and
Cincinnati Milacron Inc., on the other hand, filed on October
2, 1998 as Exhibit 2 to the Company's Current Report on Form
8-K, and incorporated herein by reference.
3.1 Certificate of Incorporation of UNOVA, Inc., filed on October
22, 1997 as Exhibit 3A to Amendment No. 2 to the Company's
Registration Statement on Form 10 No. 001-13279, and
incorporated herein by reference.
3.2 By-laws of UNOVA, Inc., as amended on February 5, 1999, filed
as Exhibit 3.2 to the Company's 1998 Annual Report on Form
10-K, and incorporated herein by reference.
4.1 $400,000,000 Credit Agreement dated September 24, 1997, among
UNOVA, Inc., the Banks listed therein, and Morgan Guaranty
Trust Company of New York, as Agent, filed on October 1, 1997
as Exhibit 10M to Amendment No. 1 to the Company's
Registration Statement on Form 10 No. 001-13279, and
incorporated herein by reference.
4.2 Amendment No. 1 to the $400,000,000 Credit Agreement, dated
January 15, 1998, filed as Exhibit 4.4 to the Company's 1997
Annual Report on Form 10-K, and incorporated herein by
reference.
4.3 Amendment No. 2 to the $400,000,000 Credit Agreement, dated
May 15, 1998, filed as Exhibit 4.7 to the Company's June 30,
1998 Quarterly Report on Form 10-Q, and incorporated herein by
reference.
4.4 Amendment No. 3 to the $400,000,000 Credit Agreement, dated
September 24, 1998, filed as Exhibit 4.8 to the Company's
September 30, 1998 Quarterly Report on Form 10-Q, and
incorporated herein by reference.
4.5 Rights Agreement dated September 24, 1997, between UNOVA, Inc.
and The Chase Manhattan Bank, as Rights Agent, to which is
annexed the form of Right Certificate as Exhibit A, filed on
October 22, 1997 as Exhibit 3C to Amendment No. 2 to the
Company's Registration Statement on Form 10 No. 001-13279, and
incorporated herein by reference.
4.6 Indenture dated as of March 11, 1998 between the Company and
The First National Bank of Chicago, Trustee, providing for the
issuance of securities in series, filed as Exhibit 4.5 to the
Company's 1997 Annual Report on Form 10-K, and incorporated
herein by reference.
4.7 Form of 6.875% Notes due March 15, 2005 issued by the Company
under such indenture, filed as Exhibit 4.6 to the Company's
1997 Annual Report on Form 10-K, and incorporated herein by
reference.
</TABLE>
E-1
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
<TABLE>
<S> <C>
4.8 Form of 7.00% Notes due March 15, 2008 issued by the Company
under such indenture, filed as Exhibit 4.7 to the Company's
1997 Annual Report on Form 10-K, and incorporated herein by
reference.
4.9 $100,000,000 Credit Agreement dated January 13, 1999, among
UNOVA, Inc., the Banks listed therein, and Morgan Guaranty
Trust Company of New York, as Agent, filed as Exhibit 4.9 to
the Company's 1998 Annual Report on Form 10-K, and
incorporated herein by reference.
4.10 Transfer and Administration Agreement dated June 18, 1999,
among Enterprise Funding Corporation, as Company, KCH Funding,
L.L.C., as Transferor, UNOVA, Inc., Individually and as
Servicer, and Nationsbank, N.A., as Lead Arranger, Agent and
Bank Investor.*
4.11 Receivables Purchase Agreement dated June 18, 1999, between
UNOVA, Inc., as Seller, and KCH Funding, L.L.C., as
Purchaser.*
4.12 Originator Receivables Purchase Agreement dated June 18, 1999,
among UNOVA Industrial Automation Systems, Inc. and Intermec
Technologies Corporation, as Sellers, and UNOVA, Inc., as
Purchaser.*
4.13 Instruments defining the rights of holders of other long-term
debt of the Company are not filed as exhibits because the
amount of debt authorized under any such instrument does not
exceed 10% of the total assets of the Company and its
consolidated subsidiaries. The Company hereby undertakes to
furnish a copy of any such instrument to the Commission upon
request.
10.1 Distribution and Indemnity Agreement dated October 31, 1997,
between Western Atlas Inc. and UNOVA, Inc, filed as Exhibit
10.1 to the Company's September 30, 1997 Quarterly Report on
Form 10-Q, and incorporated herein by reference.
10.2 Tax Sharing Agreement dated October 31, 1997, between Western
Atlas Inc., and UNOVA, Inc., filed as Exhibit 10.2 to the
Company's September 30, 1997 Quarterly Report on Form 10-Q,
and incorporated herein by reference.
10.3 Employee Benefits Agreement dated October 31, 1997, between
Western Atlas Inc., and UNOVA, Inc., filed as Exhibit 10.3 to
the Company's September 30, 1997 Quarterly Report on Form
10-Q, and incorporated herein by reference.
10.4 Intellectual Property Agreement dated October 31, 1997,
between Western Atlas Inc., and UNOVA, Inc., filed as Exhibit
10.4 to the Company's September 30, 1997 Quarterly Report on
Form 10-Q, and incorporated herein by reference.
10.5 Change of Control Employment Agreements with Alton J. Brann,
Michael E. Keane, Norman L. Roberts and certain other officers
of the Company, dated as of October 31, 1997, filed as Exhibit
10.5 to the Company's September 30, 1997 Quarterly Report on
Form 10-Q, and incorporated herein by reference.
10.6 Employment Agreement between Intermec Corporation and Michael
Ohanian, dated May 18, 1995, as amended, filed on August 18,
1997 as exhibit 10J to the Company's Registration Statement on
Form 10 No. 001-13279 and incorporated herein by reference.
</TABLE>
E-2
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
<TABLE>
<S> <C>
10.7 Amendment No. 1 to Employment Agreement between Intermec
Corporation and Michael Ohanian, dated February 28, 1997,
filed as Exhibit 10.18 to the Company's 1997 Annual Report on
Form 10-K, and incorporated herein by reference.
10.8 Amendment No. 2 to Employment Agreement between Intermec
Technologies Corporation and Michael Ohanian, dated February
28, 1998, filed as Exhibit 10.19 to the Company's 1997 Annual
Report on Form 10-K, and incorporated herein by reference.
10.9 Amendment No. 3 to Employment Agreement between Intermec
Technologies Corporation and Michael Ohanian, dated May 20,
1998, filed as Exhibit 10.9 to the Company's 1998 Annual
Report on Form 10-K, and incorporated herein by reference.
10.10 Amendment No. 4 to Employment Agreement between Intermec
Technologies Corporation and Michael Ohanian, dated February
28, 1999, filed as Exhibit 10.10 to the Company's 1998 Annual
Report on Form 10-K, and incorporated herein by reference.
10.11 Amendment No. 5 to Employment Agreement between Intermec
Technologies Corporation and Michael Ohanian, dated May 18,
1999.*
10.12 UNOVA, Inc. Director Stock Option and Fee Plan, filed as
Exhibit 10.7 to the Company's September 30, 1997 Quarterly
Report on Form 10-Q, and incorporated herein by reference.
10.13 UNOVA, Inc. Restoration Plan, filed on August 18, 1997 as
Exhibit 10I to the Company's Registration Statement on Form 10
No. 001-13279 and incorporated herein by reference.
10.14 UNOVA, Inc. Supplemental Executive Retirement Plan, filed on
October 1, 1997 as Exhibit 10H to Amendment No. 1 to the
Company's Registration Statement on Form 10 No. 001-13279 and
incorporated herein by reference.
10.15 Amendment No. 1 to UNOVA, Inc. Supplemental Executive
Retirement Plan, dated September 23, 1998, filed as Exhibit
10.22 to the Company's September 30, 1998 Quarterly Report on
Form 10-Q, and incorporated herein by reference.
10.16 Amendment No. 2 to UNOVA, Inc. Supplemental Executive
Retirement Plan, dated March 11, 1999, filed as Exhibit 10.15
to the Company's 1998 Annual Report on Form 10-K, and
incorporated herein by reference.
10.17 Supplemental Retirement Agreement between UNOVA, Inc. and
Alton J. Brann, filed on October 1, 1997 as Exhibit 10L to
Amendment No. 1 to the Company's Registration Statement on
Form 10 No. 001-13279 and incorporated herein by reference.
10.18 Amendment No. 1 to Supplemental Retirement Agreement between
UNOVA, Inc. and Alton J. Brann, dated September 23, 1998,
filed as Exhibit 10.21 to the Company's September 30, 1998
Quarterly Report on Form 10-Q, and incorporated herein by
reference.
</TABLE>
E-3
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
<TABLE>
<S> <C>
10.19 Amendment No. 2 to Supplemental Executive Retirement Agreement
between UNOVA, Inc. and Alton J. Brann, dated March 11, 1999,
filed as Exhibit 10.18 to the Company's 1998 Annual Report on
Form 10-K, and incorporated herein by reference.
10.20 Employment Agreement dated August 1997, between UNOVA, Inc.,
and Clayton A. Williams, filed on October 1, 1997 as Exhibit
10K to Amendment No. 1 to the Company's Registration Statement
on Form 10 No. 001-13279 and incorporated herein by reference.
10.21 Amendment No. 1 to Employment Agreement between UNOVA, Inc.
and Clayton A. Williams, dated March 24, 1998, filed as
Exhibit 10.20 to the Company's 1997 Annual Report on Form
10-K, and incorporated herein by reference.
10.22 Amendment No. 2 to Employment Agreement between UNOVA, Inc.
and Clayton A. Williams, dated May 18, 1998, filed as Exhibit
10.21 to the Company's 1998 Annual Report on Form 10-K, and
incorporated herein by reference.
10.23 UNOVA, Inc. 1997 Stock Incentive Plan, filed as Exhibit 10.12
to the Company's September 30, 1997 Quarterly Report on Form
10-Q, and incorporated herein by reference.
10.24 UNOVA, Inc. Executive Severance Plan, filed as Exhibit 10.13
to the Company's September 30, 1997 Quarterly Report on Form
10-Q, and incorporated herein by reference.
10.25 Form of Promissory Notes in favor of the Company given by
certain officers and key employees, filed as Exhibit 10.14 to
the Company's September 30, 1997 Quarterly Report on Form
10-Q, and incorporated herein by reference.
10.26 Board resolution dated September 24, 1997 establishing the
UNOVA, Inc. Incentive Loan Program, filed as Exhibit 10.15 to
the Company's September 30, 1997 Quarterly Report on Form
10-Q, and incorporated herein by reference.
10.27 UNOVA, Inc. Management Incentive Compensation Plan, filed as
Exhibit 10.16 to the Company's 1997 Annual Report on Form
10-K, and incorporated herein by reference.
10.28 UNOVA, Inc. Executive Survivor Benefit Plan, filed as Exhibit
10.17 to the Company's 1997 Annual Report on Form 10-K, and
incorporated herein by reference.
10.29 UNOVA, Inc. 1999 Stock Incentive Plan, filed as Annex A to the
Company's definitive Proxy Statement relating to the Annual
Meeting of Shareholders to be held on May 7, 1999 (the "1999
Proxy Statement"), and incorporated herein by reference.
10.30 UNOVA, Inc. Management Incentive Compensation Plan, filed as
Annex B to the Company's 1999 Proxy Statement, and
incorporated herein by reference.
10.31 UNOVA, Inc. Executive Medical Benefit Plan, filed as Exhibit
10.30 to the Company's 1998 Annual Report on Form 10-K, and
incorporated herein by reference.
10.32 Letter Offering Employment to Larry D. Brady as President
and Chief Operating Officer of UNOVA, Inc., as accepted by
Mr. Brady on June 16, 1999.*
</TABLE>
E-4
<PAGE>
INDEX TO EXHIBITS (CONTINUED)
<TABLE>
<S> <C>
27 Financial Data Schedule (filed only electronically with the
Securities and Exchange Commission).*
* Copies of these documents have been included in this Quarterly
Report on Form 10-Q filed with the Securities and Exchange
Commission.
</TABLE>
E-5
<PAGE>
EXHIBIT 4.10
================================================================================
TRANSFER AND ADMINISTRATION AGREEMENT
among
ENTERPRISE FUNDING CORPORATION
as Company
and
KCH FUNDING, L.L.C.
as Transferor
and
UNOVA, INC.
as the Parent and
as Servicer
and
NATIONSBANK, N.A.
as Lead Arranger, Agent and Bank Investor
Dated as of June 18, 1999
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS.............................................................................................1
SECTION 1.1. Certain Defined Terms......................................................................1
SECTION 1.2. Other Terms...............................................................................22
SECTION 1.3. Computation of Time Periods...............................................................22
ARTICLE II PURCHASES AND SETTLEMENTS.............................................................................23
SECTION 2.1. Transfers.................................................................................23
SECTION 2.2. Procedures................................................................................23
SECTION 2.3. Selection of Tranche Periods and Tranche Rates............................................26
SECTION 2.4. Discount, Fees and Other Costs and Expenses...............................................29
SECTION 2.5. Non-Liquidation Settlement and Reinvestment Procedures....................................29
SECTION 2.6. Liquidation Settlement Procedures.........................................................30
SECTION 2.7. Protection of Ownership Interest of Agent, the Company and the
Bank Investors........................................................................31
SECTION 2.8. Deemed Collections; Application of Payments...............................................32
SECTION 2.9. Payments and Computations, Etc............................................................33
SECTION 2.10. Reports...................................................................................34
SECTION 2.11. Collection Account........................................................................34
SECTION 2.12. Sharing of Payments, Etc..................................................................34
SECTION 2.13. Right of Setoff...........................................................................35
ARTICLE III REPRESENTATIONS AND WARRANTIES.......................................................................35
SECTION 3.1. Representations and Warranties of the Transferor..........................................35
SECTION 3.2. Representations and Warranties of the Servicer............................................38
ARTICLE IV CONDITIONS PRECEDENT..................................................................................40
SECTION 4.1. Conditions to Closing.....................................................................40
SECTION 4.2. Conditions Precedent to Each Incremental Transfer.........................................43
ARTICLE V COVENANTS..............................................................................................43
SECTION 5.1. Affirmative Covenants of Transferor.......................................................43
SECTION 5.2. Negative Covenants of the Transferor......................................................49
SECTION 5.3. Financial Covenant of the Parent..........................................................51
SECTION 5.4. Affirmative Covenants of the Servicer.....................................................52
SECTION 5.5. Negative Covenants of the Servicer........................................................54
ARTICLE VI ADMINISTRATION AND COLLECTIONS........................................................................55
SECTION 6.1. Appointment of Servicer...................................................................55
SECTION 6.2. Duties of Servicer........................................................................55
SECTION 6.3. Rights After Designation of New Servicer..................................................57
SECTION 6.4. Servicer Default..........................................................................57
SECTION 6.5. Responsibilities of the Transferor and the Parent.........................................58
ARTICLE VII TERMINATION EVENTS...................................................................................58
SECTION 7.1. Termination Events........................................................................58
SECTION 7.2. Termination...............................................................................60
ARTICLE VIII INDEMNIFICATION; EXPENSES; RELATED MATTERS..........................................................61
SECTION 8.1. Indemnities by the Transferor.............................................................61
SECTION 8.2. Indemnity for Taxes, Reserves and Expenses................................................64
SECTION 8.3. Taxes.....................................................................................66
SECTION 8.4. Other Costs, Expenses and Related Matters.................................................66
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 8.5. Reconveyance Under Certain Circumstances..................................................67
SECTION 8.6. Indemnities by the Servicer...............................................................67
ARTICLE IX THE AGENT; BANK COMMITMENT............................................................................68
SECTION 9.1. Authorization and Action..................................................................68
SECTION 9.2. Agent's Reliance, Etc.....................................................................68
SECTION 9.3. Termination Event or Potential Termination Event..........................................68
SECTION 9.4. Rights as Bank Investor...................................................................69
SECTION 9.5. Indemnification of the Agent..............................................................69
SECTION 9.6. Non-Reliance..............................................................................70
SECTION 9.7. Resignation of Agent......................................................................70
SECTION 9.8. Payments by the Agent.....................................................................70
SECTION 9.9. Bank Commitment; Assignment to Bank Investors.............................................70
ARTICLE X MISCELLANEOUS..........................................................................................74
SECTION 10.1. Term of Agreement........................................................................74
SECTION 10.2. Waivers; Amendments......................................................................75
SECTION 10.3. Notices..................................................................................75
SECTION 10.4. Governing Law; Submission to Jurisdiction; Integration...................................77
SECTION 10.5. Counterparts.............................................................................78
SECTION 10.6. Successors and Assigns...................................................................78
SECTION 10.7. Waiver of Confidentiality................................................................79
SECTION 10.8. Confidentiality Agreement................................................................79
SECTION 10.9. No Bankruptcy Petition Against the Company...............................................80
SECTION 10.10. Characterization of the Transactions Contemplated by the Agreement......................80
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A Form of Contract
EXHIBIT B Credit and Collection Policies and Practices
EXHIBIT C List of Lock-Box Banks and Accounts
EXHIBIT D Form of Lock-Box Agreement
EXHIBIT E Form of Investor Report
EXHIBIT F Form of Transfer Certificate
EXHIBIT G Form of Assignment and Assumption Agreement
EXHIBIT H Form of Transfer Request
EXHIBIT I Location of Records
EXHIBIT J List of Subsidiaries, Divisions and Tradenames
EXHIBIT K Form of Opinion of Counsel for the Transferor
EXHIBITS L-1 and L-2 Forms of Secretary's Certificate
EXHIBIT M Form of Certificate
ANNEX 1 Special Concentration Obligors
ANNEX 2 Originator Subsidiaries and Divisions
</TABLE>
ii
<PAGE>
TRANSFER AND ADMINISTRATION AGREEMENT
TRANSFER AND ADMINISTRATION AGREEMENT (this "AGREEMENT"),
dated as of June 18, 1999, by and among KCH FUNDING, L.L.C., a Delaware limited
liability company, as transferor (in such capacity, the "TRANSFEROR"), UNOVA,
INC., a Delaware corporation, as the parent of the Transferor (in such capacity,
the "PARENT") and as servicer (in such capacity, the "SERVICER"), ENTERPRISE
FUNDING CORPORATION, a Delaware corporation (the "COMPANY"), NATIONSBANK, N.A.,
a national banking association ("NATIONSBANK"), as Lead Arranger, as agent for
the Company and the Bank Investors (in such capacity, the "AGENT"), as
Administrative Agent and as a Bank Investor.
ARTICLE I
DEFINITIONS
SECTION 1.1. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:
"ADMINISTRATIVE AGENT" means NationsBank, as administrative
agent for the Company.
"ADMINISTRATIVE FEE" means the fee payable by the Transferor
to the Agent, the terms of which are set forth in the Fee Letter.
"ADVERSE CLAIM" means a lien, security interest, charge or
encumbrance of any kind, of or on any Person's assets or properties in favor of
any other Person (including any UCC financing statement or any similar
instrument filed against such Person's assets or properties). The term "Adverse
Claim" shall not include any such Adverse Claim in favor of the Company or the
Bank Investors or any Adverse Claim specifically permitted under the terms of
this Agreement or the Receivables Purchase Agreement or the Originator
Subsidiary Receivables Purchase Agreement.
"AFFECTED ASSETS" means, collectively, the Receivables and the
Related Security, Collections and Proceeds relating thereto.
"AFFILIATE" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. A Person shall be deemed to control
another Person if the controlling Person possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of the
controlled Person, whether through ownership of voting stock, by contract or
otherwise.
"AGENT" means NationsBank, in its capacity as agent for the
Company and the Bank Investors, and any successor thereto appointed pursuant to
Article IX.
"AGGREGATE UNPAIDS" means, at any time, an amount equal to the
sum of (i) the aggregate Discount accrued and to accrue to maturity of all
outstanding Tranche Periods to which the Net Investment is allocated, including
all Related Commercial Paper, (ii) the Net Investment at such time, and (iii)
all other amounts owed (whether due or accrued) hereunder by the Transferor,
<PAGE>
the Servicer or the Parent to the Agent, the Administrative Agent, Company or
Bank Investors at such time.
"ARRANGEMENT FEE" means the fee payable on the date of
execution hereof by the Parent to NationsBank, the terms of which are set forth
in the Fee Letter.
"ASSIGNMENT AMOUNT" with respect to a Bank Investor shall mean
at any time an amount equal to the lesser of (i) such Bank Investor's Pro Rata
Share of the Net Investment at such time, (ii) such Bank Investor's Pro Rata
Share of the aggregate outstanding principal balance of the Receivables (other
than Defaulted Receivables not required to be paid by the Transferor or a
guarantor) plus all Collections received by the Servicer but not yet remitted by
the Servicer plus any amounts in respect of "deemed collections" required to be
paid by the Transferor at such time and (iii) such Bank Investor's unused
Commitment.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" means an Assignment and
Assumption Agreement substantially in the form of Exhibit G attached hereto.
"BANK INVESTORS" shall mean NationsBank and its successors and
assigns.
"BANKRUPTCY CODE" shall mean the Bankruptcy Reform Act of 1978
(11 U.S.C.) Sections 101 et seq., as amended.
"BASE RATE" or "BR" means a rate per annum equal to the
greater of (i) the prime rate of interest announced by the Liquidity Provider
(or, if more than one Liquidity Provider, then by NationsBank) from time to
time, changing when and as said prime rate changes (such rate not necessarily
being the lowest or best rate charged by the Liquidity Provider (or NationsBank,
as applicable)) and (ii) the sum of (a) 1.50% and (b) the rate equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day for such transactions received by the Liquidity Provider
(or, if more than one Liquidity Provider, then by NationsBank) from three
Federal funds brokers of recognized standing selected by it.
"BENEFIT ARRANGEMENT" means at any time an employee benefit
plan within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"BR TRANCHE" means a Tranche as to which Discount is
calculated at the Base Rate.
"BR TRANCHE PERIOD" means, with respect to a BR Tranche,
either (a) prior to the Termination Date, a period of up to thirty (30) days
requested by the Transferor and agreed to by the Company, NationsBank, on behalf
of the Liquidity Provider, or the Agent, as the case may be, commencing on a
Business Day requested by the Transferor and agreed to by the Company,
NationsBank or the Agent, as the case may be, or (b) after the Termination Date,
a period of one
2
<PAGE>
(1) day. If a BR Tranche Period would end on a day which is not a Business
Day, such BR Tranche Period shall end on the next succeeding Business Day.
"BUSINESS DAY" means any day excluding Saturday, Sunday and
any day on which banks in New York, New York, Charlotte, North Carolina or Los
Angeles, California are authorized or required by law to close, and, when used
with respect to the determination of any Eurodollar Rate or any notice with
respect thereto, any such day which is also a day for trading by and between
banks in United States dollar deposits in the London interbank market.
"CAPITALIZED LEASE" of a Person means any lease of property by
such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with GAAP.
"CERTIFICATE" means the certificate issued to the Agent for
the benefit of the Company and the Bank Investors pursuant to Section 2.2(e)
hereof.
"CHANGE OF CONTROL" means (a) as to the Transferor, that the
Transferor shall no longer be a wholly owned subsidiary of the Parent and (b) as
to the Parent, "Change of Control" means any of the following:
(i) An acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (for purposes of
the definition of "Change of Control" only, a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 30 percent or more of either (A) the then outstanding
shares of common stock of the Parent (the "Outstanding Parent Common
Stock") or (B) the combined voting power of the then outstanding voting
securities of the Parent entitled to vote generally in the election of
directors (the "Outstanding Voting Securities"); excluding, however,
the following acquisitions of Outstanding Parent Common Stock and
Outstanding Parent Voting Securities: (x) any acquisition by the
Parent, (y) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Parent or any corporation
controlled by the Parent, or (z) any acquisition by any Person pursuant
to a transaction which complies with clauses (A), (B) and (C) of
subsection (iii) of this definition; or
(ii) Individuals who, as of the Closing Date, constitute
the Board of Directors of the Parent (the "Incumbent Board") cease for
any reason to constitute at least a majority of the Board; provided,
however, that any individual who becomes a member of the Board
subsequent to the Closing Date whose election, or nomination for
election by the Parent's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the
Incumbent Board, but provided further that any such individual whose
initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the Exchange Act) or other actual or
threatened election contest solicitation of proxies or
3
<PAGE>
consents by or on behalf of a Person other than the Board shall not be
so considered as a member of the Incumbent Board; or
(iii) The approval by the shareholders of the Parent of a
reorganization, merger or consolidation or sale or other disposition of
all or substantially all of the assets of the Parent (a "Business
Combination"), or if consummation of such Business Combination is
subject, at the time of such approval by shareholders, to the consent
of any government or governmental agency, obtaining of such consent
(either explicitly or implicitly by consummation); excluding, however,
such a Business Combination pursuant to which (A) all or substantially
all of the individuals and entities who are the beneficial owners,
respectively, of the Outstanding Parent Common Stock and Outstanding
Parent Voting Securities immediately prior to such Business Combination
will beneficially own, directly or indirectly, more than 60 percent of,
respectively, the then outstanding shares of common stock, and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the case
may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Parent or all or substantially all of Parent's
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately
prior to such Business Combination of the Outstanding Parent Common
Stock and Outstanding Parent Voting Securities, as the case may be, (B)
no Person (other than any employee benefit plan (or related trust)
sponsored or maintained by the Parent or any corporation controlled by
the Parent or such corporation resulting from such Business
Combination) will beneficially own, directly or indirectly, 30 percent
or more of, respectively, the outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the outstanding voting securities of such corporation
entitled to vote generally in the election of directors except to the
extent that such ownership existed with respect to the Parent prior to
the Business Combination and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination will have been members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination; or
(iv) The approval by the shareholders of the Parent of a
complete liquidation or dissolution of the Parent.
"CLASS 1 OBLIGOR" means any Obligor and its affiliates which
does not have a public debt rating from S&P or Moody's on its long-term
senior unsecured debt obligations, or any Obligor and its affiliates
whose long-term senior unsecured debt obligations are rated below Baa3
or BBB- by S&P or Moody's, respectively.
"CLASS 2 OBLIGOR" means any Obligor and its affiliates whose
long-term senior unsecured debt obligations are rated at least Baa3 and
BBB- by S&P and Moody's, respectively, but which is not a Class 3
Obligor, and with respect to which ratings neither Standard & Poor's
nor Moody's shall have made a public announcement anticipating a
downgrading of such Class 2 Obligor's long-term unsecured debt
obligations to a rating less than the aforementioned ratings.
4
<PAGE>
"CLASS 3 OBLIGOR" means any Obligor and its affiliates whose
long-term senior unsecured debt obligations are rated at least A3 and
A- by S&P and Moody's respectively, and with respect to which ratings
neither Standard & Poor's nor Moody's shall have made a public
announcement anticipating a downgrading of such Class 3 Obligor's
long-term unsecured debt obligations to a rating less than the
aforementioned ratings.
"CLOSING DATE" means June 18, 1999.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL AGENT" means NationsBank, as collateral agent for
any Liquidity Provider, any Credit Support Provider, the holders of Commercial
Paper and certain other parties.
"COLLECTION ACCOUNT" means the account, established by the
Agent, for the benefit of the Company and the Bank Investors, pursuant to
Section 2.11 hereof.
"COLLECTIONS" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all Finance Charges, if any, and cash proceeds of the Related
Security with respect to such Receivable.
"COMMERCIAL PAPER" means the promissory notes issued by the
Company in the commercial paper market.
"COMMITMENT" means (i) with respect to each Bank Investor
party hereto, the commitment of such Bank Investor to make acquisitions from the
Transferor or the Company in accordance herewith in an amount not to exceed the
dollar amount set forth opposite such Bank Investor's signature on the signature
page hereto under the heading "COMMITMENT", MINUS the dollar amount of any
Commitment or portion thereof assigned pursuant to an Assignment and Assumption
Agreement PLUS the dollar amount of any increase to such Bank Investor's
Commitment consented to by such Bank Investor prior to the time of determination
and (ii) with respect to any assignee of a Bank Investor party hereto pursuant
to an Assignment and Assumption Agreement, the commitment of such assignee to
make acquisitions from the Transferor or the Company not to exceed the amount
set forth in such Assignment and Assumption Agreement MINUS the dollar amount of
any Commitment or portion thereof assigned pursuant to an Assignment and
Assumption Agreement prior to such time of determination PLUS the dollar amount
of any increase to such assignee's Commitment consented to by it prior to the
time of determination; PROVIDED, HOWEVER, that in the event that the Facility
Limit is reduced, in either case, the aggregate commitment of all the Bank
Investors shall be reduced in a like amount and the commitment of each Bank
Investor shall be reduced in proportion to such reduction.
"COMMITMENT TERMINATION DATE" means June 16, 2000, or such
later date to which the Commitment Termination Date may be extended by the
Transferor, the Agent and the Bank Investors not later than thirty (30) days
prior to the then current Commitment Termination Date.
"COMPANY" means Enterprise Funding Corporation, and its
successors and assigns, including any Conduit Assignee.
5
<PAGE>
"CONCENTRATION FACTOR" means for any Designated Obligor on any
date of determination (a) three percent (3%) of the Net Receivables Balance
prior to any exclusion for excess concentrations on such date; PROVIDED,
HOWEVER, that with respect to any Designated Obligor and its Affiliates whose
long-term unsecured debt obligations are rated at least "BBB-" by Standard &
Poor's and at least "Baa3" by Moody's, and with respect to which rating neither
Standard & Poor's nor Moody's shall have made a public announcement anticipating
a downgrading of such Designated Obligor's long-term unsecured debt obligations
to a rating less than the aforementioned ratings, but which is not a Class 3
Obligor, "Concentration Factor" means five percent (5%) of the Net Receivables
Balance prior to any exclusion for excess concentrations on such date; PROVIDED,
FURTHER, that with respect to any Designated Obligor and its Affiliates which is
a Class 3 Obligor, "Concentration Factor" means seven percent (7%) of the Net
Receivables Balance prior to any exclusion for excess concentrations on such
date; PROVIDED, FURTHER, that, with respect to any Special Concentration
Obligor, the "Concentration Factor" means the percentage set forth on Annex 1
hereto for such Special Concentration Obligor if the long-term unsecured debt
obligations of such Special Concentration Obligor are rated at least the ratings
by Standard & Poor's and Moody's set forth in such Annex 1 (as Annex 1 may from
time to time be amended by the written agreement of the parties hereto), and
with respect to which ratings neither Standard & Poor's nor Moody's shall have
made a public announcement anticipating a downgrading of such Designated
Obligor's long-term unsecured debt obligations to a rating less than the
aforementioned ratings, or (b) such other amount determined by the Agent in the
reasonable exercise of its good faith judgment and disclosed in a written notice
delivered to the Transferor, provided that such other amount shall be applied
only to future Transfers after receipt of notice. In any event, the
Concentration Factor with regard to the Special Concentration Obligors shall not
exceed 33% of the Net Receivables Balance prior to any exclusion for excess
concentrations.
"CONDUIT ASSIGNEE" shall mean any commercial paper conduit
administered by NationsBank or Bank of America National Trust and Savings
Association and designated by NationsBank from time to time to accept an
assignment from the Company of all or a portion of the Net Investment.
"CONDUIT TERMINATION EVENT" means either (a) the Liquidity
Provider or the Credit Support Provider shall have given notice that an event of
default has occurred and is continuing under any of its respective agreements
with the Company or (b) the Commercial Paper issued by the Company shall not be
rated at least "A-2" by Standard & Poor's and at least "P-2" by Moody's.
"CONTRACT" means an agreement, or invoice in substantially the
form of one of the forms attached hereto as Exhibit A and/or evidenced by
customer purchase orders or otherwise approved by the Agent, which approval
shall not be unreasonably withheld or delayed, pursuant to or under which an
Obligor shall be obligated to pay for merchandise purchased or services
rendered.
"CP RATE" means, with respect to any CP Tranche Period, the
rate equivalent to the rate (or if more than one rate, the weighted average of
the rates) at which Commercial Paper having a term equal to such CP Tranche
Period may be sold by any placement agent or
6
<PAGE>
commercial paper dealer selected by the Company, PROVIDED, HOWEVER, that if
the rate (or rates) as agreed between any such agent or dealer and the
Company is a discount rate, then the rate (or if more than one rate, the
weighted average of the rates) resulting from the Company's converting such
discount rate (or rates) to an interest-bearing equivalent rate per annum.
"CP TRANCHE" means a Tranche as to which Discount is
calculated at a CP Rate.
"CP TRANCHE PERIOD" means, with respect to a CP Tranche, a
period of days not to exceed ninety (90) days commencing on a Business Day
requested by the Transferor and agreed to by the Company pursuant to Section 2.3
hereof. If a CP Tranche Period would end on a day which is not a Business Day,
such CP Tranche Period shall end on the next succeeding Business Day.
"CREDIT AND COLLECTION POLICY" shall mean the applicable
Originator Subsidiary's credit and collection policy or policies and practices,
relating to Contracts and Receivables existing on the date hereof and referred
to in Exhibit B attached hereto, as modified from time to time in compliance
with Section 5.2(c) hereof.
"CREDIT SUPPORT AGREEMENT" means the agreement between the
Company and the Credit Support Provider evidencing the obligation of the Credit
Support Provider to provide credit support to the Company in connection with the
issuance by the Company of Commercial Paper.
"CREDIT SUPPORT PROVIDER" means the Person or Persons who
provides credit support to the Company in connection with the issuance by the
Company of Commercial Paper.
"DEALER FEE" means the fee payable by the Transferor to the
Administrative Agent, the terms of which are set forth in the Fee Letter.
"DEFAULT AMOUNT" means, for any fiscal month, the aggregate
outstanding balance of all Receivables which became Defaulted Receivables during
such fiscal month.
"DEFAULTED RECEIVABLE" means a Receivable: (i) as to which any
payment, or part thereof, remains unpaid for one hundred and twenty (120) days
or more from the original invoice date for such Receivable; (ii) as to which an
Event of Bankruptcy has occurred and is continuing with respect to the Obligor
thereof; (iii) which has been identified by the Transferor, the Parent or the
Servicer as uncollectible; or (iv) which, consistent with the Credit and
Collection Policy, should be written off as uncollectible.
"DEFAULTING BANK INVESTOR" has the meaning specified in
Section 2.2(c) hereof.
"DELINQUENCY RATIO" means with respect to any date of
determination, the ratio (expressed as a percentage) of (i) the aggregate
outstanding balance of all Delinquent Receivables as of such date to (ii) the
aggregate outstanding balance of all Receivables (other than Defaulted
Receivables) as of such date.
7
<PAGE>
"DELINQUENT RECEIVABLE" means a Receivable: (i) as to which
any payment, or part thereof, remains unpaid for more than thirty (30) days from
the original due date for such Receivable and (ii) which is not a Defaulted
Receivable.
"DESIGNATED OBLIGOR" means, at any time, each Obligor;
PROVIDED, HOWEVER, that, upon notice to the Transferor from the Agent, any
Obligor shall cease to be a Designated Obligor with regard to future Transfers
after the Transferor's receipt of such notice to such effect from the Agent,
delivered at any time; provided that the Agent shall exercise its right to
reject any such Obligor in a reasonable manner; provided, further that no
Special Concentration Obligor shall be excluded as a "Designated Obligor," for
so long as it is in compliance with the rating requirements set forth on Annex
1.
"DILUTION RATIO" means, the ratio (expressed as a percentage)
of (i) the aggregate amount of any Receivables that are reduced or canceled as a
result of any defective, rejected or returned merchandise or services or as a
result of credits, rebates, discounts, disputes, warranty claims, repossessed or
returned goods, chargebacks, allowances, other similar dilutive factors, and any
other billing or other adjustment (whether effected through the granting of
credits against the applicable Receivables or by the issuance of a check or
other payment in respect of (and as payment for) such reduction) by the Parent,
the Transferor or the Servicer, provided to Obligors in respect of Receivables
during the preceding fiscal month by (ii) the aggregate outstanding balance of
all Receivables which arose during the second preceding fiscal month (or such
other preceding month during which such diluted Receivables were created).
"DILUTION RESERVE" means, at any time, an amount equal to the
product of (a) 1.5, (b) the highest Dilution Ratio as of the last day of each of
the twelve (12) fiscal months preceding the current month, utilizing the
dilution level experienced in March 1998 in replacement of the March 1999
dilution level, and (c) the sum of the Net Investment, the Loss Reserve, the
Discount Reserve and the Servicing Fee Reserve at such time.
"DISCOUNT" means, with respect to any Tranche Period:
<TABLE>
<CAPTION>
TR x TNI x AD
---
360
<S> <C>
Where:
TR = the Tranche Rate applicable to such Tranche Period.
TNI = the portion of the Net Investment allocated to such Tranche Period.
AD = the actual number of days during such Tranche Period.
</TABLE>
PROVIDED, HOWEVER, that no provision of this Agreement shall require the payment
or permit the collection of Discount in excess of the maximum permitted by
applicable law; and, PROVIDED, FURTHER, that Discount shall not be considered
paid by any distribution if at any time such distribution is rescinded or must
be returned for any reason.
"DISCOUNT RESERVE" means, at any time, an amount equal to:
8
<PAGE>
<TABLE>
<CAPTION>
TD + LY
Where:
<S> <C>
TD = the sum of the unpaid Discount for all Tranche Periods.
LY = the Liquidation Yield.
</TABLE>
"EARLY COLLECTION FEE" means, for any Tranche Period during
which the portion of the Net Investment that was allocated to such Tranche
Period is reduced for any reason whatsoever, the amount payable in accordance
with Section 8.4(b) hereof, equal to the excess, if any, of (i) the additional
Discount that would have accrued during such Tranche Period if such reductions
had not occurred, minus (ii) the income received by the recipient of such
reductions from investing the proceeds of such reductions in a reasonable
manner.
"ELIGIBLE INVESTMENTS" means any of the following (a)
negotiable instruments or securities represented by instruments in bearer or
registered or in book-entry form which evidence (i) obligations fully guaranteed
by the United States; (ii) time deposits in, or bankers acceptances issued by,
any depositary institution or trust company incorporated under the laws of the
United States or any state thereof and subject to supervision and examination by
Federal or state banking or depositary institution authorities; PROVIDED,
HOWEVER, that at the time of investment or contractual commitment to invest
therein, the certificates of deposit or short-term deposits, if any, or
long-term unsecured debt obligations (other than such obligation whose rating is
based on collateral or on the credit of a Person other than such institution or
trust company) of such depositary institution or trust company shall have a
credit rating from S&P and Moody's of at least "A-1" and "P-1", respectively, in
the case of the certificates of deposit or short-term deposits, or a rating not
lower than one of the two highest investment categories granted by S&P and by
Moody's; (iii) certificates of deposit having, at the time of investment or
contractual commitment to invest therein, a rating from S&P and Moody's of at
least "A-1" and "P-1", respectively; or (iv) investments in money market funds
rated in the highest investment category or otherwise approved in writing by the
applicable rating agencies; (b) demand deposits in any depositary institution or
trust company referred to in (a)(ii) above; (c) commercial paper (having
original or remaining maturities of no more than 30 days) having, at the time of
investment or contractual commitment to invest therein, a credit rating from S&P
and Moody's of at least "A-1" and "P-1", respectively; (d) Eurodollar time
deposits having a credit rating from S&P and Moody's of at least "A-1" and
"P-1", respectively; and (e) repurchase agreements involving any of the Eligible
Investments described in clauses (a)(i), (a)(iii) and (d) hereof, so long as the
other party to the repurchase agreement has at the time of investment therein, a
rating from S&P and Moody's of at least "A-1" and "P-1", respectively.
"ELIGIBLE RECEIVABLE" means, at any time, any Receivable:
(i) which has been originated by an Originator
Subsidiary, sold to the Transferor pursuant to (and in accordance with) the
Receivables Purchase Agreement and to which the Transferor has good title
thereto, free and clear of all Adverse Claims;
9
<PAGE>
(ii) which (together with the Collections and Related
Security related thereto) has been the subject of either a valid transfer and
assignment from the Transferor to the Agent, on behalf of the Company and the
Bank Investors, of all of the Transferor's right, title and interest therein or
the grant of a first priority perfected security interest therein (and in the
Collections and Related Security related thereto) to the Agent for the benefit
of the Company and the Bank Investors, effective until the termination of this
Agreement;
(iii) the Obligor of which is a United States resident, is
a Designated Obligor at the time of the initial creation of an interest therein
hereunder, is not an Affiliate or employee of any of the parties hereto, and is
not a government or a governmental subdivision or agency;
(iv) which is not a Defaulted Receivable at the time of
the initial creation of an interest therein hereunder;
(v) which is not a Delinquent Receivable at the time of
the initial creation of an interest therein hereunder, provided that, for the
initial Incremental Transfer only, the term "Eligible Receivable" shall be
deemed not to include this clause.
(vi) which, (A) arises pursuant to a Contract with respect
to which each of the Parent, the Originator Subsidiary and the Transferor has
performed all obligations required to be performed by it thereunder, including
without limitation shipment of the merchandise and/or the performance of the
services purchased thereunder; (B) has been billed; and (C) according to the
Contract related thereto, is required to be paid in full within sixty (60) days
of the original invoice date therefor;
(vii) which is an "eligible asset" as defined in Rule 3a-7
under the Investment Company Act of 1940, as amended;
(viii) a purchase of which with the proceeds of Commercial
Paper would constitute a "current transaction" within the meaning of Section
3(a)(3) of the Securities Act of 1933, as amended;
(ix) which is an "account" or "chattel paper" and is not
evidenced by instruments within the meaning of Article 9 of the UCC of all
applicable jurisdictions;
(x) which is denominated and payable only in United
States dollars in the United States;
(xi) which, arises under a Contract that together with
such Receivable, is in full force and effect and constitutes the legal, valid
and binding obligation of the related Obligor enforceable against such Obligor
in accordance with its terms and is not subject to any litigation, dispute,
offset, counterclaim or other defense;
(xii) which, together with the Contract related thereto,
does not contravene in any material respect any laws, rules or regulations
applicable thereto (including, without limitation, laws, rules and regulations
relating to truth in lending, fair credit billing, fair
10
<PAGE>
credit reporting, equal credit opportunity, fair debt collection practices
and privacy) and with respect to which no part of the Contract related
thereto is in violation of any such law, rule or regulation in any material
respect;
(xiii) which (A) satisfies all applicable requirements of
the applicable Credit and Collection Policy and (B) is assignable without the
consent of, or notice (which has not been given) to, the Obligor thereunder;
(xiv) which was generated in the ordinary course of the
applicable Originator Subsidiary's business;
(xv) the Obligor of which has been directed to make all
payments to a specified account of the Servicer with respect to which there
shall be a Lock-Box Agreement in effect, except as permitted pursuant to Section
4.1(n);
(xvi) Reserved;
(xvii) the assignment of which under the Receivables
Purchase Agreement by the Parent to the Transferor and hereunder by the
Transferor to the Agent does not violate, conflict or contravene any applicable
laws, rules, regulations, orders or writs or any contractual or other
restriction, limitation or encumbrance;
(xviii) except as permitted by Section 6.2(a), which has not
been compromised, adjusted or modified (including by the extension of time for
payment or the granting of any discounts, allowances or credits); PROVIDED,
HOWEVER, that only such portion of such Receivable that is the subject of such
compromise, adjustment or modification shall be deemed to be ineligible pursuant
to the terms of this clause (xviii), and
(xix) which is not a Receivable originated by the
Cincinnati Machine Division of UNOVA Industrial Automation Systems, Inc. until
such time as the Agent and the Transferor shall have mutually agreed in writing
that this clause is no longer effective.
"ERISA" means the U.S. Employee Retirement Income Security Act
of 1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA GROUP" means the Parent, any Subsidiary and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the Parent or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"ESTIMATED MATURITY PERIOD" means, at any time, the period,
rounded upward to the nearest whole number of days, equal to the weighted
average number of days until due of the Receivables as calculated by the
Servicer in good faith and set forth in the most recent Investor Report, such
calculation to be based on the assumptions that (a) each Receivable within a
particular aging category (as set forth in the Investor Report) will be paid on
the last day of such aging category and (b) the last day of the last such aging
category coincides with the last date on which any Outstanding Balance of any
Receivables would be written off as uncollectible or
11
<PAGE>
charged against any applicable reserve or similar account in accordance with
the objective requirements of the applicable Credit and Collection Policy and
the applicable Originator Subsidiary's normal accounting practices applied on
a basis consistent with those reflected in its financial statements;
PROVIDED, HOWEVER, that if the Agent, the Company or any of the Bank
Investors shall reasonably disagree with any such calculation, the Agent may
recalculate the Estimated Maturity Period on a reasonable basis, and such
reasonable recalculation, in the absence of manifest error, shall be
conclusive.
"EURODOLLAR RATE" means, with respect to any Eurodollar
Tranche Period, a rate which is 1.1 % in excess of a rate per annum equal to the
sum (rounded upwards, if necessary, to the next higher 1/100 of 1%) of the rate
obtained by dividing (i) the applicable LIBOR Rate by (ii) a percentage equal to
100% minus the reserve percentage used for determining the maximum reserve
requirement as specified in Regulation D (including, without limitation, any
marginal, emergency, supplemental, special or other reserves) that is applicable
to the Agent during such Eurodollar Tranche Period in respect of eurocurrency or
eurodollar funding, lending or liabilities (or, if more than one percentage
shall be so applicable, the daily average of such percentage for those days in
such Eurodollar Tranche Period during which any such percentage shall be
applicable).
"EURODOLLAR TRANCHE" means a Tranche as to which Discount is
calculated at the Eurodollar Rate.
"EURODOLLAR TRANCHE PERIOD" means, with respect to a
Eurodollar Tranche, prior to the Termination Date, a period of one (1) month or
three (3) months, commencing on a Business Day requested by the Transferor;
PROVIDED, HOWEVER, that if such Eurodollar Tranche Period would expire on a day
which is not a Business Day, such Eurodollar Tranche Period shall expire on the
next succeeding Business Day; PROVIDED, FURTHER, that if such Eurodollar Tranche
Period would expire on (a) a day which is not a Business Day but is a day of the
month after which no further Business Day occurs in such month, such Eurodollar
Tranche Period shall expire on the next preceding Business Day or (b) a Business
Day for which there is no numerically corresponding day in the applicable
subsequent calendar month, such Eurodollar Tranche Period shall expire on the
last Business Day of such month.
"EVENT OF BANKRUPTCY" means, with respect to any Person, (i)
that such Person (a) shall generally not pay its debts as such debts become due
or (b) shall admit in writing its inability to pay its debts generally or (c)
shall make a general assignment for the benefit of creditors; (ii) any
proceeding shall be instituted by or against such Person seeking to adjudicate
it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee or other similar official for it or any substantial part of
its property and, in the case of any such proceeding instituted against any such
Person, such proceeding remains undismissed for a period of 60 days or (iii) if
such Person is a corporation, such Person or any Subsidiary shall take any
corporate action to authorize any of the actions set forth in the preceding
clauses (i) or (ii).
12
<PAGE>
"EXCLUDED TAXES" shall have the meaning specified in Section
8.3 hereof.
"FACILITY FEE" means the fee payable by the Transferor to the
Agent the terms of which are set forth in the Fee Letter.
"FACILITY LIMIT" means $102,000,000 PROVIDED that such amount
may not at any time exceed the aggregate Commitments at any time in effect.
"FEE LETTER" means the confidential letter agreement dated the
date hereof among the Transferor, the Parent, the Company and the Agent with
respect to the fees to be paid by the Transferor, as amended, modified or
supplemented from time to time.
"FINANCE CHARGES" means, with respect to a Contract, any
finance, interest, late or similar charges owing by an Obligor in respect of the
related Receivable.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such accounting profession, in effect from time to time.
"GUARANTY" means, with respect to any Person any agreement by
which such Person assumes, guarantees, endorses, contingently agrees to purchase
or provide funds for the payment of, or otherwise becomes liable upon, the
obligation of any other Person, or agrees to maintain the net worth or working
capital or other financial condition of any other Person or otherwise assures
any other creditor of such other Person against loss, including, without
limitation, any comfort letter, operating agreement or take-or-pay contract and
shall include, without limitation, the contingent liability of such Person in
connection with any application for a letter of credit.
"IAS" means UNOVA Industrial Automation Systems, Inc., a
Delaware corporation.
"INCREMENTAL TRANSFER" means a Transfer which is made pursuant
to Section 2.2(a) hereof.
"INDEBTEDNESS" means, with respect to any Person such Person's
(i) obligations for borrowed money, (ii) obligations representing the deferred
purchase price of property other than accounts payable arising in the ordinary
course of such Person's business on terms customary in the trade, (iii)
obligations, whether or not assumed, secured by liens or payable out of the
proceeds or products of property now or hereafter owned or acquired by such
Person, (iv) obligations which are evidenced by notes, acceptances, or other
instruments, (v) Capitalized Lease obligations and (vi) obligations for which
such Person is obligated pursuant to a Guaranty.
"INDEMNIFIED AMOUNTS" has the meaning specified in Section 8.1
hereof.
"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1
hereof.
13
<PAGE>
"INTEREST COMPONENT" shall mean, (i) with respect to any
Commercial Paper issued on an interest-bearing basis, the interest payable on
such Commercial Paper at its maturity (including any dealer commissions) and
(ii) with respect to any Commercial Paper issued on a discount basis, the
portion of the face amount of such Commercial Paper representing the discount
incurred in respect thereof (including any dealer commissions).
"INTERMEC" means Intermec Technologies Corporation, a
Washington corporation.
"INVESTMENT TERMINATION DATE" means the first Business Day
after the delivery by the Company to the Transferor of written notice that the
Company elects, in its sole discretion, to commence the amortization of its
interest in the Net Investment or to liquidate its interest in the Transferred
Interest and the Net Investment.
"INVESTOR REPORT" means a report, in substantially the form
attached hereto as Exhibit E or in such other form as is mutually agreed to by
the Transferor and the Agent, furnished by the Servicer pursuant to Section 2.10
hereof.
"LAW" means any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or
award of any Official Body.
"LIBOR RATE" means, with respect to any Eurodollar Tranche
Period the rate at which deposits in U.S. dollars are offered to the Agent, in
the London interbank market at approximately 11:00 a.m. (London time) two (2)
Business Days before the first day of such Eurodollar Tranche Period in an
amount approximately equal to the Eurodollar Tranche to which the Eurodollar
Rate is to apply and for a period of time approximately equal to the applicable
Eurodollar Tranche Period.
"LIEN" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of Section 5.1(a)(xii) and 5.3(c), the Parent or any
Subsidiary shall be deemed to own subject to a Lien any asset which it has
acquired or holds subject to the interest of a vendor or lessor under any
conditional sale agreement, capital lease or other title retention agreement
relating to such asset.
"LIQUIDATION YIELD" means, at any time, an amount equal to:
<TABLE>
<CAPTION>
(RVF x LBR x NI) x (EM X 1.5)
--------
360
<S> <C>
Where:
RVF = the Rate Variance Factor at such time.
LBR = the Base Rate applicable to the
liquidation period of the Net Investment at
such time.
NI = the Net Investment at such time.
EM = the Estimated Maturity Period of the Receivables.
</TABLE>
14
<PAGE>
"LIQUIDITY PROVIDER" means the Person or Persons who will
provide liquidity support to the Company in connection with the issuance by the
Company of Commercial Paper.
"LIQUIDITY PROVIDER AGREEMENT" means the agreement between the
Company and the Liquidity Provider evidencing the obligation of the Liquidity
Provider to provide liquidity support to the Company in connection with the
issuance by the Company of Commercial Paper.
"LOCK-BOX ACCOUNT" means an account maintained by the Servicer
at a Lock-Box Bank for the purpose of receiving Collections from Receivables, as
set forth in Exhibit C hereto.
"LOCK-BOX AGREEMENT" means an agreement between the Servicer
and a Lock-Box Bank in substantially the form of Exhibit D hereto or with such
modifications or in such other form as consented to by the Agent, whose consent
shall not be unreasonably withheld or delayed.
"LOCK-BOX BANK" means each of the banks set forth in Exhibit C
hereto and such banks as may be added thereto or deleted therefrom pursuant to
Section 2.7 hereof.
"LOSS PERCENTAGE" means on any day the greatest of (a) 2.5
times the highest Loss-to-Liquidation Ratio as of the last day of each of the
twelve (12) calendar months preceding the then current month, (b) 4 times the
highest Concentration Factor of all Designated Obligors (exclusive of Class 2
Obligors, Class 3 Obligors and Special Concentration Obligors), and (c) ten
percent (10%).
"LOSS RESERVE" means, on any day, an amount equal to:
<TABLE>
<CAPTION>
LP x (NI + DLR + DR + SFR)
<S> <C>
Where:
LP = the Loss Percentage at the close of business of the Servicer on such day.
NI = the Net Investment at the close of business of the Servicer on such day.
DLR = the Dilution Reserve at the close of business of the Servicer on such day.
DR = the Discount Reserve at the close of business of the Servicer on such day.
SFR = the Servicing Fee Reserve at the close of business of the Servicer on such day.
</TABLE>
15
<PAGE>
Notwithstanding the foregoing, the Loss Reserve shall at all times be at least
equal to $10,000,000.
"LOSS-TO-LIQUIDATION RATIO" means, for any period of
determination, the ratio (expressed as a percentage) of (i) the aggregate
outstanding balance of all Receivables which became Defaulted Receivables during
such period to (ii) the aggregate amount of cash Collections received by the
Servicer during such period.
"MAJORITY INVESTORS" shall mean, at any time, the Agent and
those Bank Investors which hold Commitments aggregating in excess of 51% of the
Facility Limit as of such date.
"MATERIAL ADVERSE EFFECT" means any event or condition which
would have a material adverse effect on (i) the collectibility of the
Receivables, (ii) the condition (financial or otherwise), businesses or
properties of the Transferor, the Servicer or the Parent, in each case on a
consolidated basis with its Subsidiaries, (iii) the ability of the Transferor,
the Servicer or the Parent to perform its respective obligations under the
Transaction Documents to which it is a party, or (iv) the interests of the
Agent, the Company or the Bank Investors under the Transaction Documents.
"MATERIAL PLAN" means at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $25,000,000.
"MAXIMUM NET INVESTMENT" means $100,000,000.
"MAXIMUM PERCENTAGE FACTOR" means 98%.
"MOODY'S" means Moody's Investors Service, Inc.
"MULTIEMPLOYER PLAN" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions in an amount exceeding $1,000,000 per annum or has within the
preceding five plan years made such contributions, including for these purposes
any Person which ceased to be a member of the ERISA Group during such five year
period.
"NET INVESTMENT" means the sum of the cash amounts paid to the
Transferor for each Incremental Transfer less the aggregate amount of
Collections received and applied by the Agent to reduce such Net Investment
pursuant to Section 2.5, 2.6 or 2.8 hereof; PROVIDED that the Net Investment
shall be restored and reinstated in the amount of any Collections so received
and applied if at any time the distribution of such Collections is rescinded or
must otherwise be returned for any reason; and PROVIDED FURTHER that the Net
Investment may be increased by the amount described in Section 9.9(c) as
described therein.
"NET RECEIVABLES BALANCE" means at any time the outstanding
balance of the Eligible Receivables (in the aggregate) at such time reduced by
the sum of (i) the aggregate amount by which the outstanding balance of all
Eligible Receivables of each Designated Obligor exceeds the Concentration Factor
for such Designated Obligor, PLUS (ii) the aggregate outstanding
16
<PAGE>
balance of all Eligible Receivables which are Defaulted Receivables, PLUS
(iii) the aggregate outstanding balance of all Eligible Receivables of each
Obligor with respect to which either 50% or more of such Obligor's
Receivables are Defaulted Receivables.
"NON-DEFAULTING BANK INVESTOR" has the meaning specified in
Section 2.2(c) hereof.
"OBLIGOR" means a Person obligated to make payments in respect
of a Receivable pursuant to a Contract.
"OFFICIAL BODY" means any government or political subdivision
or any agency, authority, bureau, central bank, commission, department or
instrumentality of any such government or political subdivision, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
"ORIGINATOR SUBSIDIARIES" means, collectively, (i) the
divisions listed on Annex 2 hereto of IAS (as Annex 2 may from time to time be
amended by the written agreement of the parties hereto) and (ii) Intermec
("Intermec").
"ORIGINATOR SUBSIDIARY RECEIVABLES PURCHASE AGREEMENT" means
the Originator Receivables Purchase Agreement, dated as of the date hereof,
between the Parent, IAS and Intermec, as such Agreement may be amended, modified
or supplemented from time to time.
"OTHER TRANSFEROR" means any Person other than the Transferor
that has entered into a receivables purchase agreement, loan and security
agreement, note purchase agreement, transfer and administration agreement or any
other similar agreement with the Company.
"PARENT" means UNOVA, Inc., a Delaware corporation, and its
successors and permitted assigns.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any of the functions under ERISA.
"PERCENTAGE FACTOR" means the fraction (expressed as a
percentage) computed at any time of determination as follows:
<TABLE>
<CAPTION>
(NI + LR + DLR + DR + SFR)
--------------------------
NRB
<S> <C>
Where:
NI = the Net Investment at such time of determination.
LR = the Loss Reserve at such time of determination.
DLR = the Dilution Reserve at such time of determination.
DR = the Discount Reserve at such time of determination.
SFR = the Servicing Fee Reserve at such time of determination.
NRB = the Net Receivables Balance at such time of determination.
</TABLE>
17
<PAGE>
The Percentage Factor shall be calculated as set forth in
Section 2.2(f).
"PERSON" means any corporation, limited liability company,
natural person, firm, joint venture, partnership, trust, unincorporated
organization, enterprise, government or any department or agency of any
government.
"PLAN" means at any time an employee pension benefit plan
(other than a Multiemployer Plan) which is covered by Title IV of ERISA or
subject to the minimum funding standards under Section 412 of the Internal
Revenue Code and either (i) is maintained, or contributed to, by any member of
the ERISA Group for employees of any member of the ERISA Group or (ii) has at
any time within the preceding five years been maintained, or contributed to, by
any Person which was at such time a member of the ERISA Group for employees of
any Person which was at such time a member of the ERISA Group.
"POTENTIAL TERMINATION EVENT" means an event which but for the
lapse of time or the giving of notice, or both, would constitute a Termination
Event.
"PRO RATA SHARE" means, for a Bank Investor, the Commitment of
such Bank Investor divided by the sum of the Commitments of all Bank Investors.
"PROCEEDS" means "proceeds" as defined in Section 9-306(1) of
the UCC of the states set forth in Section 2.7 hereof.
"PROGRAM FEE" means the fee payable by the Transferor and the
Parent to the Company, the terms of which are set forth in the Fee Letter.
"PURCHASED INTEREST" means the interest in the Receivables
acquired by the Liquidity Provider through purchase pursuant to the terms of the
Liquidity Provider Agreement.
"PURCHASE TERMINATION DATE" means the date upon which the
Transferor shall cease, for any reason whatsoever, to make purchases of
Receivables from the Parent under the Receivables Purchase Agreement or the
Receivables Purchase Agreement shall terminate for any reason whatsoever.
"RATE VARIANCE FACTOR" means the number, computed from time to
time in good faith by the Agent, that reflects the largest potential variance
(from minimum to maximum) in selected interest rates over a period of time
reasonably selected by the Agent from time to time after notification to the
Transferor, set forth in a written notice by the Agent to the Transferor and the
Servicer.
"RECEIVABLE" means the indebtedness, obligation or liability
owed to the Parent or any Originator Subsidiary by any Obligor (without giving
effect to any purchase under the Receivables Purchase Agreement by the
Transferor at any time) under a Contract and sold by the
18
<PAGE>
Parent to the Transferor pursuant to the Receivables Purchase Agreement,
whether constituting an account, chattel paper, instrument, investment
property or general intangible, arising in connection with the sale or lease
of merchandise or the rendering of services by an Originator Subsidiary and
includes the right to payment of any Finance Charges and other obligations of
such Obligor with respect thereto; PROVIDED, HOWEVER, that only Receivables
of IAS which are generated from the divisions listed on Annex 2, attached
hereto (as such annex may be modified from time to time by the written
agreement of the parties hereto), shall be included within the scope of this
Agreement and all other receivables generated from other divisions of IAS are
excluded hereunder. Notwithstanding the foregoing, once a Receivable has been
deemed collected pursuant to Section 2.8 hereof, it shall no longer
constitute a Receivable hereunder.
"RECEIVABLES PURCHASE AGREEMENT" means the Receivables
Purchase Agreement, dated as of the date hereof, between the Transferor and the
Parent, as such agreement may be amended, modified, or supplemented from time to
time.
"RECEIVABLE SYSTEMS" means all material computer applications
(including, but not limited to those of its suppliers and vendors and any third
party servicers) which are related to or involved in the origination,
collection, management or servicing of the Receivables.
"RECORDS" means all Contracts and other documents, books,
records and other information (including, without limitation, computer programs,
tapes, discs, punch cards, data processing software and related property and
rights) maintained with respect to Receivables and the related Obligors.
"RELATED COMMERCIAL PAPER" shall mean Commercial Paper issued
by the Company the proceeds of which were used to acquire, or refinance the
acquisition of, an interest in Receivables with respect to the Transferor.
"RELATED SECURITY" means with respect to any Receivable, all
of the Transferor's rights, title and interest in, to and under:
(i) the merchandise (including returned or repossessed
merchandise), if any, the sale of which by an Originator Subsidiary
gave rise to such Receivable;
(ii) all other security interests or liens and property
subject thereto from time to time, if any, purporting to secure payment
of such Receivable, whether pursuant to the Contract related to such
Receivable or otherwise, together with all financing statements signed
by an Obligor describing any collateral securing such Receivable;
(iii) all guarantees, indemnities, warranties, insurance
(and proceeds and premium refunds thereof) or other agreements or
arrangements of any kind from time to time supporting or securing
payment of such Receivable whether pursuant to the Contract related to
such Receivable or otherwise;
(iv) all Records related to such Receivable;
19
<PAGE>
(v) all rights and remedies of the Transferor under the
Receivables Purchase Agreement, together with all financing statements
filed by the Transferor against the Parent in connection therewith;
(vi) all Lock-Box Accounts and Lock-Box Agreements; and
(vii) all Proceeds of any of the foregoing.
"SECTION 8.2 COSTS" has the meaning specified in Section
8.2(d) hereof.
"SERVICER" means at any time the Person then authorized
pursuant to Section 6.1 hereof to service, administer and collect the
Receivables.
"SERVICER ADVANCE" has the meaning set forth in Section 2.5
hereof.
"SERVICER DEFAULT" has the meaning specified in Section 6.4
hereof.
"SERVICING FEE" means the fees payable by the Company or the
Bank Investors to Servicer, with respect to a Tranche, in an amount equal to
0.50% per annum on the amount of the Net Investment allocated to such Tranche
pursuant to Section 2.3 hereof. Such fee shall accrue from the date of the
initial purchase of an interest in the Receivables to the date on which the
Percentage Factor is reduced to zero. Such fee shall be payable only from
Collections pursuant to, and subject to the priority of payments set forth in,
Section 2.5 hereof. After the Termination Date, such fee shall be payable only
from Collections pursuant to, and subject to the priority of payments set forth
in, Section 2.6 hereof.
"SERVICING FEE RESERVE" means at any time an amount equal to
the product of (a) the aggregate outstanding balance of the Receivables at such
time multiplied by the Servicing Fee percentage, and (b) a fraction, the
numerator of which is the sum of (i) 1.5 multiplied by the Estimated Maturity
Period plus (ii) 30, and the denominator of which is 360.
"SPECIAL CONCENTRATION OBLIGORS" means each Obligor listed on
Annex 2 hereto.
"STANDARD & POOR'S" or "S&P" means Standard & Poor's Ratings
Services, a division of The McGraw-Hill Companies, Inc.
"SUBSIDIARY" of a Person means any Person more than 50% of the
outstanding voting interests of which shall at any time be owned or controlled,
directly or indirectly, by such Person or by one or more Subsidiaries of such
Person or any similar business organization which is so owned or controlled.
"TAXES" shall have the meaning specified in Section 8.3
hereof.
"TERMINATION DATE" means the earliest of (i) the Business Day
designated by the Transferor to the Agent as the Termination Date at any time
following 60 days' written notice to the Agent, (ii) the date of termination of
the commitment of the Liquidity Provider under the Liquidity Provider Agreement
(unless the Company's interest in the Net Investment has been
20
<PAGE>
assigned to the Bank Investors), (iii) the date of termination of the
commitment of the Credit Support Provider under the Credit Support Agreement
(unless the Company's interest in the Net Investment has been assigned to the
Bank Investors), (iv) the day upon which the Termination Date is declared or
automatically occurs pursuant to Section 7.2(a) hereof, (v) two Business Days
prior to the Commitment Termination Date, (vi) the day on which an Investment
Termination Date shall occur (unless the Company's interest in the Net
Investment has been assigned to the Bank Investors), or (vii) the Purchase
Termination Date.
"TERMINATION EVENT" means an event described in Section 7.1
hereof.
"TRANCHE" means a portion of the Net Investment allocated to a
Tranche Period pursuant to Section 2.3 hereof.
"TRANCHE PERIOD" means a CP Tranche Period, a BR Tranche
Period or a Eurodollar Tranche Period.
"TRANCHE RATE" means the CP Rate, the Base Rate or the
Eurodollar Rate.
"TRANSACTION DOCUMENTS" means, collectively, this Agreement,
the Receivables Purchase Agreement, the Originator Subsidiary Receivables
Purchase Agreement, the Fee Letter, the Lock-Box Agreements, the Certificate,
the Transfer Certificate and all of the other instruments, documents and other
agreements executed and delivered by the Servicer, the Parent or the Transferor
in connection with any of the foregoing, in each case, as the same may be
amended, restated, supplemented or otherwise modified from time to time.
"TRANSFER" means a conveyance, transfer and assignment by the
Transferor to the Agent, on behalf of the Company or the Bank Investors, as
applicable, of an undivided percentage ownership interest in the Receivables
hereunder (including, without limitation, as a result of any reinvestment of
Collections in Transferred Interests pursuant to Section 2.2(g) and 2.5).
"TRANSFER CERTIFICATE" means the certificate substantially in
the form of Exhibit F hereto.
"TRANSFER DATE" means, with respect to each Transfer, the
Business Day on which such Transfer is made.
"TRANSFER PRICE" means with respect to any Incremental
Transfer, the amount paid to the Transferor by the Company or the Bank Investors
as described in the applicable Transfer Certificate.
"TRANSFER PRICE DEFICIT" has the meaning specified in Section
2.2(c) hereof.
"TRANSFER REQUEST" means the request substantially in the form
of Exhibit H hereto.
"TRANSFEROR" means KCH Funding, L.L.C., a Delaware limited
liability company, and its successors and permitted assigns.
21
<PAGE>
"TRANSFERRED INTEREST" means, at any time of determination, an
undivided percentage ownership interest in (i) each and every then outstanding
Receivable, (ii) all Related Security with respect to each such Receivable,
(iii) all Collections with respect thereto, and (iv) other Proceeds of the
foregoing, which undivided ownership interest shall be equal to the Percentage
Factor at such time, and only at such time (without regard to prior
calculations). The Transferred Interest in each Receivable, together with
Related Security, Collections and Proceeds with respect thereto, shall at all
times be equal to the Transferred Interest in each other Receivable, together
with Related Security, Collections and Proceeds with respect thereto. To the
extent that the Transferred Interest shall decrease as a result of a
recalculation of the Percentage Factor, the Agent, on behalf of the Company or
the Bank Investors, as applicable, shall be considered to have reconveyed to the
Transferor an undivided percentage ownership interest in each Receivable,
together with Related Security, Collections and Proceeds with respect thereto,
in an amount equal to such decrease such that in each case the Transferred
Interest in each Receivable shall be equal to the Transferred Interest in each
other Receivable.
"UCC" means, with respect to any state, the Uniform Commercial
Code as from time to time in effect in such state.
"UNFUNDED LIABILITIES" means, with respect to any Plan at any
time, the amount (if any) by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA Group
to the PBGC or any other Person under Title IV of ERISA.
"U.S." or "UNITED STATES" means the United States of America.
"YEAR 2000 COMPLIANT" with respect to any Person means that
such Person will be able to perform properly date-sensitive functions for all
dates before and after January 1, 2000 which failure could have a material
adverse effect on its operations.
"YEAR 2000 PROBLEM" with respect to any Person means the risk
that computer applications used by such Person (or its suppliers and vendors)
may be unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999.
SECTION 1.2. OTHER TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. All terms used in Article
9 of the UCC in the State of New York, and not specifically defined herein,
are used herein as defined in such Article 9.
SECTION 1.3. COMPUTATION OF TIME PERIODS. Unless otherwise stated in
this Agreement, in the computation of a period of time from a specified date
to a later specified date, the word "from" means "from and including", the
words "to" and "until" each means "to but
22
<PAGE>
excluding", and the word "within" means "from and excluding a specified date
and to and including a later specified date".
ARTICLE II
PURCHASES AND SETTLEMENTS
SECTION 2.1. TRANSFERS.
Upon the terms and subject to the conditions herein set forth,
provided that the Termination Date shall not have occurred, the Transferor may,
at its option, convey, transfer and assign to the Agent, on behalf of the
Company or the Bank Investors, as applicable, and the Agent, on behalf of the
Company may, at the Company's option, or the Agent, on behalf of the Bank
Investors, shall (in accordance with Section 9.9(a) hereof), if so requested by
the Transferor, accept such conveyance, transfer and assignment from the
Transferor, without recourse except as provided herein, of undivided percentage
ownership interests in the Receivables, together with the Related Security,
Collections and Proceeds with respect thereto (each, an "INCREMENTAL TRANSFER");
PROVIDED that after giving effect to the payment to the Transferor of the
Transfer Price for such Incremental Transfer (x) where the Transferred Interest
is held by the Agent on behalf of the Company (i) the Net Investment plus the
Interest Component would not exceed the Facility Limit and (ii) the Net
Investment would not exceed the Maximum Net Investment and (y) where the
Transferred Interest is held by the Agent on behalf of the Bank Investors, the
Net Investment would not exceed the aggregate Commitments. The parties hereto
understand that in no event shall the Net Investment be held by the Agent on
behalf of the Company and the Bank Investors simultaneously, except in the case
of an assignment to a Bank Investor pursuant to Section 9.9(f) hereof.
By accepting any conveyance, transfer and assignment
hereunder, neither the Company nor any Bank Investor, the Administrative Agent
or the Agent assumes or shall have any obligations or liability under any of the
Receivables or the Contracts, all of which shall remain the obligations and
liabilities of the Transferor and the Parent.
The Transferor may reduce the Facility Limit by giving three
Business Days prior written notice to the Agent.
SECTION 2.2. PROCEDURES.
(a) NOTICE. The Transferor shall, by notice to the Agent
in the form of a Transfer Request given by telecopy, offer to convey, transfer
and assign to the Agent, on behalf of the Company or the Bank Investors, as
applicable, undivided percentage ownership interests in the Receivables and the
other Affected Assets relating thereto at least three (3) Business Days prior to
the proposed date of any Incremental Transfer. The requested Transfer Price
shall be at least $5,000,000 and integral multiples of $1,000,000 in excess
thereof (or, to the extent that the then available unused portion of the
Facility Limit is less than such amount, such lesser amount). The Agent shall
promptly notify the Company or each of the Bank Investors, as the case may be,
of the Agent's receipt of any Transfer Request for an Incremental Transfer to be
made to the Agent on behalf of such Person. To the extent that any such
Incremental Transfer is requested of
23
<PAGE>
the Agent on behalf of the Company, the Company shall instruct the Agent to
accept or reject such offer by notice given to the Transferor and the Agent
by telephone or telecopy by no later than the close of its business on the
Business Day following its receipt of any such request. Each Transfer Request
shall be irrevocable and binding on the Transferor and the Transferor shall
indemnify the Agent, the Company and each Bank Investor against any loss or
expense incurred by the Agent, the Company or any Bank Investor, either
directly or indirectly (including, in the case of the Company, through the
Liquidity Provider Agreement) as a result of any failure by the Transferor to
complete such Incremental Transfer including, without limitation, any loss or
expense incurred by the Agent, Company or any Bank Investor, either directly
or indirectly (including, in the case of the Company, pursuant to the
Liquidity Provider Agreement) by reason of the liquidation or reemployment of
funds acquired by the Company (or the Liquidity Provider) or any Bank
Investor (including, without limitation, funds obtained by issuing commercial
paper or promissory notes or obtaining deposits as loans from third parties)
for the Company or any Bank Investor to fund such Incremental Transfer for
the applicable Tranche Period.
On the date of the initial Incremental Transfer, the Agent, on
behalf of the Company or the Bank Investors, as applicable, shall deliver
written confirmation to the Transferor of the Transfer Price, the Tranche
Period(s) and the Tranche Rate(s) relating to such Transfer and the Transferor
shall deliver to the Agent the Transfer Certificate. The Agent shall maintain a
record of the date and amount of the initial Incremental Transfer and each
subsequent Incremental Transfer. On the date of each subsequent Incremental
Transfer, the Agent shall send written confirmation to the Transferor of the
Transfer Date, Transfer Price, Tranche Period(s) and the Tranche Rate(s)
applicable to such Incremental Transfer. Following each Incremental Transfer,
the Company or Bank Investors, as applicable, shall deposit to the Transferor's
account at the location indicated in Section 10.3 hereof, in immediately
available funds, an amount equal to the Transfer Price for such Incremental
Transfer made to the Company or the Bank Investors, as applicable.
(b) PAYMENTS. By no later than 11:00 a.m. (New York time)
on any Transfer Date, the Company or each Bank Investor, as the case may be,
shall remit its share (which, in the case of an Incremental Transfer to the Bank
Investors, shall be equal to such Bank Investor's Pro Rata Share) of the
aggregate Transfer Price for such Transfer to the account of the Agent specified
therefor from time to time by the Agent by notice to such Persons. The
obligation of each Bank Investor to remit its Pro Rata Share of any such
Transfer Price shall be several from that of each other Bank Investor, and the
failure of any Bank Investor to so make such amount available to the Agent shall
not relieve any other Bank Investor of its obligation hereunder. Following each
Incremental Transfer and the Agent's receipt of funds from the Company or the
Bank Investors as aforesaid, the Agent shall remit such funds received in
respect of the Transfer Price to the Transferor's account at the location
indicated in Section 10.3 hereof, in immediately available funds. Unless the
Agent shall have received notice from the Company or any Bank Investor, as
applicable, that such Person will not make its share of any Transfer Price
relating to any Incremental Transfer available on the applicable Transfer Date
therefor, the Agent may (but shall have no obligation to) make the Company's or
any such Bank Investor's share of any such Transfer Price available to the
Transferor in anticipation of the receipt by the Agent of such amount from the
Company or such Bank Investor. To the extent the Company or any such Bank
Investor fails to remit any such amount to the Agent after any such advance by
the Agent on such
24
<PAGE>
Transfer Date, the Company or such Bank Investor, on the one hand, and the
Transferor, on the other hand, shall be required to pay such amount, together
with interest thereon at a per annum rate equal to the Federal funds rate (as
determined in accordance with clause (ii) of the definition of "Base Rate"),
in the case of the Company or any such Bank Investor, or the Base Rate, in
the case of the Transferor, to the Agent upon its demand therefor (PROVIDED
that the Company shall have no obligation to pay such interest amounts except
to the extent that it shall have sufficient funds to pay the face amount of
its Commercial Paper in full). Until such amount shall be repaid, such amount
shall be deemed to be Net Investment paid by the Agent and the Agent shall be
deemed to be the owner of a Transferred Interest hereunder. Upon the payment
of such amount to the Agent (x) by the Transferor, the amount of the
aggregate Net Investment shall be reduced by such amount or (y) by the
Company or such Bank Investor, such payment shall constitute such Person's
payment of its share of the applicable Transfer Price for such Transfer.
Notwithstanding anything contained in this Section 2.2(b) or
elsewhere in this Agreement to the contrary, no Bank Investor shall be obligated
to provide the Agent or the Transferor with funds in connection with an
Incremental Transfer in an amount that would exceed such Bank Investor's unused
Commitment then in effect.
(c) DEFAULTING BANK INVESTOR. If by 2:00 P.M. (New York
time), whether or not the Agent has advanced the Transfer Price, one or more
Bank Investors (each, a "DEFAULTING BANK INVESTOR", and each Bank Investor other
than the Defaulting Bank Investor being referred to as a "NON-DEFAULTING BANK
INVESTOR") fails to make its Pro Rata Share of the Transfer Price available to
the Agent pursuant to Section 2.2 (b) hereof (the aggregate amount not so made
available to the Agent being herein called the "TRANSFER PRICE DEFICIT"), then
the Agent shall, by no later than 2:30 P.M. (New York time on the Transfer
Date), instruct each Non-Defaulting Bank Investor to pay, by no later than 3:00
P.M. (New York time on the Transfer Date), in immediately available funds, to
the account designated by the Agent, an amount equal to the lesser of (x) such
Non-Defaulting Bank Investor's proportionate share (based upon the relative
Commitments of the Non-Defaulting Bank Investors) of the Transfer Price Deficit
and (y) its unused Commitment. A Defaulting Bank Investor shall forthwith, upon
demand, pay to the Agent for the ratable benefit of the Non-Defaulting Bank
Investors all amounts paid by each Non-Defaulting Bank Investor on behalf of
such Defaulting Bank Investor, together with interest thereon, for each day from
the date a payment was made by a Non-Defaulting Bank Investor until the date
such Non-Defaulting Bank Investor has been paid such amounts in full, at a rate
per annum equal to the sum of the Base Rate PLUS 2%.
(d) ALL TRANSFERS. Each Transfer shall constitute a
purchase by the Agent, on behalf of the Company or the Bank Investors, as
applicable, of undivided percentage ownership interests in each and every
Receivable, together with Related Security, Collections and Proceeds with
respect thereto, then existing, as well as in each and every Receivable,
together with Related Security, Collections and Proceeds with respect
thereto, which arises at any time after the date of such Transfer. The
Agent's aggregate undivided percentage ownership interest in the Receivables,
together with the Related Security, Collections and Proceeds with respect
thereto, held on behalf of the Company or the Bank Investors, as applicable,
shall equal the Percentage Factor in effect from time to time. The Agent
shall hold the Transferred Interests on behalf of the Company and each Bank
Investor in accordance with each of the Company's and each Bank
25
<PAGE>
Investor's percentage interest in the Transferred Interest (determined on the
basis of the relationship that the portion of the Net Investment funded by
such Person bears to the aggregate Net Investment of the Company and all of
the Bank Investors at such time).
(e) CERTIFICATE. The Transferor shall issue to the Agent
the Certificate, in the form of Exhibit M, on or prior to the Closing Date.
(f) COMPUTATION OF PERCENTAGE FACTOR. The Percentage
Factor shall be initially computed by the Servicer as of the opening of business
of the Servicer on the date of the initial Incremental Transfer hereunder.
Thereafter until the Termination Date, the Percentage Factor shall be
automatically recomputed as of the close of business of the Servicer on each day
(other than a day after the Termination Date) and the Servicer shall report such
computation as of the last day of the related period, to the Agent in the
Investor Report and as otherwise reasonably requested by the Agent. The
Percentage Factor shall remain constant from the time as of which any such
computation or recomputation is made until the time as of which the next such
recomputation, if any, shall be made, notwithstanding any additional Receivables
arising, any Incremental Transfer made pursuant to Section 2.2(a) or any
reinvestment Transfer made pursuant to Section 2.2(g). The Percentage Factor, as
computed as of the day immediately preceding the Termination Date shall remain
constant at all times on and after the Termination Date until the date on which
the Agent, on behalf of the Company and the Bank Investors shall have received
the Aggregate Unpaids, at which time the Percentage Factor shall be recomputed
as set forth in Section 2.6.
(g) REINVESTMENT TRANSFERS. On each Business Day
occurring after the initial Incremental Transfer hereunder and prior to the
Termination Date, the Transferor hereby agrees to convey, transfer and assign to
the Agent, on behalf of the Company or the Bank Investors, as applicable, and in
consideration of Transferor's agreement to maintain at all times prior to the
Termination Date a Net Receivables Balance in an amount at least sufficient to
maintain the Percentage Factor at an amount not greater than the Maximum
Percentage Factor, the Agent, on behalf of the Company may, and the Agent, on
behalf of the Bank Investors shall, purchase from the Transferor undivided
percentage ownership interests in each and every Receivable, together with
Related Security, Collections and Proceeds with respect thereto, to the extent
that Collections are available for such Transfer in accordance with Section 2.5
hereof, such that after giving effect to such Transfer, (i) the amount of the
Net Investment at the close of business on such Business Day shall be equal to
the amount of the Net Investment at the close of business on the Business Day
immediately preceding such Business Day plus the Transfer Price of any
Incremental Transfer made on such day, if any, and (ii) the Transferred Interest
in each Receivable, together with Related Security, Collections and Proceeds
with respect thereto, shall be equal to the Transferred Interest in each other
Receivable, together with Related Security, Collections and Proceeds with
respect thereto.
SECTION 2.3. SELECTION OF TRANCHE PERIODS AND TRANCHE RATES.
(a) PRIOR TO THE TERMINATION DATE; TRANSFERRED INTEREST
HELD ON BEHALF OF THE COMPANY. At all times hereafter, but prior to the
Termination Date and with respect to the Transferred Interest held by the Agent
on behalf of the Company, the Transferor may, subject to
26
<PAGE>
the Company's approval and the limitations described below, request Tranche
Periods and allocate a portion of the Net Investment to each selected Tranche
Period, so that the aggregate amounts allocated to outstanding Tranche
Periods at all times shall equal the Net Investment held on behalf of the
Company. The Transferor shall give the Company irrevocable notice by
telephone of the requested Tranche Period(s) at least two (2) Business Days
prior to the requested Transfer Date or the expiration of any then existing
Tranche Period; PROVIDED, HOWEVER, that the Company may select, in its sole
discretion, any such Tranche Period if (i) the Transferor fails to provide
such notice on a timely basis or (ii) the Company determines, in its sole
discretion, that the Tranche Period requested by the Transferor is
unavailable or for any reason commercially undesirable to any party. The
Company confirms that it is its intention to allocate all or substantially
all of the Net Investment held on behalf of it to one or more CP Tranche
Periods; PROVIDED that the Company may determine, from time to time, in its
sole discretion, that funding such Net Investment by means of one or more CP
Tranche Periods is not possible or is not desirable for any reason. If the
Liquidity Provider acquires from the Company a Purchased Interest with
respect to the Receivables pursuant to the terms of the Liquidity Provider
Agreement, NationsBank, on behalf of the Liquidity Provider, may exercise the
right of selection granted to the Company hereby. The initial Tranche Period
applicable to any such Purchased Interest shall be a period of not greater
than seven (7) Business Days or such shorter period as shall be necessary to
obtain a Eurodollar Tranche and such Tranche shall be a BR Tranche.
Thereafter, the Tranche Period applicable thereto shall be a Eurodollar
Tranche Period and, if the Eurodollar Rate is not available, a BR Tranche
Period.
(b) ON AND AFTER THE TERMINATION DATE; TRANSFERRED
INTEREST HELD ON BEHALF OF THE COMPANY. At all times on and after the
Termination Date, with respect to any portion of the Transferred Interest which
shall be held by the Agent on behalf of the Company, the Agent shall select all
Tranche Periods and Tranche Rates applicable thereto. At all times after the
Termination Date but prior to the occurrence of a Termination Event, Discount
shall be determined by reference to the CP Rate; after the occurrence of a
Termination Date caused by a Termination Event (other than a Conduit Termination
Event), Discount shall be determined as set forth in Section 7.2(b) hereof. If
the Liquidity Provider acquires from the Company a Purchased Interest with
respect to the Receivables pursuant to the terms of the Liquidity Provider
Agreement, NationsBank, on behalf of the Liquidity Provider, may exercise the
right of selection granted to the Company hereby. The initial Tranche Period
applicable to any such Purchased Interest shall be a period of not greater than
seven (7) Business Days or such shorter period as shall be necessary to obtain a
Eurodollar Tranche and such Tranche shall be a BR Tranche.
(c) PRIOR TO THE TERMINATION DATE; TRANSFERRED INTEREST
HELD ON BEHALF OF THE BANK INVESTORS. At all times with respect to any portion
of the Transferred Interest held by the Agent on behalf of the Bank Investors,
but prior to the Termination Date, the initial Tranche Period applicable to such
portion of the Net Investment allocable thereto shall be a period of not greater
than seven (7) Business Days or such shorter period as shall be necessary to
obtain a Eurodollar Tranche and such Transfer shall be a BR Tranche. Thereafter,
with respect to such portion, and with respect to any other portion of the
Transferred Interest held on behalf of the Bank Investors (or any of them),
PROVIDED that the Termination Date caused by a Termination Event (other than a
Conduit Termination Event) shall not have occurred, the Tranche Rate applicable
thereto shall be the Eurodollar Rate and, if the Eurodollar Rate is not
available, the
27
<PAGE>
Base Rate. The Transferor shall give the Agent irrevocable notice by
telephone of the new requested Tranche Period at least three (3) Business
Days prior to the expiration of any then existing Tranche Period.
(d) ON AND AFTER THE TERMINATION DATE; TRANSFERRED
INTEREST HELD ON BEHALF OF THE BANK INVESTORS. At all times on and after the
Termination Date, with respect to any portion of the Transferred Interest held
by the Agent on behalf of the Bank Investors, the Agent shall select all Tranche
Periods and Tranche Rates applicable thereto. At all times on and after the
Termination Date but prior to the occurrence of a Termination Event, Discount
shall be determined by reference to the Eurodollar Rate or, if the Eurodollar
Rate is not available, the Base Rate; after the occurrence of a Termination
Event (other than a Conduit Termination Event), Tranche Periods and Tranche
Rates shall be determined as set forth in Section 7.2(b) hereof. In the case of
any Tranche Period outstanding upon the occurrence of the Termination Date, such
Tranche Period may, in the discretion of the Agent, end on the date of such
occurrence.
(e) EURODOLLAR RATE PROTECTION; ILLEGALITY. (i) If the
Agent is unable to obtain on a timely basis the information necessary to
determine the Eurodollar Rate for any proposed Eurodollar Tranche, then
(A) the Agent shall forthwith notify
the Company or Bank Investors, as applicable and the Transferor that the
Eurodollar Rate cannot be determined for such Eurodollar Tranche, and
(B) while such circumstances exist,
neither the Company, the Bank Investors or the Agent shall allocate the Net
Investment of any additional Transferred Interests purchased during such period
or reallocate the Net Investment allocated to any then existing Tranche ending
during such period, to a Eurodollar Tranche.
(i) If, with respect to any outstanding
Eurodollar Tranche, the Company or any of the Bank Investors on behalf of which
the Agent holds any Transferred Interest therein notifies the Agent that it is
unable to obtain matching deposits in the London interbank market to fund its
purchase or maintenance of such Transferred Interest or that the Eurodollar Rate
applicable to such Transferred Interest will not adequately reflect the cost to
the Person of funding or maintaining its respective Transferred Interest for
such Tranche Period then the Agent shall forthwith so notify the Transferor,
whereupon neither the Agent nor the Company or the Bank Investors, as
applicable, shall, while such circumstances exist, allocate any Net Investment
of any additional Transferred Interest purchased during such period or
reallocate the Net Investment allocated to any Tranche ending during such
period, to a Eurodollar Tranche.
(ii) Notwithstanding any other provision of this
Agreement, if the Company or any of the Bank Investors, as applicable, shall
notify the Agent that such Person has determined (or has been notified by any
Liquidity Provider) that the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful (either for the
Company, such Bank Investor, or such Liquidity Provider, as applicable), or any
central bank or other governmental authority asserts that it is unlawful, for
the Company, such Bank Investor or such
28
<PAGE>
Liquidity Provider, as applicable, to fund the purchases or maintenance of
the Transferred Interest at the Eurodollar Rate, then (x) as of the effective
date of such notice from such Person to the Agent, the obligation or ability
of the Company or such Bank Investor, as applicable, to fund its purchase or
maintenance of the Transferred Interest at the Eurodollar Rate shall be
suspended until such Person notifies the Agent that the circumstances causing
such suspension no longer exist and (y) the Net Investment of each Eurodollar
Tranche in which such Person owns an interest shall either (1) if such Person
may lawfully continue to maintain the Transferred Interest at the Eurodollar
Rate until the last day of the applicable Tranche Period, be reallocated on
the last day of such Tranche Period to another Tranche Period in respect of
which the Net Investment allocated thereto accrues Discount at a Tranche Rate
other than the Eurodollar Rate or (2) if such Person shall determine that it
may not lawfully continue to maintain the Transferred Interest at the
Eurodollar Rate until the end of the applicable Tranche Period, such Person's
share of the Net Investment allocated to such Tranche Period shall be deemed
to accrue Discount at the Base Rate from the effective date of such notice
until the end of such Tranche Period.
SECTION 2.4. DISCOUNT, FEES AND OTHER COSTS AND EXPENSES.
Notwithstanding the limitation on recourse under Section 2.1 hereof, the
Transferor shall pay, as and when due in accordance with this Agreement and
the Fee Letter, all fees hereunder and under the Fee Letter, Discount
(including Discount due the Company or any Bank Investor), all amounts
payable pursuant to Article VIII hereof (subject to the exclusions therein),
if any, and the Servicing Fees payable in accordance with Section 6.2(b). On
the last day of each Tranche Period, the Transferor shall pay to the Agent,
on behalf of the Company or the Bank Investors, as applicable, an amount
equal to the accrued and unpaid Discount for such Tranche Period together
with, in the event the Transferred Interest is held on behalf of the Company,
an amount equal to the discount accrued on the Company's Commercial Paper to
the extent such Commercial Paper was issued in order to fund the Transferred
Interest in an amount in excess of the Transfer Price of an Incremental
Transfer. Discount shall accrue with respect to each Tranche Period on each
day occurring during such Tranche Period. Nothing in this Agreement shall
limit in any way the obligations of the Transferor to pay the amounts set
forth in this Section 2.4. The Parent agrees to pay any amounts payable under
this Section 2.4 by the Transferor which are not paid when due by the
Transferor.
SECTION 2.5. NON-LIQUIDATION SETTLEMENT AND REINVESTMENT
PROCEDURES. On each day after the date of any Incremental Transfer but prior
to the Termination Date and provided that no Potential Termination Event
(other than a Conduit Termination Event) shall have occurred and be
continuing, the Servicer shall out of the Percentage Factor of Collections
received on or prior to such day and not previously applied or accounted for:
(a) set aside and hold in trust for the Agent, on behalf of the Company or
the Bank Investors, as applicable, (or deposit into the Collection Account if
so required pursuant to Section 2.11 hereof) an amount equal to all Discount
and the Servicing Fee accrued through such day and not so previously set
aside or paid and (b) apply the balance of such Percentage Factor of
Collections remaining after application of Collections as provided in clause
(a) of this Section 2.5 to the Transferor, for the benefit of the Agent, on
behalf of the Company or the Bank Investors, as applicable, to the purchase
of additional undivided percentage interests in Receivables pursuant to
Section 2.2(g) hereof. On the last day of each Tranche Period, from the
amounts set aside as described in clause (a) of the first sentence of this
Section 2.5, the Servicer shall deposit to the Agent's account, for the
benefit
29
<PAGE>
of the Company or the Bank Investors, as applicable, an amount equal to the
accrued and unpaid Discount for such Tranche Period and shall deposit to the
Servicer's account an amount equal to the accrued and unpaid Servicing Fee
for such Tranche Period. The Agent, upon its receipt of such amounts in the
Agent's account, shall distribute such amounts to the Company and/or the Bank
Investors entitled thereto as set forth above; PROVIDED that if the Agent
shall have insufficient funds to pay all of the above amounts in full on any
such date, the Agent shall pay such amounts ratably (based on the amounts
owing to each such Person) to all such Persons entitled to payment thereof.
In addition, the Servicer shall remit to the Transferor at the end of each
Tranche Period, such portion of Collections not allocated to the Agent, on
behalf of Company or the Bank Investors, as applicable.
SECTION 2.6. LIQUIDATION SETTLEMENT PROCEDURES. If at any time on
or prior to the Termination Date, the Percentage Factor is greater than the
Maximum Percentage Factor, then the Transferor shall immediately pay to the
Agent, for the benefit of the Company or the Bank Investors, as applicable,
from previously received Collections, an amount equal to the amount such
that, when applied in reduction of the Net Investment, will result in a
Percentage Factor less than or equal to the Maximum Percentage Factor. Such
amount shall be applied to the reduction of the Net Investment of Tranche
Periods selected by the Agent. On the Termination Date and on each day
thereafter, and on each day on which a Potential Termination Event (other
than a Conduit Termination Event) has occurred and is continuing, the
Servicer shall set aside and hold in trust for the Agent, on behalf of the
Company or the Bank Investors, as applicable, (or deposit into the Collection
Account if so required pursuant to Section 2.11 hereof) the Percentage Factor
of all Collections received on such day and shall hold in trust for the
Transferor such portion of Collections not allocated to the Agent, on behalf
of the Company or the Bank Investors, as applicable. On the Termination Date
or any day on which a Potential Termination Event (other than a Conduit
Termination Event) occurs, the Servicer shall deposit to the Agent's account,
for the benefit of the Company or the Bank Investors, as applicable, any
amounts set aside pursuant to Section 2.5 above. On the last day of each
Tranche Period to occur on or after the Termination Date or during the
continuance of a Potential Termination Event (other than a Conduit
Termination Event), the Servicer shall deposit to the Agent's account (to the
extent not already so deposited), for the benefit of the Company and the Bank
Investors, as applicable, the amounts set aside for the Agent, on behalf of
the Company or the Bank Investors, pursuant to the second preceding sentence,
but not to exceed the sum of (i) the accrued Discount for such Tranche
Period, (ii) the portion of the Net Investment allocated to such Tranche
Period and (iii) all other Aggregate Unpaids. On such day, the Servicer shall
deposit to the Agent's account, from the amounts set aside for the Company
and the Bank Investors, pursuant to the preceding sentence which remain after
payment in full of the aforementioned amounts, the accrued Servicing Fee for
such Tranche Period. If there shall be insufficient funds on deposit for the
Servicer to distribute funds in payment in full of the aforementioned
amounts, the Servicer shall distribute funds in the following order of
priority:
FIRST, in payment of the accrued Discount;
SECOND, if the Transferor, the Parent or an Affiliate of the
Transferor or the Parent is not the Servicer, to the
Servicer's account, in payment of the Servicing Fee payable to
the Servicer;
30
<PAGE>
THIRD, in reduction of the Net Investment allocated to any
Tranche Period ending on such date;
FOURTH, in payment of all fees payable by the Transferor under
the Fee Letter or hereunder;
FIFTH, in payment of all other Aggregate Unpaids; and
SIXTH, if the Transferor, the Parent or an Affiliate of the
Transferor or the Parent is the Servicer, to its account as
Servicer, in payment of the Servicing Fee payable to the such
Person as Servicer.
The Agent, upon its receipt of such amounts in the Agent's account, shall
distribute such amounts to the Company and/or the Bank Investors entitled
thereto as set forth above; PROVIDED that if the Agent shall have insufficient
funds to pay all of the above amounts in full on any such date, the Agent shall
pay such amounts in the order of priority set forth above and, with respect to
any such category above for which the Agent shall have insufficient funds to pay
all amounts owing on such date, ratably (based on the amounts in such categories
owing to such Persons) among all such Persons entitled to payment thereof.
Following the date on which the Net Investment has been
reduced to zero, all accrued Discount and Servicing Fees have been paid in full
and all other Aggregate Unpaids have been paid in full, (i) the Servicer shall
recompute the Percentage Factor, (ii) the Agent, on behalf of the Company and
the Bank Investors, shall be considered to have reconveyed to the Transferor all
of the Agent's right, title and interest in and to the Affected Assets
(including the Transferred Interest), (iii) the Servicer shall pay to the
Transferor any remaining Collections set aside and held by the Servicer pursuant
to the third sentence of this Section 2.6 and (iv) the Agent, on behalf of the
Company and the Bank Investors, shall execute and deliver to the Transferor, at
the Transferor's expense, such documents or instruments as are necessary or
reasonably requested by the Transferor to terminate the Agent's interests in the
Affected Assets. Any such documents shall be prepared by or on behalf of the
Transferor. On the last day of each Tranche Period, the Servicer shall remit to
the Transferor such portion of Collections set aside for the Transferor pursuant
to this Section 2.6.
SECTION 2.7. PROTECTION OF OWNERSHIP INTEREST OF THE AGENT, THE COMPANY
AND THE BANK INVESTORS.
(a) The Transferor agrees that it will, and will cause the Parent
to, from time to time, at its expense, promptly execute and deliver all
instruments and documents and take all actions as may be necessary or as the
Agent may reasonably request in order to perfect or protect the Transferred
Interest or to enable the Agent, the Company or the Bank Investors to exercise
or enforce any of their respective rights hereunder. Without limiting the
foregoing, the Transferor will, and will cause the Parent to, upon the request
of the Agent, the Company or any of the Bank Investors, in order to accurately
reflect this purchase and sale transaction, (x) execute and file such financing
or continuation statements or amendments thereto or assignments thereof (as
permitted pursuant to Section 10.6 hereof) as may be reasonably requested by the
Agent, the
31
<PAGE>
Company or any of the Bank Investors and (y) mark its aged trial balances
computerized records with a legend describing the conveyance to the
Transferor of the Receivables (in the case of the Parent) and to the Agent,
for the benefit of the Company and the Bank Investors, of the Transferred
Interest. The Transferor shall, and will cause the Parent to, upon the
reasonable request of the Agent, the Company or any of the Bank Investors,
obtain such additional search reports as the Agent, the Company or any of the
Bank Investors shall reasonably request. To the fullest extent permitted by
applicable law, the Agent shall be permitted to sign and file continuation
statements and amendments thereto and assignments thereof without the
Transferor's or the Parent's signature. Carbon, photographic or other
reproduction of this Agreement or any financing statement shall be sufficient
as a financing statement. The Transferor shall not, and shall not permit the
Parent, to change its respective name, identity or corporate structure
(within the meaning of Section 9-402(7) of the UCC as in effect in the States
of New York and California, nor relocate its respective chief executive
office or any office where Records are kept unless it shall have: (i) given
the Agent at least thirty (30) days prior notice thereof and (ii) prepared at
Transferor's expense and delivered to the Agent all financing statements,
instruments and other documents necessary to preserve and protect the
Transferred Interest or reasonably requested by the Agent in connection with
such change or relocation. Any filings under the UCC or otherwise that are
occasioned by such change in name or location shall be made at the expense of
Transferor.
(b) The Servicer shall instruct all Obligors to cause all
Collections to be deposited directly with a Lock-Box Bank. Any Lock-Box Account
maintained by a Lock-Box Bank pursuant to the related Lock-Box Agreement shall
be under the exclusive ownership and control of the Agent which is hereby
granted to the Agent by the Parent and the Transferor. The Servicer shall be
permitted to give instructions to the Lock-Box Banks for so long as neither a
Potential Termination Event (other than a Conduit Termination Event) nor any
Termination Event (other than a Conduit Termination Event) has occurred and is
continuing hereunder. The Servicer shall not add any bank as a Lock-Box Bank to
those listed on Exhibit C attached hereto unless such bank has entered into a
Lock-Box Agreement. The Servicer shall not terminate any bank as a Lock-Box Bank
unless the Agent shall have received fifteen (15) days' prior notice of such
termination. If the Transferor, the Parent or the Servicer receives any
Collections, the Transferor, the Parent or the Servicer, as applicable, shall
immediately, but in any event within two (2) Business Days of receipt, remit
(and shall cause the Parent to remit) such Collections to a Lock-Box Account;
provided, that the Transferor, the Parent and the Servicer may initially deposit
checks constituting Collections which it receives pursuant to this sentence into
its operating account if, within two (2) Business Days, such Collections are
transferred from such operating account to a Lock-Box Account and the aggregate
amount of such Collections in all such operating accounts does not exceed at any
one time $10,000,000.
SECTION 2.8. DEEMED COLLECTIONS; APPLICATION OF PAYMENTS. (a) If on any
day the outstanding balance of a Receivable conveyed hereunder and included at
any time as an Eligible Receivable on an Investor Report is either (x) reduced
as a result of any defective, rejected or returned merchandise or services, any
discount, credit, dispute, warranty claim, repossessed or returned goods,
charge-back, allowance, any billing adjustment, similar dilutive factor or other
similar adjustment or (y) reduced or canceled as a result of a setoff or offset
in respect of any claim by any Person against the Parent, any Originator
Subsidiary or the Transferor (whether such
32
<PAGE>
claim arises out of the same or a related transaction or an unrelated
transaction), the Transferor shall be deemed to have received on such day a
Collection of such Receivable in the amount of such reduction or cancellation
and the Transferor shall pay to the Servicer an amount equal to such
reduction or cancellation and such amount shall be applied by the Servicer as
a Collection in accordance with Section 2.5 or 2.6 hereof, as applicable if
the Percentage Factor equals or exceeds the Maximum Percentage Factor or if a
Termination Event (other than a Conduit Termination Event) has occurred and
is continuing. The Net Investment shall be reduced by the amount of such
payment applied to the reduction of the Net Investment and actually received
by the Agent.
(b) If on any day any of the representations or
warranties in Article III was or becomes untrue with respect to a Receivable
(whether on or after the date of any transfer of an interest therein to the
Agent, for the benefit of the Company or the Bank Investors, as applicable, as
contemplated hereunder), the Transferor shall be deemed to have received on such
day a Collection of such Receivable in full and the Transferor shall on such day
pay to the Servicer an amount equal to the outstanding balance of such
Receivable and such amount shall be allocated and applied by the Servicer as a
Collection allocable to the Transferred Interest in accordance with Section 2.5
or 2.6 hereof, as applicable if the Percentage Factor equals or exceeds the
Maximum Percentage Factor or if a Termination Event (other than a Conduit
Termination Event) has occurred and is continuing. The Net Investment shall be
reduced by the amount of such payment applied to the reduction of the Net
Investment and actually received by the Agent.
(c) Any payment by an Obligor in respect of any
indebtedness, obligation or liability owed by it to the Transferor, any
Originator Subsidiary or the Parent shall, except as otherwise specified by such
Obligor or otherwise required by contract or law and unless otherwise instructed
by the Agent, be applied as a Collection of any Receivable of such Obligor
included in the Transferred Interest (starting with the oldest such Receivable)
to the extent of any amounts then due and payable thereunder before being
applied to any other receivable or other indebtedness of such Obligor.
SECTION 2.9. PAYMENTS AND COMPUTATIONS, ETC. All amounts to be paid or
deposited by the Transferor or the Servicer hereunder shall be paid or deposited
in accordance with the terms hereof no later than 1:00 p.m. (New York time) on
the day when due in immediately available funds; if such amounts are payable to
the Agent (whether on behalf of the Company or any Bank Investor or otherwise)
they shall be paid or deposited in the account indicated in Section 10.3 hereof,
until otherwise notified by the Agent. The Transferor shall, to the extent
permitted by law, pay to the Agent, for the benefit of the Company and the Bank
Investors upon demand, interest on all amounts not paid or deposited when due
hereunder at a rate equal to 1% per annum plus the Base Rate. All computations
of Discount, interest and all per annum fees hereunder shall be made on the
basis of a year of 360 days for the actual number of days (including the first
but excluding the last day) elapsed. Any computations by the Agent of amounts
payable by the Transferor hereunder shall be binding upon the Transferor absent
manifest error.
33
<PAGE>
SECTION 2.10. REPORTS.
(a) On or before the fifteenth (15th) Business Day of
each fiscal month, the Servicer shall prepare or cause to be prepared and
forward to the Agent and the Administrative Agent (i) an Investor Report as of
the end of the last day of the immediately preceding fiscal month, (ii) if
requested by the Agent or the Administrative Agent, a listing by Obligor of all
Receivables together with an aging of such Receivables and (iii) such other
information pertaining to the Affected Assets or the transactions hereunder as
the Agent or the Administrative Agent may reasonably request.
(b) The Servicer shall prepare and forward to the
Administrative Agent and the Agent such other information pertaining to the
Affected Assets or the transactions hereunder as the Agent may reasonably
request from time to time.
SECTION 2.11. COLLECTION ACCOUNT. There shall be established on the day
of the initial Incremental Transfer hereunder and maintained with the Agent, a
segregated account (the "COLLECTION ACCOUNT"), bearing a designation clearly
indicating that the funds deposited therein are held for the benefit of the
Agent, on behalf of the Company and the Bank Investors. On and after the
occurrence of a Termination Event (other than a Conduit Termination Event) or a
Potential Termination Event (other than a Conduit Termination Event), the
Servicer shall remit daily within two (2) Business Days of receipt to the
Collection Account all Collections received with respect to any Receivables.
Funds on deposit in the Collection Account (other than investment earnings)
shall be invested by the Agent, in the name of the Agent, in Eligible
Investments that will mature so that such funds will be available prior to the
last day of each successive Tranche Period following such investment, and so as
to permit amounts in the Collection Account to be paid and applied in accordance
with the provisions of Sections 2.5 and 2.6 hereof. On the last day of each
Tranche Period, all interest and earnings (net of losses and investment
expenses) on funds on deposit in the Collection Account shall be retained in the
Collection Account and be available to make any payments required to be made
hereunder (including Discount) by the Transferor. On the date on which the Net
Investment is zero, all accrued Discount and Servicing Fees have been paid in
full and all other Aggregate Unpaids have been paid in full, any funds remaining
on deposit in the Collection Account shall be paid to the Transferor.
SECTION 2.12. SHARING OF PAYMENTS, ETC. If the Company or any Bank
Investor (for purposes of this Section only, being a "Recipient") shall obtain
any payment (whether voluntary, involuntary, through the exercise of any right
of setoff, or otherwise) on account of the Transferred Interest owned by it
(other than pursuant to the Fee Letter, or Article VIII and other than as a
result of the differences in the timing of the applications of Collections
pursuant to Section 2.5 or 2.6) in excess of its ratable share of payments on
account of Transferred Interest obtained by the Company and/or the Bank
Investors entitled thereto, such Recipient shall forthwith purchase from the
Company and/or the Bank Investors entitled to a share of such amount
participations in the Transferred Interests owned by such Persons as shall be
necessary to cause such Recipient to share the excess payment ratably with each
such other Person entitled thereto; PROVIDED, HOWEVER, that if all or any
portion of such excess payment is thereafter recovered from such Recipient, such
purchase from each such other Person shall be rescinded and
34
<PAGE>
each such other Person shall repay to the Recipient the purchase price paid
by such Recipient for such participation to the extent of such recovery,
together with an amount equal to such other Person's ratable share (according
to the proportion of (a) the amount of such other Person's required payment
to (b) the total amount so recovered from the Recipient) of any interest or
other amount paid or payable by the Recipient in respect of the total amount
so recovered.
SECTION 2.13. RIGHT OF SETOFF. Without in any way limiting the
provisions of Section 2.12 hereof, each of the Agent, the Company and the Bank
Investors is hereby authorized (in addition to any other rights it may have) at
any time after the occurrence of the Termination Date due to the occurrence of a
Termination Event (other than a Conduit Termination Event) or during the
continuance of a Potential Termination Event (other than a Conduit Termination
Event) to set-off, appropriate and apply (without presentment, demand, protest
or other notice which are hereby expressly waived) any deposits and any other
indebtedness held or owing by the Agent, the Company or such Bank Investor to,
or for the account of, the Transferor against the amount of the Aggregate
Unpaids owing by the Transferor to such Person or to the Agent on behalf of such
Person (even if contingent or unmatured).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. REPRESENTATIONS AND WARRANTIES OF THE TRANSFEROR. On the
Closing Date and on the date of each Transfer, the Transferor represents and
warrants to the Agent, the Company and the Bank Investors that:
(a) EXISTENCE AND POWER. The Transferor is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware and has all requisite limited liability
company power and all material governmental licenses, authorizations, consents
and approvals required to carry on its business in each jurisdiction in which
its business is now conducted and the Transferor is duly qualified to do
business in, and is in good standing in, every other jurisdiction in which the
nature of its business requires it to be so qualified, except where the failure
to have such items or to be so qualified or in good standing would not have a
Material Adverse Effect.
(b) AUTHORIZATION; CONTRAVENTION. The execution, delivery
and performance by the Transferor of this Agreement, the Receivables Purchase
Agreement, the Fee Letter, the Certificate, the Transfer Certificate and the
other Transaction Documents to which the Transferor is a party are within the
Transferor's powers, have been duly authorized by all necessary limited
liability company action, require no action by or in respect of, or filing with,
any Official Body or official thereof (except as contemplated by Section 2.7
hereof), and do not contravene, or constitute a default under, any provision of
applicable law, rule or regulation or of the certificate of formation or limited
liability company agreement of the Transferor or of any agreement, judgment,
injunction, order, writ, decree or other instrument binding upon the Transferor
or result in the creation or imposition of any Adverse Claim on the assets of
the Transferor (except as contemplated by Section 2.7 hereof).
35
<PAGE>
(c) BINDING EFFECT. Each of this Agreement, the
Receivables Purchase Agreement, the Fee Letter, the Certificate and the other
Transaction Documents to which the Transferor is a party has been duly executed
and delivered and constitutes and the Transfer Certificate upon payment of the
Transfer Price set forth therein will constitute the legal, valid and binding
obligation of the Transferor, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws affecting the rights of creditors generally.
(d) PERFECTION. Immediately preceding each Transfer
hereunder, the Transferor shall be the legal and beneficial owner of all of the
Receivables and the Related Security and Collections to be transferred
hereunder, free and clear of all Adverse Claims. On or prior to each Transfer
and each recomputation of the Transferred Interest, all financing statements and
other documents required to be recorded or filed under the UCC in order to
perfect and protect the interest of the Agent on behalf of the Company and the
Bank Investors in the Transferred Interest against all creditors of and
purchasers from the Transferor, any Originator Subsidiary and the Parent will
have been duly filed in each filing office necessary for such purpose and all
filing fees and taxes, if any, payable in connection with such filings shall
have been paid in full.
(e) ACCURACY OF INFORMATION. All information
heretofore furnished by the Transferor (including without limitation, the
Investor Reports, any reports delivered pursuant to Section 2.10 hereof and
the Transferor's financial statements) to the Company, any Bank Investors,
the Agent or the Administrative Agent for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Transferor to the Company, any Bank
Investors, the Agent or the Administrative Agent will be complete and
accurate as of its date in every material respect, and the Transferor has not
omitted to disclose any information which is material to the transaction on
the date such information is stated or certified.
(f) TAX STATUS. The Transferor has filed all tax returns
(federal, state and local), if any, required to be filed and has paid or made
adequate provision for the payment of all taxes and assessments and other
governmental charges, if any, payable by it.
(g) ACTION, SUITS. There are no actions, suits or
proceedings pending, or to the knowledge of the Transferor threatened, against
or affecting the Transferor or its properties, in or before any court,
arbitrator or other body; there are no actions, suits or proceedings pending, or
to the knowledge of the Transferor threatened, against the Parent or any
Originator Subsidiary, or their respective properties, in or before any court,
arbitrator or other body which could reasonably be expected to have a material
adverse effect on the collectibility of the Receivables; the Transferor is not
in violation of any order of any court, arbitrator or Official Body.
(h) USE OF PROCEEDS. No proceeds of any Transfer will be
used by the Transferor to acquire any security in any transaction which is
subject to Section 12 of the Securities Exchange Act of 1934, as amended or for
any purpose that violates any applicable law, rule or regulation, including
Regulation U of the Federal Reserve Board.
36
<PAGE>
(i) PLACE OF BUSINESS. The principal place of business
and chief executive office (as such terms are defined in the UCC) of the
Transferor are located at the address of the Transferor indicated in Section
10.3 hereof and the offices where the Transferor keeps all its Records, are
located at the address(es) described on Exhibit I or such other locations
notified to the Company in accordance with Section 2.7 hereof in jurisdictions
where all action required by Section 2.7 hereof has been taken and completed.
(j) GOOD TITLE. Upon each Transfer the Agent shall
acquire a valid ownership interest to the extent of the Transferred Interest or
a first priority perfected security interest in each Receivable that exists on
the date of such Transfer and in the Related Security and Collections with
respect thereto free and clear of any Adverse Claim.
(k) TRADENAMES, ETC. As of the date hereof, the
Transferor has no Subsidiaries or divisions.
(l) NATURE OF RECEIVABLES. Each Receivable (x)
represented by the Transferor or the Servicer to be an Eligible Receivable
(including in any Investor Report or other report delivered pursuant to Section
2.10 hereof) or (y) included in the calculation of the Net Receivables Balance,
in fact satisfies at such time the definition of "Eligible Receivable" set forth
herein and, in the case of clause (y) above, is not a Receivable of the type
described in clause (i) of the definition of "Net Receivables Balance".
(m) COVERAGE REQUIREMENT; AMOUNT OF RECEIVABLES. The
Percentage Factor does not exceed the Maximum Percentage Factor. As of May 31,
1999, the aggregate outstanding balance of the Receivables in existence was
$207,588,629 and the Net Receivable Balance was $132,323,430.
(n) CREDIT AND COLLECTION POLICY. Since June 4, 1999,
there have been no material changes in the Credit and Collection Policy other
than as permitted hereunder.
(o) [Reserved]
(p) NO TERMINATION EVENT. No event has occurred and is
continuing and no condition exists which constitutes a Termination Event
(other than a Conduit Termination Event) or a Potential Termination Event
(other than a Conduit Termination Event).
(q) NOT AN INVESTMENT COMPANY OR A HOLDING COMPANY. The
Transferor is not, and is not controlled by, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or is exempt from all
provisions of such Act. The Transferor is not a "holding company", or a
subsidiary or affiliate of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(r) ERISA. Each member of the ERISA Group has fulfilled
its obligations under the minimum funding standards of ERISA and the Internal
Revenue Code with respect to each Plan and is in compliance in all material
respects with the presently applicable provisions of ERISA and the Internal
Revenue Code with respect to each Plan. No member of the ERISA Group has (i)
sought a waiver of the minimum funding standard under Section 412 of the
Internal
37
<PAGE>
Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
(s) LOCK-BOX ACCOUNTS. The names and addresses of all
the Lock-Box Banks, together with the account numbers of the Lock-Box
Accounts at such Lock-Box Banks, are specified in Exhibit C hereto (or at
such other Lock-Box Banks and/or with such other Lock-Box Accounts as will
have been notified to the Agent and for which Lock-Box Agreements will have
been executed in accordance with Section 2.7(b) hereof and delivered to the
Servicer). All Obligors have been instructed to make payment to a Lock-Box
Account and only Collections are deposited into the Lock-Box Accounts.
(t) BULK SALES. No transaction contemplated hereby or
by the Receivables Purchase Agreement requires compliance with any bulk sales
act or similar law.
(u) TRANSFERS UNDER RECEIVABLES PURCHASE AGREEMENT.
Each Receivable which has been transferred to the Transferor by the Parent
has been purchased by the Transferor from the Parent pursuant to, and in
accordance with, the terms of the Receivables Purchase Agreement.
(v) PREFERENCE; VOIDABILITY. The Transferor shall have
given reasonably equivalent value to the Parent in consideration for the
transfer to the Transferor of the Receivables and Related Security from the
Parent, and each such transfer shall not have been made for or on account of
an antecedent debt owed by the Parent to the Transferor.
SECTION 3.2. REPRESENTATIONS AND WARRANTIES OF THE SERVICER. On the
Closing Date and on the date of each Transfer, the Servicer represents and
warrants to the Agent, the Company and the Bank Investors that:
(a) CORPORATE EXISTENCE AND POWER. The Servicer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all corporate power and all material
governmental licenses, authorizations, consents and approvals required to
carry on its business in each jurisdiction in which its business is now
conducted and the Servicer is duly qualified to do business in, and is in
good standing in, every other jurisdiction in which the nature of its
business requires it to be so qualified, except where the failure to have
such item or to be so qualified or in good standing would not have a Material
Adverse Effect.
(b) CORPORATE AND GOVERNMENTAL AUTHORIZATION;
CONTRAVENTION. The execution, delivery and performance by the Servicer of this
Agreement are within the Servicer's corporate powers, have been duly authorized
by all necessary corporate action, require no action by or in respect of, or
filing with, any Official Body or official thereof, and do not contravene, or
constitute a default under, any provision of applicable law, rule or regulation
or of the charter or bylaws of the Servicer or of any agreement, judgment,
injunction, order, writ, decree or other instrument binding upon the Servicer or
result in the creation or imposition of any Adverse Claim
38
<PAGE>
on the assets of the Servicer or any of its Subsidiaries except where such
failure would not have a Material Adverse Effect.
(c) BINDING EFFECT. This Agreement has been duly executed
and delivered and constitutes the legal, valid and binding obligation of the
Servicer, enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws affecting the rights of
creditors.
(d) ACCURACY OF INFORMATION. All information heretofore
furnished by the Servicer to the Agent, the Company, any Bank Investor or the
Administrative Agent for purposes of or in connection with this Agreement or any
transaction contemplated hereby is, and all such information hereafter furnished
by the Servicer to the Agent, the Company, any Bank Investor or the
Administrative Agent will be complete and accurate as of such date in every
material respect, on the date such information is stated or certified.
(e) ACTION, SUITS. There are no actions, suits or
proceedings pending, or to the knowledge of the Servicer threatened, against
or affecting the Servicer or any Originator Subsidiary of the Servicer or
their respective properties, in or before any court, arbitrator or other body
which could reasonably be expected to have a Material Adverse Effect; the
Servicer is not in violation of any material order of any court, arbitrator
or Official Body.
(f) NATURE OF RECEIVABLES. Each Receivable included in
the calculation of the Net Receivables Balance in fact satisfies at such time
the definition of "Eligible Receivable" and is not a Receivable of the type
described in clause (i) of the definition of "Net Receivables Balance".
(g) AMOUNT OF RECEIVABLES. As of May 31, 1999, the
aggregate outstanding balance of the Receivables in existence was
$207,588,629 and the Net Receivables Balance was $132,323,430.
(h) CREDIT AND COLLECTION POLICY. Since June 4, 1999,
there have been no material changes in the Credit and Collection Policy other
than as permitted hereunder.
(i) COLLECTIONS AND SERVICING; MATERIAL ADVERSE
EFFECT. Since June 4, 1999, there has been no material adverse change in the
ability of the Servicer to service and collect the Receivables.
(j) NOT AN INVESTMENT COMPANY OR A HOLDING COMPANY.
The Servicer is not, and is not controlled by, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended, or is exempt
from all provisions of such Act. The Servicer is not a "holding company," or
a subsidiary or affiliate of a "holding company," within the meaning of the
Public Utility Holding Company Act of 1935, as amended.
(k) LOCK-BOX ACCOUNTS. The names and addresses of all
the Lock-Box Banks, together with the account numbers of the Lock-Box
Accounts at such Lock-Box Banks, are specified in Exhibit C (or at such other
Lock-Box Banks and/or with such other Lock-Box Accounts as will have been
notified to the Transferor and the Agent and for which Lock-Box Agreements
will have been executed in accordance with Section 2.7(b) hereof and
delivered to the
39
<PAGE>
Servicer). All Obligors have been instructed to make payment to a Lock-Box
Account and only Collections are deposited into the Lock-Box Accounts.
(l) YEAR 2000 COMPLIANCE. The Servicer has (i)
initiated a review and assessment of all areas within its and each of its
Subsidiaries' business and operations (including those affected by suppliers
and vendors) that could be adversely affected by the Year 2000 Problem, (ii)
developed a plan and timeline for addressing the Year 2000 Problem on a
timely basis, and (iii) to date, implemented that plan in accordance with
that timetable. The Servicer reasonably believes that all computer
applications (including those of its suppliers and vendors) that are material
to its or any of the Originator Subsidiaries' business and operations will on
a timely basis be Year 2000 Compliant except to the extent that a failure to
do so could not reasonably be expected (a) to have a Material Adverse Effect
or (b) to result in a Termination Event (other than a Conduit Termination
Event) or Potential Termination Event (other than a Conduit Termination
Event). The Servicer (i) has completed a review and assessment of all
Receivable Systems and (ii) has determined that such Receivable Systems are
Year 2000 Compliant or will be Year 2000 Compliant on or before September 30,
1999 and thereafter.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1. CONDITIONS TO CLOSING. On or prior to the date of execution
hereof, the Transferor shall deliver to the Agent the following documents,
instruments and fees all of which shall be in a form and substance acceptable
to the Agent:
(a) A copy of the resolutions of the Board of Directors
of each of the Transferor and each member of the Transferor certified by its
Secretary or Assistant Secretary approving the execution, delivery and
performance by the Transferor of this Agreement, the Receivables Purchase
Agreement and the other Transaction Documents to be delivered by the Transferor
hereunder or thereunder and all other documents evidencing necessary limited
liability company or corporate action and government approvals, if any.
(b) A copy of the resolutions of the Board of Directors
of each of the Parent and the Servicer, certified by its Secretary or Assistant
Secretary approving the execution, delivery and performance by it of this
Agreement, the Receivables Purchase Agreement and the other Transactions
Documents to be delivered by such entity hereunder or thereunder and all other
documents evidencing necessary corporate action (including shareholders
consents) and government approvals, if any.
(c) The certificate of formation of the Transferor
certified by the Secretary of State of the State of Delaware dated a date
reasonably prior to the Closing Date.
(d) The charter of each of the Parent and the Servicer
certified by the Secretary of State of the State of Delaware dated a date
reasonably prior to the Closing Date.
40
<PAGE>
(e) A Good Standing Certificate for the Transferor issued
by the Secretary of State of the State of Delaware and certificates of
qualification as a foreign limited liability company issued by the Secretaries
of State or other similar officials of each jurisdiction where such
qualification is material to the transactions contemplated by this Agreement and
the other Transaction Documents, in each case, dated a date reasonably prior to
the Closing Date.
(f) A Good Standing Certificate for each of the Parent
and the Servicer issued by the Secretary of State of the State of Delaware
and certificates of qualification as a foreign corporation issued by the
Secretaries of State or other similar officials of each jurisdiction when
such qualification is material to the transactions contemplated by this
Agreement and the Receivables Purchase Agreement and the other Transaction
Documents, in each case, dated a date reasonably prior to the Closing Date.
(g) A Certificate of the Secretary or Assistant
Secretary of the Transferor substantially in the form of Exhibit L-1 attached
hereto.
(h) A Certificate of the Secretary or Assistant Secretary
of each of the Parent and the Servicer substantially in the forms of Exhibit L-2
attached hereto.
(i) Copies of proper financing statements (Form UCC-1),
naming the Transferor as the debtor in favor of the Agent as secured party, for
the benefit of the Company and the Bank Investors, or other similar instruments
or documents as may be necessary or in the reasonable opinion of the Agent
desirable under the UCC of all appropriate jurisdictions or any comparable law
to perfect the Agent's ownership interest or security interest in all
Receivables and the Related Security and Collections relating thereto.
(j) Copies of proper financing statements (Form UCC-1),
naming the Parent as the debtor in favor of the Transferor as secured party and
the Agent, for the benefit of the Company and the Bank Investors, as assignee of
the secured party or other similar instruments or documents as may be necessary
or in the reasonable opinion of the Agent desirable under the UCC of all
appropriate jurisdictions or any comparable law to perfect the Transferor's
ownership interest in all Receivables.
(k) Copies of proper financing statements (Form UCC-3),
if any, necessary to terminate all security interests and other rights of any
person in Receivables previously granted by Transferor.
(l) Copies of proper financing statements (Form UCC-3),
if any, necessary to terminate all security interests and other rights of any
person in Receivables previously granted by the Parent.
(m) Certified copies of request for information or copies
(Form UCC-11) (or a similar search report certified by parties acceptable to the
Agent) dated a date reasonably near the date of the initial Incremental Transfer
listing all effective financing statements which name the Transferor or the
Parent (under their respective present names and any previous names) as debtor
and which are filed in jurisdictions in which the filings were made pursuant to
items (i) or (j)
41
<PAGE>
above together with copies of such financing statements (none of which shall
cover any Receivables or Contracts).
(n) Executed copies of the Lock-Box Agreements relating
to each of the Lock- Boxes and the Lock-Box Accounts; provided, however, that
such Lock-Box Agreements may instead be delivered up to 60 days after the
Closing Date. To the extent that any such Lock-Box Agreements are not received
on or prior to such 60th day, the Receivables which arise on and after such date
which generate the Collections which are to be deposited to the Lock-Box Account
to which such Lock-Box Agreement relates shall not be deemed to be Eligible
Receivables until such Lock-Box Agreement is received by the Agent.
(o) An opinion of Latham & Watkins, special counsel to
the Transferor, the Servicer and the Parent, covering the matters set forth in
Exhibit K hereto as well as addressing the time period over which UCC financing
statements filed in all appropriate jurisdictions remain effective.
(p) An opinion of (i) Latham & Watkins, special
counsel to the Transferor and the Parent, covering certain bankruptcy and
insolvency matters (i.e. "true sale" and non-consolidation) and (ii) Morris,
Nichols, Arsht & Tunnel, special Delaware counsel to the Transferor, covering
certain Delaware law and bankruptcy and insolvency matters relating to the
Transferor's status as a single-member limited liability company, in each
case in form and substance satisfactory to the Agent and Agent's counsel.
(q) A computer tape or other listing satisfactory to the
Agent setting forth all Receivables and the outstanding balances thereon and
such other information as the Agent may reasonably request.
(r) An executed copy of this Agreement, the Receivables
Purchase Agreement, the Fee Letter and each of the other Transaction Documents
to be executed by the Parent, Servicer or the Transferor.
(s) The Transfer Certificate, duly executed by the
Transferor.
(t) The Certificate, duly executed by the Transferor and
appropriately completed.
(u) Evidence of the payment of all fees due at closing
pursuant to the Fee Letter.
(v) An Investor Report as of the end of the May 1999
fiscal month.
(w) Evidence of the appointment of National Registered
Agents, Inc. as agent for process as required by Section 10.4(d) hereof.
(x) Evidence that all accounts required to be established
hereunder have been established.
42
<PAGE>
(y) Such other documents, approvals, instruments,
certificates and opinions as the Agent or the Administrative Agent, shall
reasonably request.
SECTION 4.2. CONDITIONS PRECEDENT TO EACH INCREMENTAL TRANSFER. The
obligation of the Company or any Bank Investor to make any Incremental
Transfer (including the initial Incremental Transfer) of Receivables
hereunder on any date prior to the Commitment Termination Date is subject to
the satisfaction of the following conditions:
(a) The Agent shall have received a Transfer Request,
appropriately completed, within the time period required by Section 2.2 hereof;
(b) The Agent shall have received a computer tape or
other listing reasonably satisfactory to the Agent with respect to such
Receivables to be transferred, and the information set forth therein shall be
true, complete and correct.
(c) All of the representations and warranties set forth
in Sections 3.1 and 3.2 hereof shall be true, complete and correct in all
material respects on and as of the day of such Transfer as though made on and as
of such day and shall be deemed repeated on such day.
(d) The Agent shall have received such other documents,
approvals, instruments, certificates and opinions as the Agent or the
Administrative Agent, shall reasonably request.
ARTICLE V
COVENANTS
SECTION 5.1. AFFIRMATIVE COVENANTS OF TRANSFEROR. Unless the Agent shall
otherwise consent in writing, at all times from the date hereof to the later
to occur of (i) the Termination Date or (ii) earlier of (A) the date on which
the Net Investment has been reduced to zero, all accrued Discount and
Servicing Fees shall have been paid in full and all other Aggregate Unpaids
shall have been paid in full in cash and (B) all Receivables sold hereunder
have been written-off after all commercially reasonable efforts to collect
such Receivables have been exhausted or such Receivables have been collected:
(a) FINANCIAL REPORTING AND OTHER INFORMATION. The
Transferor will and will cause the Parent and each of the Parent's Subsidiaries
to maintain, for itself and each of its respective Subsidiaries, a system of
accounting established and administered in accordance with GAAP, and furnish to
the Agent:
(i) ANNUAL REPORTING OF TRANSFEROR. Within one
hundred twenty (120) days after the close of the Transferor's fiscal years,
unaudited financial statements, prepared in accordance with GAAP, including a
balance sheet as of the end of such period, and related statements of
operations, shareholder's equity and cash flows.
(ii) ANNUAL REPORTING OF PARENT. Within one
hundred and twenty (120) days after the close of the Parent's fiscal year, a
consolidated balance sheet of the Parent and its consolidated Subsidiaries as of
the end of such year and the related consolidated financial
43
<PAGE>
statements in the form then required to be filed with the Securities and
Exchange Commission on Form 10-K or its equivalent, all reported on by
independent certified public accountants, acceptable to the Agent.
(iii) [Reserved]
(iv) QUARTERLY REPORTING OF PARENT. Within sixty
(60) days after the close of each of the first three fiscal quarters of each
fiscal year of the Parent, a consolidated balance sheet of the Parent and its
Subsidiaries as of the end of such quarter and the related consolidated
financial statements in the form then required to be filed with the Securities
and Exchange Commission on Form 10-Q or its equivalent, a certified (subject to
normal year-end adjustments) by the chief financial officer or the chief
accounting officer of the Parent.
(v) AUDITOR COMPLIANCE CERTIFICATES.
Simultaneously with the delivery of each set of financial statements set forth
in clause (ii) above, a statement of the firm of independent public accountants
which reported on such statements to the effect that nothing has come to their
attention to cause them to believe that the Parent was not in compliance with
the terms and conditions of Section 5.3 on the date of such statements, or, if
in the opinion of such accountants, the Parent was not in compliance with the
terms and conditions of Section 5.3, stating the nature and status of such
non-compliance, and with respect to such other matters as the Agent may
reasonably request.
(vi) ADDITIONAL COMPLIANCE CERTIFICATES. Together
with the financial statements required under clauses (i), (ii) and (iv), a
compliance certificate signed by the Transferor's or the Parent's, as
applicable, chief financial officer or chief accounting officer stating that (x)
the attached financial statements have been prepared in accordance with GAAP and
accurately reflect the financial condition of the Transferor or the Parent as
applicable and (y) to the best of such Person's knowledge, no Termination Event
(other than a Conduit Termination Event) or Potential Termination Event (other
than a Conduit Termination Event) exists, or if any Termination Event (other
than a Conduit Termination Event) or Potential Termination Event (other than a
Conduit Termination Event) exists, stating the nature and status thereof and
showing the computation of, and showing compliance with, each of the financial
ratios and restrictions set forth in Section 5.2(l), Section 5.3 and Section
7.1(l) through (n) hereof.
(vii) SHAREHOLDERS STATEMENTS AND REPORTS.
Promptly upon the furnishing thereof to the shareholders of the Transferor or
the Parent, copies of all financial statements, reports and proxy statements
so furnished.
(viii) S.E.C. FILINGS. Promptly upon the filing
thereof, copies of all registration statements and annual, quarterly, monthly or
other regular reports which the Parent or any Subsidiary files with the
Securities and Exchange Commission other than routine registration statements
relating to employee benefits on Form S-8.
(ix) NOTICE OF TERMINATION EVENTS OR POTENTIAL
TERMINATION EVENTS, ETC. (A) As soon as possible and in any event within two (2)
Business Days after the Transferor obtains knowledge or should have known of the
occurrence of any Termination Event (other than
44
<PAGE>
a Conduit Termination Event) or Potential Termination Event (other than a
Conduit Termination Event), a statement of the chief financial officer or
chief accounting officer of the Transferor or the Parent setting forth
details of such Termination Event or Potential Termination Event and the
action which the Transferor proposes to take with respect thereto, which
information shall be updated promptly from time to time; (B) promptly after
the Transferor obtains knowledge thereof, notice of any litigation,
investigation or proceeding that may exist at any time between the Transferor
and any Person that may result in a Material Adverse Effect or any litigation
or proceeding relating to any Transaction Document; and (C) promptly after
the Transferor obtains knowledge or should have known of the occurrence
thereof, notice of a Material Adverse Effect.
(x) CHANGE IN CREDIT AND COLLECTION POLICY AND
DEBT RATINGS. Within ten (10) days after the date any material change in or
amendment to the Credit and Collection Policy is made, a copy of the Credit and
Collection Policy then in effect indicating such change or amendment. Within
five (5) days after the date of any change in the Transferor's or the Parent's
public or private debt ratings, if any, a written certification of the
Transferor's or the Parent's public and private debt ratings after giving effect
to any such change.
(xi) CREDIT AND COLLECTION POLICY. Within ninety
(90) days after the close of each of the Parent's and the Transferor's fiscal
years, a complete copy of the Credit and Collection Policy then in effect, if
requested by the Agent.
(xii) ERISA. If and when any member of the
ERISA Group (i) gives or is required to give notice to the PBGC of any
"reportable event" (as defined in Section 4043 of ERISA) with respect to any
Material Plan which might constitute grounds for a termination of such Plan
under Title IV of ERISA, or knows that the plan administrator of any Material
Plan has given or is required to give notice of any such reportable event, a
copy of the notice of such reportable event given or required to be given to
the PBGC; (ii) receives notice of complete or partial withdrawal liability
under Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such notice;
(iii) receives notice from the PBGC under Title IV of ERISA of an intent to
terminate, impose liability (other than for premiums under Section 4007 of
ERISA) in respect of, or appoint a trustee to administer, any Material Plan,
a copy of such notice; (iv) applies for a waiver of the minimum funding
standard under Section 412 of the Internal Revenue Code, a copy of such
application; (v) gives notice of intent to terminate any Material Plan under
Section 4041(c) of ERISA, a copy of such notice and other information filed
with the PBGC; (vi) gives notice of withdrawal from any Material Plan
pursuant to Section 4063 of ERISA, a copy of such notice; or (vii) fails to
make any payment or contribution to any material Plan or Multiemployer Plan
or in respect of any Benefit Arrangement or makes any amendment to any
Material Plan or Benefit Arrangement which has resulted or could result in
the imposition of a Lien or the posting of a bond or other security, a
certificate of the chief financial officer or the chief accounting officer of
the Borrower setting forth details as to such occurrence and action, if any,
which the Borrower or applicable member of the ERISA Group is required or
proposes to take;
(xiii) CHANGE IN ACCOUNTANTS OR ACCOUNTING POLICY.
Promptly after such change, if any, notice of any change (A) in the principal
accountants or (B) in its accounting policy of either the Transferor or the
Parent which would have a Material Adverse Effect.
45
<PAGE>
(xiv) OTHER INFORMATION. Such other information
(including non- financial information) as the Agent or the Administrative Agent
may from time to time reasonably request with respect to the Parent, the
Transferor or any Originator Subsidiary.
(b) CONDUCT OF BUSINESS. The Transferor will (i)
carry on and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as it is presently conducted and
do all things necessary to remain duly organized, validly existing and in
good standing in its jurisdiction of organization and maintain all requisite
authority to conduct its business in each jurisdiction in which its business
is conducted and (ii) will at all times be a wholly-owned Subsidiary of the
Parent.
(c) COMPLIANCE WITH LAWS. The Transferor will comply
with all laws, rules, regulations, orders, writs, judgments, injunctions,
decrees or awards to which it or its properties may be subject.
(d) FURNISHING OF INFORMATION AND INSPECTION OF
RECORDS. The Transferor will and will cause the Parent and each Originator
Subsidiary to furnish to the Agent from time to time such information with
respect to the Receivables as the Agent may reasonably request, including,
without limitation, listings identifying the Obligor and the outstanding
balance for each Receivable. The Transferor will, and will cause the Parent
and each Originator Subsidiary to, at any time and from time to time during
regular business hours permit, upon reasonable notice, the Agent, or its
agents or representatives, (i) to examine and make copies of and take
abstracts from all Records and (ii) to visit the offices and properties of
the Transferor, the Parent and the Originator Subsidiaries, as applicable,
for the purpose of examining such Records, and to discuss matters relating to
Receivables or the Transferor's or the Parent's performance hereunder and
under the other Transaction Documents to which such Person is a party with
any of the officers, directors, employees or independent public accountants
of the Transferor, each Originator Subsidiary or the Parent, as applicable,
having knowledge of such matters.
(e) OFFICES, RECORDS AND BOOKS OF ACCOUNT. The
Transferor (i) shall keep its principal place of business and chief executive
office (as such terms or similar terms are used in the UCC) and the office where
it keeps its records concerning the Receivables at the address of the Transferor
set forth in Section 10.3 hereof or at any other locations in jurisdictions
where all actions reasonably requested by the Agent to protect and perfect the
interest of the Agent, for the benefit of the Company and the Bank Investors, in
the Receivables and related items (including the Affected Assets) have been
taken and completed and (ii) shall provide the Agent with at least 30 days'
written notice before making any change in the Transferor's name or making any
other change in the Transferor's identity or organizational structure that could
render any UCC financing statement filed in connection with this Agreement
seriously misleading as such term (or similar term) is used in the UCC; each
notice to the Agent pursuant to this sentence shall set forth the applicable
change and the effective date thereof. The Transferor will and will cause the
Servicer and the Originator Subsidiaries to maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing Receivables in the event of the
destruction of the originals thereof), and keep and maintain, all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records adequate
to permit the daily identification of
46
<PAGE>
each new Receivable and all Collections of and adjustments to each existing
Receivable). The Transferor will, and will cause the Parent to, give the
Agent notice of any material change in the administrative and operating
procedures of the Transferor, the Servicer or the Originator Subsidiaries, as
applicable, referred to in the previous sentence.
(f) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND
CONTRACTS. The Transferor, at its expense, will and will cause the Parent to
timely and fully perform and comply with all material provisions, covenants and
other promises required to be observed by the Transferor, the Originator
Subsidiaries or the Parent under the Contracts related to the Receivables.
(g) CREDIT AND COLLECTION POLICIES. The Transferor will
and will cause the Parent and the Originator Subsidiaries to comply in all
material respects with each Credit and Collection Policy in regard to each
Receivable and the related Contract.
(h) COLLECTIONS. The Transferor shall and shall cause the
Parent and the Originator Subsidiaries to instruct all Obligors to cause all
Collections to be deposited directly to a Lock-Box Account.
(i) COLLECTIONS RECEIVED. The Transferor shall and shall
cause the Parent and the Originator Subsidiaries to hold in trust, and deposit,
immediately, but in any event not later than two (2) Business Days of its
receipt thereof, to a Lock-Box Account all Collections received from time to
time by the Transferor or the Parent, as the case may be, provided, that the
Transferor, the Parent and the Originator Subsidiaries may initially deposit
checks constituting Collections which it receives into its operating account if
such Collections are transferred from such operating account to a Lock-Box
Account within two (2) Business Days and the aggregate amount of such
Collections in all such operating accounts does not exceed at any one time
$10,000,000.
(j) SALE TREATMENT. The Transferor will not (i) for
accounting purposes treat the transactions contemplated by the Receivables
Purchase Agreement in any manner other than as a sale of Receivables by the
Parent to the Transferor, or (ii) account for (other than for tax purposes) or
otherwise treat the transactions contemplated hereby in any manner other than as
a sale of Receivables by the Transferor to the Agent on behalf of the Company or
the Bank Investors, as applicable. In addition, the Transferor shall, and shall
cause the Parent to, disclose (in a footnote or otherwise) in all of its
respective financial statements (including any such financial statements
consolidated with any other Persons' financial statements) the existence and
nature of the transaction contemplated hereby and by the Receivables Purchase
Agreement and the interest of the Transferor (in the case of the Parent's
financial statements) and the Agent, on behalf of the Company and the Bank
Investors, in the Affected Assets. For federal and state income taxes, the
Transferor and the Agent shall treat the transactions hereunder as a financing.
(k) SEPARATE BUSINESS. (a) The Transferor will be a
limited purpose entity whose primary activities are restricted in its
certificate of formation or limited liability company agreement to (i)
purchasing or otherwise acquiring from the Parent, owning, holding, granting
security interests or selling interests in Affected Assets, (ii) entering into
agreements for the
47
<PAGE>
selling, financing and servicing of the Affected Assets, and (iii) conducting
such other activities as it deems necessary or appropriate to carry out its
primary activities. The Transferor shall not create any Subsidiaries or
divisions. The Transferor will not engage in any business other than the
transactions contemplated by the Transaction Documents. The Transferor shall
at all times, except as otherwise permitted hereby, (a) pay its expenses, (b)
have at all times at least one member of its board of directors which is not
and has never been an employee, officer or director of the Parent or any
Affiliate of the Parent or of any creditor of the Parent or any Affiliate of
the Parent and are persons who are familiar and have experience with asset
securitization, (c) maintain the Transferor's books, financial statements,
accounting records and other limited liability company documents and records
separate from those of the Parent or any other entity, (d) not commingle the
Transferor's assets with those of the Parent or any other entity, (e) act
solely in its limited liability company name and through its own authorized
officers and agents, (f) make investments directly or by brokers engaged and
paid by the Transferor or its agents (PROVIDED that if any such agent is an
Affiliate of the Transferor it shall be compensated at a fair market rate for
its services), (g) separately manage the Transferor's liabilities from those
of the Parent or any Affiliates of the Parent and pay its own liabilities,
including all administrative expenses, from its own separate assets, except
that the Parent may pay the organizational expenses of the Transferor, and
(h) pay from the Transferor's assets all obligations and indebtedness of any
kind incurred by the Transferor. The Transferor shall abide by all limited
liability company formalities, including the maintenance of current minute
books, and the Transferor shall cause its financial statements to be prepared
in accordance with GAAP in a manner that indicates the separate existence of
the Transferor and its assets and liabilities. The Transferor shall (i) pay
all its liabilities, (ii) not assume the liabilities of the Parent or any
Affiliate of the Parent, (iii) not lend funds or extend credit to the Parent
or any affiliate of the Parent except pursuant to the Receivables Purchase
Agreement in connection with the purchase of Receivables thereunder and (iv)
not guarantee the liabilities of the Parent or any Affiliates of the Parent.
The officers and directors of the board of directors of the Transferor (as
appropriate) shall make decisions with respect to the business and daily
operations of the Transferor independent of and not dictated by any
controlling entity. The Transferor shall not engage in any business not
permitted by its certificate of formation or limited liability company
agreement as in effect on the Closing Date.
(l) ORGANIZATIONAL DOCUMENTS. The Transferor shall only
amend, alter, change or repeal Sections 7, 8, 9, 10, 16, 21, 22, 24, 25, or 29
or Schedule A of its limited liability company agreement with the prior written
consent of the Agent.
(m) [Reserved]
(n) OWNERSHIP INTEREST, ETC. The Transferor shall and
shall cause the Parent to at its expense, take all action necessary or desirable
to establish and maintain a valid and enforceable undivided percentage ownership
or security interest, to the extent of the Transferred Interest, in the
Receivables, the Related Security and Proceeds with respect thereto, and a first
priority perfected security interest in the Affected Assets in favor of the
Agent for the benefit of the Company and the Bank Investors, in each case free
and clear of any Adverse Claim, including taking such action to perfect, protect
or more fully evidence the interest of the Agent, as the Agent may reasonably
request.
48
<PAGE>
SECTION 5.2. NEGATIVE COVENANTS OF THE TRANSFEROR. Unless the Agent
shall otherwise consent in writing, at all times from the date hereof to the
later to occur of (i) the Termination Date or (ii) the earlier of (A) the
date on which the Net Investment has been reduced to zero, all accrued
Discount and Servicing Fees shall have been paid in full and all other
Aggregate Unpaids shall have been paid in full, in cash and (B) all
Receivables sold hereunder have been written-off after all commercially
reasonable efforts to collect such Receivables have been exhausted or such
Receivables have been collected:
(a) NO SALES, LIENS, ETC. Except as otherwise provided
herein and in the Receivables Purchase Agreement and the Originator Subsidiary
Receivables Purchase Agreement, the Transferor will not and will not permit the
Parent or any Originator Subsidiary to sell, assign (by operation of law or
otherwise) or otherwise dispose of, or create or suffer to exist any Adverse
Claim upon (or the filing of any financing statement) or with respect to (x) any
of the Affected Assets, (y) any inventory or goods, the sale of which gives rise
to a Receivable transferred hereunder (other than sales in the ordinary course
of its business) or (z) any account which concentrates in a Lock-Box Bank to
which the Collections of Receivables sold hereunder are sent, or assign any
right to receive income in respect thereof.
(b) NO EXTENSION OR AMENDMENT OF RECEIVABLES. Except as
otherwise permitted in Section 6.2 hereof, the Transferor will not and will not
permit the Parent or any Originator Subsidiary to extend, amend or otherwise
modify the terms of any Receivable, or amend, modify or waive the terms or
conditions of the Contract related thereto.
(c) NO CHANGE IN BUSINESS OR CREDIT AND COLLECTION
POLICY. The Transferor will not make any change in the character of its business
or in its Credit and Collection Policy, which change would, in either case,
impair the collectibility of any Receivables or otherwise have a Material
Adverse Effect.
(d) NO MERGERS, ETC. The Transferor will not (i)
consolidate or merge with or into any other Person, or (ii) sell, lease or
transfer all or substantially all of its assets to any other Person.
(e) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. The
Transferor will not add or terminate any bank as a Lock-Box Bank or any account
as a Lock-Box Account to or from those listed in Exhibit C hereto or make any
change in its instructions to Obligors regarding payments to be made to any
Lock-Box Account, unless (i) such instructions are to deposit such payments to
another existing Lock-Box Account or (ii) the Agent shall have received written
notice of such addition, termination or change at least 30 days prior thereto
and the Agent shall have received a Lock-Box Agreement executed by each new
Lock-Box Bank or an existing Lock-Box Bank with respect to each new Lock-Box
Account, as applicable.
(f) DEPOSITS TO LOCK-BOX ACCOUNTS. The Transferor will
not and will not permit the Parent or any Originator Subsidiary to deposit or
otherwise credit, or cause or permit to be so deposited or credited, to any
Lock-Box Account cash or cash proceeds other than Collections of Receivables
unless such other cash and proceeds are removed from such LockBox Account
within two (2) Business Days.
49
<PAGE>
(g) CHANGE OF NAME, ETC. The Transferor will not change
its name, identity or structure or the location of its chief executive office,
unless at least ten (10) days prior to the effective date of any such change the
Transferor delivers to the Agent (i) such documents, instruments or agreements,
executed by the Transferor as are necessary to reflect such change and to
continue the perfection of the Agent's ownership interests or security interests
in the Affected Assets and (ii) new or revised Lock-Box Agreements executed by
the Lock-Box Banks which reflect such change and enable the Agent to continue to
exercise its rights contained in Section 2.7 hereof.
(h) AMENDMENTS TO AGREEMENTS. The Transferor will not
and will not permit the Parent or any Originator Subsidiary to amend, modify,
or supplement the Receivables Purchase Agreement, any Originator Subsidiary
Receivables Purchase Agreement or any LockBox Agreement or waive any
provision thereof, in each case except with the prior written consent of the
Agent; nor shall the Transferor take, or permit the Parent or any Originator
Subsidiary to take, any other action under the Receivables Purchase
Agreement, any Originator Subsidiary Receivables Purchase Agreement, or any
Lock-Box Agreement that could have a material adverse effect on the Agent,
the Company or any Bank Investor or which is inconsistent with the terms of
this Agreement.
(i) OTHER DEBT. Except as provided for herein, the
Transferor will not create, incur, assume or suffer to exist any indebtedness
whether current or funded, or any other liability other than (i) indebtedness of
the Transferor representing fees, expenses and indemnities arising hereunder or
under the Receivables Purchase Agreement for the purchase price of the
Receivables under the Receivables Purchase Agreement, and (ii) other
indebtedness incurred in the ordinary course of its business in an amount not to
exceed $9,500 in any fiscal year.
(j) RESERVED.
(k) PAYMENT TO THE PARENT. With respect to any Receivable
sold by the Parent to the Transferor, the Transferor shall and shall cause the
Parent to effect such sale under, and pursuant to the terms of, the Receivables
Purchase Agreement, including, without limitation, the payment by the Transferor
in cash and/or by capital contribution of the Parent, of an amount equal to the
purchase price for such Receivable as required by the terms of the Receivables
Purchase Agreement.
(l) RESTRICTED PAYMENTS. Except as contemplated by the
Receivables Purchase Agreement, the Transferor will not (A) purchase or redeem
any membership interests, (B) prepay, purchase or redeem any Indebtedness, (C)
lend or advance any funds or (D) repay any loans or advances to, for or from any
of its Affiliates (the amounts described in CLAUSES (A) through (D) being
referred to as Restricted Payments), except that the Transferor may (y) make
Restricted Payments out of funds received pursuant to Section 2.2 and (z) may
make other Restricted Payments if, after giving effect thereto, no Termination
Event (other than a Conduit Termination Event) or Potential Termination Event
(other than a Conduit Termination Event) shall have occurred and be continuing.
50
<PAGE>
SECTION 5.3. FINANCIAL COVENANT OF THE PARENT. The Leverage Ratio will
at no time exceed 3.5 to 1.0. As used in this Section 5.3, the following terms
have the meanings set forth below:
"CONSOLIDATED DEBT" means, at any date, the Debt of the Parent
and its Consolidated Subsidiaries, determined on a consolidated basis
as of such date.
"CONSOLIDATED EBITDA" means, for any period, Consolidated Net
Income for such period plus, to the extent deducted in the
determination of such Consolidated Net Income, (i) interest expense for
such period, (ii) the provision for income taxes for such period, (iii)
depreciation and amortization expense for such period and (iv) non-cash
write-offs of in-process research and development costs during such
period in connection with the acquisitions; provided that the aggregate
amount of such write-offs subsequent to the date of this Agreement
added pursuant to this clause (iv) during the term of this Agreement
shall not exceed $250,000,000.
"CONSOLIDATED NET INCOME" means, for any period, the net
income of the Parent and its Consolidated Subsidiaries for such period,
determined on a consolidated basis.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary or
other entity the accounts of which would be consolidated with those of
the Parent in its consolidated financial statements if such statements
were prepared as of such date.
"DEBT" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments, (iii) all obligations of such Person to pay
the deferred purchase price of property or services, except trade
accounts payable and deferred employee compensation obligations arising
in the ordinary course of business, (iv) all obligations of such Person
as lessee which are capitalized in accordance with generally accepted
accounting principles, (v) all unpaid reimbursement obligations of such
Person in respect of letters of credit or similar instruments but only
to the extent that either (x) the issuer has honored a drawing
thereunder or (y) payment of such obligation is otherwise due under the
terms hereof, (vi) all Debt secured by a Lien on any asset of such
Person, whether or not such Debt is otherwise an obligation of such
Person, and (vii) all Debt of others Guaranteed by such Person.
"GUARANTEE" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt
of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise,
of such Person (i) to purchase or pay (or advance or supply funds for
the purchases or payment of) such Debt (whether arising by virtue of
partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for
the purpose of assuring in any other manner the holder of such Debt of
the payment thereof or to protect such holder against loss in respect
thereof (in whole or in
51
<PAGE>
part), provided that the term Guarantee shall not include endorsements
for collection or deposit in the ordinary course of business. The term
"Guarantee" used as a verb has a corresponding meaning.
"LEVERAGE RATIO" means, at any date, the ratio of Consolidated
Debt at such date to Consolidated EBITDA for the period of four
consecutive fiscal quarters most recently ended on or prior to such
date; provided that if there shall have been an acquisition or
disposition of operations during such period, Consolidated EBITDA shall
be calculated on a pro forma basis giving effect thereto as if such
acquisition or disposition had occurred on the first day of such
period.
"SUBSIDIARY" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by the
Parent.
SECTION 5.4. AFFIRMATIVE COVENANTS OF THE SERVICER. Unless the Agent
shall otherwise consent in writing, at all times from the date hereof to the
later to occur of (i) the Termination Date or (ii) the earlier of (A) the date
on which the Net Investment has been reduced to zero, all accrued Discount and
Servicing Fees shall have been paid in full and all other Aggregate Unpaids
shall have been paid in full, in cash and (B) all Receivables sold hereunder in
have been written-off after all commercially reasonable efforts to collect have
been exhausted or such Receivables have been collected:
(a) CONDUCT OF BUSINESS. The Servicer will, and will
cause each of its Originator Subsidiaries to, do all things necessary to
remain duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and maintain all requisite
authority to conduct its business in each jurisdiction in which its business
is conducted except where the failure to do so would not have a Material
Adverse Effect. The Servicer will cause each Originator Subsidiary to carry
on and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as it is presently conducted.
(b) COMPLIANCE WITH LAWS. The Servicer will, and will
cause each of the Originator Subsidiaries to, comply with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it or its respective properties may be subject, except where the failure to do
so would not have a Material Adverse Effect.
(c) FURNISHING OF INFORMATION AND INSPECTION OF RECORDS.
The Servicer will, and will cause the Originator Subsidiaries to, furnish to the
Agent from time to time such information with respect to the Receivables as the
Agent may reasonably request (at the Servicer's expense), including, without
limitation, listings identifying the Obligor and the outstanding balance for
each Receivable. The Servicer will, and will cause the Originator Subsidiaries
to, at any time and from time to time during regular business hours permit, upon
reasonable notice, the Agent, or its agents or representatives, (i) to examine
and make copies of and take abstracts from all Records and (ii) to visit the
offices and properties of the Servicer and the Originator Subsidiaries for the
purpose of examining such Records, and to discuss matters
52
<PAGE>
relating to Receivables or its performance hereunder and under the other
Transaction Documents to which it is a party with any of the officers,
directors, employees or independent public accountants of the Servicer and
its Subsidiaries having knowledge of such matters.
(d) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The
Servicer will maintain and implement (or cause to be maintained and
implemented) administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Receivables in the
event of the destruction of the originals thereof), and keep and maintain or
cause to be kept or maintained, all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit the
daily identification of each new Receivable and all Collections of and
adjustments to each existing Receivable). The Servicer will give the Agent
notice of any material change in its administrative and operating procedures
referred to in the previous sentence.
(e) NOTICE OF AGENT'S INTEREST. In the event that the
Transferor or the Parent shall sell or otherwise transfer any interest in
accounts receivable originated by the Originator Subsidiaries, any computer
tapes or other documents or instruments provided by the Servicer in connection
with any such sale or transfer shall disclose the Transferor's ownership of the
Receivables and the Agent's interest therein.
(f) CREDIT AND COLLECTION POLICIES. The Servicer will,
and will cause the Originator Subsidiaries to, comply in all material respects
with the relevant Credit and Collection Policy with respect to each Receivable
and the related Contract.
(g) COLLECTIONS. The Servicer will instruct all Obligors
to cause all Collections to be deposited directly to a Lock-Box Account.
(h) COLLECTIONS RECEIVED. The Servicer will, and will
cause the Originator Subsidiaries to, hold in trust, and deposit,
immediately, but in any event not later than two (2) Business Days of its
receipt thereof, to a Lock-Box Account all Collections received by it from
time to time; provided, that if the Servicer or an Originator Subsidiary
receives any Collections, the Servicer shall, and shall cause each Originator
Subsidiary to, as applicable, immediately but in any event within two (2)
Business Days of receipt, remit such Collections to a Lock-Box Account;
PROVIDED, FURTHER, that the Parent and the Originator Subsidiaries may
initially deposit checks constituting Collections which it receives pursuant
to the preceding proviso into its operating account if Collections are
transferred from such operating account to a Lock-Box Account within two (2)
Business Days and the aggregate amount of such Collections in all such
operating accounts does not exceed at any one time $10,000,000.
(i) YEAR 2000 COMPLIANCE. The Servicer will promptly
notify the Agent in the event the Servicer discovers or determines that any
computer application (including those of its suppliers and vendors) (i) that is
necessary for the origination, collection, management, or servicing of the
Receivables will not be Year 2000 Compliant on or before September 30, 1999 and
thereafter, or (ii) that is otherwise material to its or any of the Originator
Subsidiaries' business and operations will not be Year 2000 Compliant on a
timely basis, except to the extent that, in the case of (ii) above, such failure
could not reasonably be expected (a) to have a Material
53
<PAGE>
Adverse Effect on the Servicer or on the transaction documented under this
Agreement or (b) to result in a Termination Event (other than a Conduit
Termination Event) or Potential Termination Event (other than a Conduit
Termination Event).
(j) CHANGE IN ACCOUNTANTS OR ACCOUNTING POLICIES. The
Servicer will promptly notify the Agent of any change (A) in its principal
accountants or (B) in its accounting policy or those of the Originator
Subsidiaries which could have a Material Adverse Effect.
SECTION 5.5. NEGATIVE COVENANTS OF THE SERVICER. Unless the Agent shall
otherwise consent in writing, at all times from the date hereof to the later to
occur of (i) the Termination Date or (ii) the earlier of (A) the date on which
the Net Investment has been reduced to zero, all accrued Discount and Servicing
Fees shall have been paid in full and all other Aggregate Unpaids shall have
been paid in full, in cash and (B) all Receivables sold hereunder in accordance
with the Credit Collection Policy have been written-off after all commercially
reasonable efforts to collect such Receivables have been exhausted or such
Receivables have been collected:
(a) NO EXTENSION OR AMENDMENT OF RECEIVABLES. Except as
otherwise permitted in Section 6.2 hereof, the Servicer will not, and will cause
the Originator Subsidiaries not to, extend, amend or otherwise modify the terms
of any Receivable, or amend, modify or waive any terms or conditions of any
Contract related thereto.
(b) NO CHANGE IN CREDIT AND COLLECTION POLICY. The
Servicer will not, and will cause the Originator Subsidiaries not to, make any
change in its Credit and Collection Policy, which change would impair the
collectibility of any material portion of the Receivables or otherwise have a
Material Adverse Effect.
(c) NO MERGERS, ETC. The Servicer will not (i)
consolidate or merge with or into any other Person or (ii) sell, lease or
otherwise transfer, directly or indirectly, all or any substantial part of the
assets of the Servicer and its Subsidiaries, taken as a whole, to any other
Person; provided that the Servicer may merge with another Person if the Servicer
is the surviving corporation and, after giving effect thereto, no Termination
Event (other than a Conduit Termination Event) or Potential Termination Event
(other than a Conduit Termination Event) exists.
(d) CHANGE IN LOCK-BOX AGREEMENTS OR PAYMENT
INSTRUCTIONS TO OBLIGORS. The Servicer will not, and will cause the
Originator Subsidiaries not to, agree to any amendment of any Lock-Box
Agreement without the prior written consent of the Agent or add or terminate
any bank as a Lock-Box Bank or any account as a Lock-Box Account to or from
those listed in Exhibit C hereto or make any change in its instructions to
Obligors regarding payments to be made to any Lock-Box Account, unless (i)
such instructions are to deposit such payments to another existing Lock-Box
Account or (ii) the Agent shall have received written notice of such
addition, termination or change at least 30 days prior thereto and the Agent
shall have received a Lock-Box Agreement executed by each new Lock-Box Bank
or an existing Lock-Box Bank with respect to each new Lock-Box Account, as
applicable.
54
<PAGE>
(e) DEPOSITS TO LOCK-BOX ACCOUNTS. The Servicer will not,
and will cause the Originator Subsidiaries not to, deposit or otherwise credit,
or cause or permit to be so deposited or credited, to any Lock-Box Account cash
or cash proceeds other than Collections of Receivables unless such other cash
and proceeds are removed from such Lock-Box Account within two (2) Business
Days.
ARTICLE VI
ADMINISTRATION AND COLLECTIONS
SECTION 6.1. APPOINTMENT OF SERVICER. The servicing, administering and
collection of the Receivables shall be conducted by such Person (the
"SERVICER") so designated from time to time in accordance with this Section
6.1. The Servicer shall be paid a Servicing Fee, in accordance with Section
2.5 hereof. Until the Company gives notice to the Parent of the designation
of a new Servicer, the Parent is hereby designated as, and hereby agrees to
perform the duties and obligations of, the Servicer pursuant to the terms
hereof. The Servicer may not delegate any of its rights, duties or
obligations hereunder, or designate a substitute Servicer, without the prior
written consent of the Agent, provided that Servicer may appoint any of the
Originator Subsidiaries to act for the Servicer as sub-servicer hereunder and
further provided that the Servicer shall continue to remain solely liable for
the performance of the duties as Servicer hereunder notwithstanding any such
delegation hereunder. The Agent may, and upon the direction of the Majority
Investors the Agent shall, after the occurrence of a Servicer Default or any
other Termination Event (other than a Conduit Termination Event) designate as
Servicer any Person (including itself) to succeed the Parent or any successor
Servicer, on the condition in each case that any such Person so designated
shall agree to perform the duties and obligations of the Servicer pursuant to
the terms hereof. Upon the occurrence of a Servicer Default, the Agent may
notify any Obligor of the Transferred Interest.
SECTION 6.2. DUTIES OF SERVICER.
(a) The Servicer shall take or cause to be taken all
such action as may be necessary or, in its determination, advisable to
collect each Receivable from time to time, all in accordance with applicable
laws, rules and regulations, with reasonable care and diligence, and in
accordance with the applicable Credit and Collection Policy. Each of the
Transferor, the Company, the Agent and the Bank Investors hereby appoints as
its agent the Servicer, from time to time designated pursuant to Section 6.1
hereof, to enforce its respective rights and interests in and under the
Affected Assets. To the extent permitted by applicable law, each of the
Transferor and the Parent (to the extent not then acting as Servicer
hereunder) hereby grants to any Servicer appointed hereunder an irrevocable
power of attorney to take any and all steps in the Transferor's and/or the
Parent's name and on behalf of the Transferor or the Parent necessary or
desirable, in the reasonable determination of the Servicer, to collect all
amounts due under any and all Receivables, including, without limitation,
endorsing the Transferor's and/or the Parent's name on checks and other
instruments representing Collections and enforcing such Receivables and the
related Contracts. The Servicer shall set aside for the account of the
Transferor and the Agent their respective allocable shares of the Collections
of Receivables in accordance with Sections 2.5 and 2.6 hereof. The Servicer
shall set aside and deposit Collections of Receivables when required
55
<PAGE>
pursuant to Article II hereof. So long as no Termination Event (other than a
Conduit Termination Event) or Potential Termination Event (other than a
Conduit Termination Event) shall have occurred and be continuing, the
Servicer may, in accordance with the Credit and Collection Policy, extend the
maturity of Receivables, and extend the maturity or adjust the outstanding
balance as the Servicer may determine to be appropriate to maximize
Collections thereof and otherwise modify the terms of Receivables as the
Servicer, acting in a prudent manner, may determine to be appropriate to
maximize Collections; PROVIDED, HOWEVER, that such extension or adjustment
shall not alter the status of such Receivable as a Delinquent Receivable or a
Defaulted Receivable. The Transferor shall deliver to the Servicer and the
Servicer or the sub-servicer shall hold in trust for the Transferor and the
Agent, on behalf of the Company and the Bank Investors, in accordance with
their respective interests, all Records which evidence or relate to
Receivables or Related Security. Following the occurrence of a Servicer
Default, notwithstanding anything to the contrary contained herein, the Agent
shall have the absolute and unlimited right, acting reasonably, to direct the
Servicer (whether the Servicer is the Parent or any other Person) to commence
or settle any legal action to enforce collection of any Receivable or to
foreclose upon or repossess any Related Security. The Servicer shall not make
the Agent, the Company or any of the Bank Investors a party to any litigation
without the prior written consent of such Person.
(b) The Servicer shall, as soon as practicable following
receipt thereof, turn over to the Transferor any collections of any indebtedness
of any Person which is not on account of a Receivable. If the Servicer is not
the Transferor or the Parent or an Affiliate of the Transferor or the Parent,
the Servicer, by giving three (3) Business Days' prior written notice to the
Agent, may revise the percentage used to calculate the Servicing Fee so long as
the revised percentage will not result in a Servicing Fee that exceeds 110% of
the reasonable and appropriate out-of-pocket costs and expenses of such Servicer
incurred in connection with the performance of its obligations hereunder as
documented to the reasonable satisfaction of the Agent, PROVIDED, HOWEVER, that
at any time after the Percentage Factor equals or exceeds 100%, any compensation
to the Servicer in excess of the Servicing Fee initially provided for herein
shall be an obligation of the Transferor and shall not be payable, in whole or
in part, from Collections allocated to the Company or the Bank Investors, as
applicable. The Servicer, if other than the Transferor or the Parent or an
Affiliate of the Transferor or the Parent, shall as soon as practicable upon
demand, deliver to the Parent all Records in its possession which evidence or
relate to indebtedness of an Obligor which is not a Receivable.
(c) On or before ninety (90) days after the end of
each fiscal year of the Servicer, beginning with the fiscal year ending
December 31, 1999, the Servicer shall cause a firm of independent public
accountants (who may also render other services to the Servicer, the
Transferor, the Parent or any Affiliates of any of the foregoing) to furnish
a report to the Agent to the effect that they have (i) compared the
information contained in the Investor Reports delivered during such fiscal
year then ended with the information contained in the Contracts and the
Servicer's records and computer systems for such period, and that, on the
basis of such examination and comparison, the information contained in the
Investor Reports reconciles with the information contained in the Contracts
and the Servicer's records and computer systems, (ii) performed procedures,
to be agreed to by the Agent and the Servicer, to confirm the Net Receivables
Balance as of the end of the fiscal year, (iii) performed procedures, to be
agreed to by the Agent and the Servicer, to confirm that the Receivables
satisfy the requirements of Eligible
56
<PAGE>
Receivables, and (iv) conducted a 'negative confirmation' of a sample of the
Receivables and verified that the Servicer's records and computer system used
in servicing the Receivables contained correct information with regard to due
dates and outstanding balances, except, in each case for (a) such exceptions
as such firm shall believe to be immaterial (which exceptions need not be
enumerated) and (b) such other exceptions as shall be set forth in such
statement.
(d) Notwithstanding anything to the contrary contained in
this Article VI, the Servicer, if not the Transferor, the Parent or any
Affiliate of the Transferor or the Parent, shall have no obligation to collect,
enforce or take any other action described in this Article VI with respect to
any indebtedness that is not included in the Transferred Interest other than to
deliver to the Transferor the collections and documents with respect to any such
indebtedness as described in Section 6.2(b) hereof.
SECTION 6.3. RIGHTS AFTER DESIGNATION OF NEW SERVICER. At any time
following the designation of a Servicer (other than the Transferor, the Parent
or any Affiliate of the Transferor or the Parent) pursuant to Section 6.1
hereof:
(i) The Agent may direct that payment of all
amounts payable under any Receivable be made directly to the Agent or its
designee.
(ii) The Transferor shall, at the Agent's request
and at the Transferor's expense, give notice of the Agent's, the Transferor's
and/or the Bank Investors' ownership of Receivables to each Obligor and direct
that payments be made directly to the Agent or its designee.
(iii) The Transferor shall, at the Agent's
request, (A) assemble all of the Records, and shall make the same available to
the Agent or its designee at a place selected by the Agent or its designee, and
(B) segregate all cash, checks and other instruments received by it from time to
time constituting Collections of Receivables in a manner acceptable to the Agent
and shall, promptly upon receipt, remit all such cash, checks and instruments,
duly endorsed or with duly executed instruments of transfer, to the Agent or its
designee.
(iv) The Transferor and the Parent hereby
authorize the Agent to take any and all steps in the Transferor's or the
Parent's name and on behalf of the Transferor and the Parent necessary or
desirable, in the determination of the Agent, to collect all amounts due under
any and all Receivables, including, without limitation, endorsing the
Transferor's or the Parent's name on checks and other instruments representing
Collections and enforcing such Receivables and the related Contracts.
SECTION 6.4. SERVICER DEFAULT. The occurrence of any one or more of the
following events shall constitute a Servicer Default:
(a) (i) the Servicer shall fail to observe or perform any
term, covenant or agreement to be observed or performed under Sections 2.5, 2.6
or 2.11 hereof for more than one (1) consecutive Business Day, or (ii) the
Servicer shall fail to observe or perform any term, covenant or agreement
hereunder (other than as referred to in clause (i) or (iii) of this Section
57
<PAGE>
6.4(a)) or under any of the other Transaction Documents to which such Person
is a party or by which such Person is bound, and such failure shall remain
unremedied for fifteen (15) days after the Servicer knows or should have
known of such failure, or (iii) the Servicer shall fail to make any payment
or deposit required to be made by it hereunder when due or the Servicer shall
fail to observe or perform any term, covenant or agreement on the Servicer's
part to be performed under Section 2.7(b), 5.4(a), 5.4(f), 5.4(g), 5.4(h),
5.5(b), 5.5(c) or 5.5(e) hereof; or
(b) any representation, warranty, certification or
statement made by the Servicer in this Agreement, the Receivables Purchase
Agreement or in any of the other Transaction Documents or in any certificate or
report delivered by it pursuant to any of the foregoing shall prove to have been
incorrect in any material respect when made or deemed made; or
(c) failure of the Servicer or any of the Originator
Subsidiaries (other than the Transferor) to pay when due (after any applicable
grace period) any amounts due under any agreement under which any Indebtedness
greater than $25,000,000 is governed; or the default by the Servicer or any of
its Subsidiaries in the performance of any term, provision or condition
contained in any agreement under which any Indebtedness greater than $25,000,000
was created or is governed if the effect thereof is to cause or to permit the
holder or holders thereof to cause such Indebtedness to become due prior to its
stated maturity or any Indebtedness of the Servicer or any of its Subsidiaries
greater than $25,000,000 shall be declared to be due and payable or required to
be prepaid (other than by a regularly scheduled payment) prior to the scheduled
date of maturity thereof; or
(d) any Event of Bankruptcy shall occur with respect to
the Servicer or any of Originator Subsidiaries.
SECTION 6.5. RESPONSIBILITIES OF THE TRANSFEROR AND THE PARENT.
Anything herein to the contrary notwithstanding, the Transferor shall, and shall
cause the Parent and each Originator Subsidiary, to, (i) perform all of the
Parent's obligations under the Contracts related to the Receivables to the same
extent as if interests in such Receivables had not been sold hereunder and under
the Receivables Purchase Agreement and the exercise by the Agent, the Company
and the Bank Investors of their rights hereunder and under the Receivables
Purchase Agreement shall not relieve the Transferor or the Parent from such
obligations and (ii) pay when due any taxes, including without limitation any
sales taxes, payable in connection with the Receivables and their creation and
satisfaction. Neither the Agent, the Company nor any of the Bank Investors shall
have any obligation or liability with respect to any Receivable or related
Contracts, nor shall it be obligated to perform any of the obligations of the
Parent thereunder.
ARTICLE VII
TERMINATION EVENTS
SECTION 7.1. TERMINATION EVENTS. The occurrence of any one or more of the
following events shall constitute a Termination Event:
58
<PAGE>
(a) (i) the Transferor or the Parent shall fail to make
any payment of Discount or any deposit to be made by it hereunder or under the
Receivables Purchase Agreement within one Business Day of the date when due
hereunder or thereunder or (ii) the Transferor or the Seller shall fail to make
any other payment to be made by it hereunder or under the Fee Letter within five
days of the date when due hereunder or thereunder; or
(b) any representation, warranty, certification or
statement made by the Transferor or the Parent in this Agreement, any other
Transaction Document to which it is a party or in any other document
delivered pursuant hereto or thereto shall prove to have been incorrect in
any material respect when made or deemed made; or
(c) the Transferor, or the Parent, shall default in
the performance of any payment or undertaking (other than those covered by
clause (a) above) (i) to be performed or observed under Sections 5.1(a)(ix),
5.1(a)(x), 5.1(b), 5.1(f), 5.1(g), 5.1(h), 5.1(i), 5.1(k), 5.1(l), 5.2(a),
(c), (d), (e), (f), (g), (i) or (l) or Section 5.3 or (ii) to be performed or
observed under any other provision hereof and such default in the case of
this clause (ii) shall continue for ten (10) Business Days after the date on
which the Transferor or the Servicer, as the case may be, knew or should have
known of such default; or
(d) any Event of Bankruptcy shall occur with respect to
the Transferor, the Parent or any Originator Subsidiary; or
(e) the Agent, on behalf of the Company and the Bank
Investors, shall, for any reason, fail or cease to have a valid and perfected
first priority ownership or security interest in the Affected Assets free and
clear of any Adverse Claims; or
(f) a Servicer Default shall have occurred; or
(g) the Liquidity Provider or the Credit Support Provider
shall have given notice that an event of default has occurred and is continuing
under any of its respective agreements with the Company; or
(h) (i) the Percentage Factor exceeds the Maximum
Percentage Factor unless the Transferor reduces the Net Investment or increases
the balance of the Affected Assets on the next Business Day so as to reduce the
Percentage Factor to less than or equal to the Maximum Percentage Factor; (ii)
the Percentage Factor equals or exceeds 100% at any time; or (iii) the Net
Investment plus, in the case where the Net Investment is held by the Company,
the Interest Component of all outstanding Related Commercial Paper, shall exceed
the Facility Limit; or
(i) the Commercial Paper issued by the Company shall not
be rated at least "A-2" by S&P and at least "P-2" by Moody's; or
(j) failure of the Transferor, the Parent or any
Originator Subsidiary of the Parent to pay when due any amounts due under any
agreement to which any such Person is a party and under which any Indebtedness
greater than $100,000, in the case of the Transferor, or $25,000,000, in the
case of the Parent or any Originator Subsidiary, is governed; or the default by
the Transferor, the Parent or any Originator Subsidiary in the performance of
any term, provision
59
<PAGE>
or condition contained in any agreement to which any such Person is a party
and under which any Indebtedness owing by the Transferor, the Parent or any
Originator Subsidiary greater than such respective amounts was created or is
governed, if the effect thereof is to cause, or permit the holder or holders
thereof to cause such Indebtedness to become due prior to its stated
maturity; or any Indebtedness owing by the Transferor, the Parent or any
Originator Subsidiary greater than such respective amounts shall be declared
to be due and payable or required to be prepaid (other than by a regularly
scheduled payment) prior to the date of maturity thereof; or
(k) there shall have occurred a material adverse
change with respect to the Transferor or the Servicer which materially and
adversely affects (i) the ability of the Servicer to collect the Receivables
or (ii) the Transferor's or the Servicer's ability to perform their
obligations under this Agreement or the Receivables Purchase Agreement which
affects the rights of the Agent in the Receivables;
(l) the Dilution Ratio averaged for any period of two (2)
consecutive months exceeds 5.5%; or
(m) the Loss to Liquidation Ratio averaged for any period
of three (3) consecutive months exceeds 15%; or
(n) the Delinquency Ratio averaged for any period of
three (3) consecutive months exceeds 35%; or
(o) a Change of Control shall occur.
(p) any member of the ERISA Group shall fail to pay when
due an amount or amounts aggregating in excess of $25,000,000 which it shall
have become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any member
of the ERISA Group, any plan administrator or any combination of the foregoing;
or the PBGC shall institute proceedings under Title IV of ERISA to terminate, to
impose liability (other than for premiums under Section 4007 of ERISA) in
respect of, or to cause a trustee to be appointed to administer, any Material
Plan; or a condition shall exist by reason of which the PBGC would be entitled
to obtain a decree adjudicating that any Material Plan must be terminated; or
there shall occur a complete or partial withdrawal from, or a default, within
the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more
Multiemployer Plans which could cause one or more members of the ERISA Group to
incur a current payment obligation in excess of $10,000,000.
SECTION 7.2. TERMINATION. (a) Upon the occurrence of any Termination
Event (other than a Conduit Termination Event), the Agent may, or at the
direction of the Majority Investors shall, by notice to the Transferor and the
Servicer declare the Termination Date to have occurred; PROVIDED, HOWEVER, that
in the case of any event described in Section 7.1(d), 7.1(e), 7.1(h)(ii),
7.1(h)(iii), the Termination Date shall be deemed to have occurred automatically
upon the occurrence of such event. Upon any such declaration or automatic
occurrence, the Agent shall have, in addition to all other rights and remedies
under this Agreement or otherwise, all other
60
<PAGE>
rights and remedies provided under the UCC of the applicable jurisdiction and
other applicable laws, all of which rights shall be cumulative.
(b) Upon the declaration or automatic occurrence of the
Termination Date pursuant to Section 7.2(a) other than as a result of events
pertaining to clauses (g) or (i) of Section 7.1, all outstanding Tranche Periods
shall end and on and after the Termination Date the Tranche Rate applicable to
the Net Investment shall be equal to the Base Rate plus 1.00% for all existing
and future Tranche Periods.
(c) Upon the occurrence and during the continuance of a
Conduit Termination Event and provided that the Termination Date shall not have
occurred as a result of an event of the type set forth in clause (i), (iv), (v)
or (vii) of the definition of "Termination Date" and that no Termination Event
(other than an event of the type set forth in clause (g) or (i) of Section 7.1)
shall have occurred and be continuing, the Bank Investors shall purchase
Receivables which comply with all of the criteria for an Eligible Receivable set
forth herein in accordance with Section 9.9(a).
ARTICLE VIII
INDEMNIFICATION; EXPENSES; RELATED MATTERS
SECTION 8.1. INDEMNITIES BY THE TRANSFEROR. Without limiting any other rights
which they may have hereunder or under applicable law, the Transferor hereby
agrees to indemnify the Company, the Bank Investors, the Agent, the
Administrative Agent, the Collateral Agent, the Liquidity Provider and the
Credit Support Provider and any successors and permitted assigns and their
respective officers, directors, employees, counsel and agents (collectively,
"INDEMNIFIED PARTIES") from and against any and all damages, losses, claims,
liabilities, costs and expenses, including, without limitation, reasonable
attorneys' fees (which such attorneys may be employees of the Liquidity
Provider, the Credit Support Provider, the Agent, the Administrative Agent or
the Collateral Agent, as applicable) and disbursements (all of the foregoing
being collectively referred to as "INDEMNIFIED AMOUNTS") awarded against or
incurred by any of them in any action or proceeding between the Transferor or
the Parent (including, in its capacity as the Servicer) and any of the
Indemnified Parties or between any of the Indemnified Parties and any third
party or otherwise arising out of or as a result of this Agreement, the other
Transaction Documents, the ownership or maintenance, either directly or
indirectly, by the Agent, the Company or any Bank Investor of the Transferred
Interest or any of the other transactions contemplated hereby or thereby,
excluding, however, (i) Indemnified Amounts to the extent resulting from
gross negligence or willful misconduct on the part of an Indemnified Party or
(ii) recourse (except as otherwise specifically provided in this Agreement)
for uncollectible Receivables and Related Security. Without limiting the
generality of the foregoing, but subject to the preceding exclusions, the
Transferor shall indemnify each Indemnified Party for Indemnified Amounts
relating to or resulting from:
(i) any representation or warranty made by the
Transferor or the Parent (including, in its capacity as the Servicer) or any
officers of the Transferor or the Parent (including, in its capacity as the
Servicer) under or in connection with this Agreement, the Receivable Purchase
Agreement, any of the other Transaction Documents, any Investor Report or
61
<PAGE>
any other information or report delivered by or on behalf of the Transferor
or the Servicer pursuant hereto, which shall have been false or incorrect in
any material respect when made or deemed made;
(ii) the failure by the Transferor or the Parent
(including, in its capacity as the Servicer) to comply with any applicable law,
rule or regulation with respect to any Receivable or the related Contract, or
the nonconformity of any Receivable or the related Contract with any such
applicable law, rule or regulation;
(iii) the failure (x) to vest and maintain vested
in the Agent, on behalf of the Company and the Bank Investors, a perfected first
priority ownership interest (to the extent of the Transferred Interest) in the
Affected Assets free and clear of any Adverse Claim or (y) to create or maintain
a valid and perfected first priority security interest in favor of the Agent,
for the benefit of the Company and the Bank Investors, in the Affected Assets as
contemplated pursuant to Section 10.10, free and clear of any Adverse Claim;
(iv) the failure to file, or any delay in filing,
financing statements, continuation statements, or other similar instruments or
documents under the UCC of any applicable jurisdiction or other applicable laws
with respect to any of the Affected Assets;
(v) any dispute, claim, offset or defense
(other than discharge in bankruptcy) of the Obligor to the payment of any
Receivable (including, without limitation, a defense based on such Receivable
or the related Contract not being the legal, valid and binding obligation of
such Obligor enforceable against it in accordance with its terms), or any
other claim resulting from the sale of merchandise or services related to
such Receivable or the furnishing or failure to furnish such merchandise or
services;
(vi) any failure of the Servicer to perform its
duties or obligations in accordance with the provisions hereof; or
(vii) any products liability claim or personal
injury or property damage suit or other similar or related claim or action of
whatever sort arising out of or in connection with merchandise or services which
are the subject of any Receivable;
(viii) the transfer of an ownership interest in any
Receivable other than an Eligible Receivable;
(ix) the failure by the Transferor or the Parent
(individually or as Servicer) to comply with any term, provision or covenant
contained in this Agreement or any of the other Transaction Documents to which
it is a party or to perform any of its respective duties under the Receivables
or the Contracts;
(x) the Percentage Factor exceeding the Maximum
Percentage Factor at any time;
62
<PAGE>
(xi) the failure of the Parent to pay when due
any taxes, including without limitation, sales, excise or personal property
taxes payable in connection with any of the Receivables;
(xii) any repayment by any Indemnified Party of
any amount previously distributed in reduction of Net Investment which such
Indemnified Party believes in good faith is required to be made;
(xiii) the commingling by the Transferor, the
Parent or the Servicer of Collections of Receivables at any time with other
funds;
(xiv) any investigation, litigation or proceeding
related to this Agreement, any of the other Transaction Documents, the use of
proceeds of Transfers by the Transferor or the Parent, the ownership of
Transferred Interests, or any Receivable, Related Security or Contract;
(xv) the failure of any Lock-Box Bank to remit
any amounts held in any Lock-Box Account pursuant to the instructions of the
Servicer, the Transferor, the Parent or the Agent (to the extent such Person is
entitled to give such instructions in accordance with the terms hereof and of
any applicable Lock-Box Agreement) whether by reason of the exercise of set-off
rights or otherwise;
(xvi) any inability to obtain any judgment in or
utilize the court or other adjudication system of, any state in which an Obligor
may be located as a result of the failure of the Transferor or the Parent to
qualify to do business or file any notice of business activity report or any
similar report;
(xvii) any failure of the Transferor to give
reasonably equivalent value to the Parent in consideration of the purchase by
the Transferor from the Parent of any Receivable, or any attempt by any Person
to void, rescind or set-aside any such transfer under statutory provisions or
common law or equitable action, including, without limitation, any provision of
the Bankruptcy Code;
(xviii) any action taken by the Transferor, the
Parent, or the Servicer (if the Transferor, the Parent or any Affiliate or
designee of the Transferor or the Parent) in the enforcement or collection of
any Receivable;
(xix) the use of the proceeds of any Transfer or
reinvestment; or
(xx) the transactions contemplated hereby being
characterized as other than debt for purposes of the Code;
PROVIDED, HOWEVER, that if the Company enters into agreements for the
purchase of interests in receivables from one or more Other Transferors, the
Company shall allocate such Indemnified Amounts which are in connection with
the Liquidity Provider Agreement, the Credit Support Agreement or the credit
support furnished by the Credit Support Provider to the Transferor and each
Other Transferor; and, PROVIDED, FURTHER, that if such Indemnified Amounts
are attributable
63
<PAGE>
to the Transferor, the Parent or the Servicer and not attributable to any
Other Transferor, the Transferor shall be solely liable for such Indemnified
Amounts or if such Indemnified Amounts are attributable to Other Transferors
and not attributable to the Transferor, the Parent or the Servicer, such
Other Transferors shall be solely liable for such Indemnified Amounts.
SECTION 8.2. INDEMNITY FOR TAXES, RESERVES AND EXPENSES. (a) If after
the date hereof, the adoption of any Law or bank regulatory guideline or any
amendment or change in the administration, interpretation or application of any
existing or future Law or bank regulatory guideline by any Official Body charged
with the administration, interpretation or application thereof, or the
compliance with any directive of any Official Body (in the case of any bank
regulatory guideline, whether or not having the force of Law):
(i) shall subject any Indemnified Party (or its
applicable lending office) to any tax, duty or other charge (other than Excluded
Taxes) with respect to this Agreement, the other Transaction Documents, the
ownership, maintenance or financing of the Transferred Interest, the Receivables
or payments of amounts due hereunder, or shall change the basis of taxation of
payments to any Indemnified Party of amounts payable in respect of this
Agreement, the other Transaction Documents, the ownership, maintenance or
financing of the Transferred Interest, the Receivables or payments of amounts
due hereunder or its obligation to advance funds hereunder, under the Liquidity
Provider Agreement or the credit support furnished by the Credit Support
Provider or otherwise in respect of this Agreement, the other Transaction
Documents, the ownership, maintenance or financing of the Transferred Interest
or the Receivables (except for changes in the rate of general corporate,
franchise, net income or other income tax imposed on such Indemnified Party by
the jurisdiction in which such Indemnified Party's principal executive office is
located);
(ii) shall impose, modify or deem applicable any
reserve, special deposit or similar requirement (including, without limitation,
any such requirement imposed by the Board of Governors of the Federal Reserve
System) against assets of, deposits with or for the account of, or credit
extended by, any Indemnified Party or shall impose on any Indemnified Party or
on the United States market for certificates of deposit or the London interbank
market any other condition affecting this Agreement, the other Transaction
Documents, the ownership, maintenance or financing of the Transferred Interest,
the Receivables or payments of amounts due hereunder or its obligation to
advance funds hereunder, under the Liquidity Provider Agreement or the credit
support provided by the Credit Support Provider or otherwise in respect of this
Agreement, the other Transaction Documents, the ownership, maintenance or
financing of the Transferred Interest or the Receivables; or
(iii) imposes upon any Indemnified Party any
other condition or expense (including, without limitation, any loss of
margin, reasonable attorneys' fees and expenses, and expenses of litigation
or preparation therefor in contesting any of the foregoing) with respect to
this Agreement, the other Transaction Documents, the ownership, maintenance
or financing of the Transferred Interest, the Receivables or payments of
amounts due hereunder or its obligation to advance funds hereunder under the
Liquidity Provider Agreement or the credit support furnished by the Credit
Support Provider or otherwise in respect of this Agreement, the other
Transaction
64
<PAGE>
Documents, the ownership, maintenance or financing of the Transferred
Interests or the Receivables,
and the result of any of the foregoing is to increase the cost to or to
reduce the amount of any sum received or receivable by such Indemnified Party
with respect to this Agreement, the other Transaction Documents, the
ownership, maintenance or financing of the Transferred Interest, the
Receivables, the obligations hereunder, the funding of any purchases
hereunder, the Liquidity Provider Agreement or the Credit Support Agreement,
by an amount deemed by such Indemnified Party to be material, then, within
ten (10) days after demand by such Indemnified Party through the Agent, the
Transferor shall pay to the Agent, for the benefit of such Indemnified Party,
such additional amount or amounts as will compensate such Indemnified Party
for such increased cost or reduction.
(b) If any Indemnified Party shall have determined that
after the date hereof, the adoption of any applicable Law or bank regulatory
guideline regarding capital adequacy, or any change therein, or any change in
the interpretation or administration thereof by any Official Body, or any
request or directive regarding capital adequacy (in the case of any bank
regulatory guideline, whether or not having the force of law) of any such
Official Body, has or would have the effect of reducing the rate of return on
capital of such Indemnified Party (or its parent) as a consequence of such
Indemnified Party's obligations hereunder or with respect hereto to a level
below that which such Indemnified Party (or its parent) could have achieved but
for such adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by such
Indemnified Party to be material, then from time to time, within ten (10) days
after demand by such Indemnified Party through the Agent, the Transferor shall
pay to the Agent, for the benefit of such Indemnified Party, such additional
amount or amounts as will compensate such Indemnified Party (or its parent) for
such reduction.
(c) The Agent will promptly notify the Transferor of any
event of which it has knowledge, occurring after the date hereof, which will
entitle an Indemnified Party to compensation pursuant to this Section 8.2. A
notice by the Agent or the applicable Indemnified Party claiming compensation
under this Section and setting forth the additional amount or amounts to be paid
to it hereunder and the basis for calculation thereof shall be conclusive in the
absence of manifest error. In determining such amount, the Agent or any
applicable Indemnified Party may use any reasonable averaging and attributing
methods.
(d) Anything in this Section 8.2 to the contrary
notwithstanding, if the Company enters into agreements for the acquisition of
interests in receivables from one or more Other Transferors, the Company
shall allocate the liability for any amounts under this Section 8.2 which are
in connection with the Liquidity Provider Agreement, the Credit Support
Agreement or the credit support provided by the Credit Support Provider
("SECTION 8.2 COSTS") to the Transferor and each Other Transferor; PROVIDED,
HOWEVER, that if such Section 8.2 Costs are attributable to the Transferor,
the Parent or the Servicer and not attributable to any Other Transferor, the
Transferor shall be solely liable for such Section 8.2 Costs or if such
Section 8.2 Costs are attributable to Other Transferors and not attributable
to the Transferor, the Parent or the Servicer, such Other Transferors shall
be solely liable for such Section 8.2 Costs.
65
<PAGE>
SECTION 8.3. TAXES. All payments made hereunder by the Transferor or
the Servicer (each, a "payor") to the Company, any Bank Investor or the Agent
(each, a "recipient") shall be made free and clear of and without deduction for
any present or future income, excise, stamp or franchise taxes and any other
taxes, fees, duties, withholdings or other charges of any nature whatsoever
imposed by any taxing authority on any recipient (or any assignee of such
parties) (such non-excluded items being called "TAXES"), but excluding franchise
taxes and taxes imposed on or measured by the recipient's net income or gross
receipts ("EXCLUDED TAXES"). In the event that any withholding or deduction from
any payment made by the payor hereunder is required in respect of any Taxes,
then such payor shall:
(a) pay directly to the relevant authority the full
amount required to be so withheld or deducted;
(b) promptly forward to the Agent an official receipt or
other documentation satisfactory to the Agent evidencing such payment to such
authority; and
(c) pay to the recipient such additional amount or
amounts as is necessary to ensure that the net amount actually received by the
recipient will equal the full amount such recipient would have received had no
such withholding or deduction been required.
Moreover, if any Taxes are directly asserted against any recipient with
respect to any payment received by such recipient hereunder, the recipient
may pay such Taxes and the payor will promptly pay such additional amounts
(including any penalties, interest or expenses) as shall be necessary in
order that the net amount received by the recipient after the payment of such
Taxes (including any Taxes on such additional amount) shall equal the amount
such recipient would have received had such Taxes not been asserted.
If the payor fails to pay any Taxes when due to the appropriate taxing
authority or fails to remit to the recipient the required receipts or other
required documentary evidence, the payor shall indemnify the recipient for
any incremental Taxes, interest, or penalties that may become payable by any
recipient as a result of any such failure.
SECTION 8.4. OTHER COSTS, EXPENSES AND RELATED MATTERS. (a) The
Transferor agrees, upon receipt of a written invoice, to pay or cause to be
paid, all reasonable out-of-pocket expenses (including, without limitation,
attorneys', accountants' and other third parties' fees and expenses, any filing
fees and expenses incurred by officers or employees of the Company, the Bank
Investors and/or the Agent) or intangible, documentary or recording taxes
incurred by or on behalf of the Company, any Bank Investor and the Agent (i) in
connection with the negotiation, execution, delivery and preparation of this
Agreement, the other Transaction Documents and any documents or instruments
delivered pursuant hereto and thereto and the transactions contemplated hereby
or thereby (including, without limitation, the perfection or protection of the
Transferred Interest) and (ii) from time to time (a) relating to any amendments,
waivers or consents under this Agreement and the other Transaction Documents,
(b) arising in connection with the Company's, any Bank Investor's, the Agent's
or the Collateral Agent's enforcement or preservation of rights (including,
without limitation, the perfection and protection of the Transferred Interest
under this Agreement), or (c) arising in connection with any audit, dispute,
66
<PAGE>
disagreement, litigation or preparation for litigation involving this
Agreement or any of the other Transaction Documents; PROVIDED, HOWEVER that
the Transferor shall not be required to pay the fees of more than one outside
counsel for all such parties with respect to the foregoing.
(b) The Transferor shall pay the Agent, for the
account of the Company and the Bank Investors, as applicable, on demand any
Early Collection Fee due on account of the reduction of a Tranche on a day
prior to the last day of its Tranche Period.
SECTION 8.5. RECONVEYANCE UNDER CERTAIN CIRCUMSTANCES.
(a) The Transferor agrees to accept the reconveyance from
the Agent, on behalf of the Company or the Bank Investors, of the Transferred
Interest if the Agent notifies Transferor of a material breach of any of the
representations and warranties described in Section 3.1(a), (b) or (c), and the
Transferor shall fail to cure such breach within fifteen (15) days.
(b) The Transferor agrees to accept the reconveyance from
the Agent, on behalf of the Company or the Bank Investors, of those Receivables
as to which the representations contained in Section 3.1(d) or (j) are
inaccurate, if the Agent notifies the Transferor of a material breach of the
representations and warranties described in Section 3.1(d) or (j) and the
Transferor shall fail to cure such breach within three (3) Business Days of such
notice.
(c) The Transferor agrees to accept the reconveyance from
the Agent, on behalf of the Company or the Bank Investors, of those Receivables
which were represented as Eligible Receivables but are not Eligible Receivables,
if the Agent notifies the Transferor that a material amount of Receivables are
not Eligible Receivables, and the Transferor shall fail to cure such event
within fifteen (15) days.
SECTION 8.6. INDEMNITIES BY THE SERVICER. Without limiting any other
rights which the Agent, the Company or the Bank Investors or the other
Indemnified Parties may have hereunder or under applicable law, the Servicer
hereby agrees to indemnify (without recourse, except as otherwise specifically
provided in this Agreement) the Indemnified Parties from and against any and all
Indemnified Amounts arising out of or resulting from (a) the failure of any
information contained in the Investor Report (to the extent provided by the
Servicer) to be true and correct, or the failure of any other information
provided to the Agent, the Company or any Bank Investor by, or on behalf of, the
Servicer to be true and correct, (b) the failure of any representation, warranty
or statement made or deemed made by the Servicer (or any of its officers) under
or in connection with this Agreement to have been true and correct as of the
date made or deemed made, (c) the failure by the Servicer to comply with any
applicable law, rule or regulation with respect to any Receivable or the related
Contract, (d) any dispute, claim, offset or defense of the Obligor to the
payment of any Receivable resulting from or related to the collection activities
of the Servicer hereunder in respect of such Receivable (including, without
limitation, the activities of any Person to whom the Servicer has delegated any
of its duties hereunder), or (e) any failure of the Servicer to perform its
duties or obligations in accordance with the provisions hereof, excluding,
however recourse for uncollectible Receivables and Related Security.
67
<PAGE>
ARTICLE IX
THE AGENT; BANK COMMITMENT
SECTION 9.1. AUTHORIZATION AND ACTION. Each of the Company and each Bank
Investor hereby irrevocably appoints and authorizes the Agent to act as its
agent under this Agreement and the other Transaction Documents with such
powers and discretion as are specifically delegated to the Agent by the terms
of this Agreement and the other Transaction Documents, together with such
other powers as are reasonably incidental thereto. The Agent (which term as
used in this sentence and in Section 9.5 and the first sentence of Section
9.6 hereof shall include its affiliates and its own and its affiliates'
officers, directors, employees, and agents): (a) shall not have any duties or
responsibilities except those expressly set forth in this Agreement and shall
not be a trustee or fiduciary for the Company or any Bank Investor; (b) shall
not be responsible to the Company or any Bank Investor for any recital,
statement, representation, or warranty (whether written or oral) made in or
in connection with any Transaction Document or any certificate or other
document referred to or provided for in, or received by any of them under,
any Transaction Document, or for the value, validity, effectiveness,
genuineness, enforceability, or sufficiency of any Transaction Document, or
any other document referred to or provided for therein or for any failure by
any of the Transferor, the Parent or the Servicer or any other Person to
perform any of its obligations thereunder; (c) shall not be responsible for
or have any duty to ascertain, inquire into, or verify the performance or
observance of any covenants or agreements by any of the Transferor, the
Parent or the Servicer or the satisfaction of any condition or to inspect the
property (including the books and records) of any of the Transferor, the
Parent or the Servicer or any of their Subsidiaries or affiliates; (d) shall
not be required to initiate or conduct any litigation or collection
proceedings under any Transaction Document; and (e) shall not be responsible
for any action taken or omitted to be taken by it under or in connection with
any Transaction Document, except for its own gross negligence or willful
misconduct. The Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care.
SECTION 9.2. AGENT'S RELIANCE, ETC. The Agent shall be entitled to rely
upon any certification, notice, instrument, writing, or other communication
(including, without limitation, any thereof by telephone or telecopy) believed
by it to be genuine and correct and to have been signed, sent or made by or on
behalf of the proper Person or Persons, and upon advice and statements of legal
counsel (including counsel for any of the Transferor, the Parent or the
Servicer), independent accountants, and other experts selected by the Agent. As
to any matters not expressly provided for by this Agreement, the Agent shall not
be required to exercise any discretion or take any action, but shall be required
to act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Majority Investors, and
such instructions shall be binding on the Company and all of the Bank Investors;
PROVIDED, HOWEVER, that the Agent shall not be required to take any action that
exposes the Agent to personal liability or that is contrary to any Transaction
Document or applicable law or unless it shall first be indemnified to its
satisfaction by the Bank Investors against any and all liability and expense
which may be incurred by it by reason of taking any such action.
SECTION 9.3. TERMINATION EVENT OR POTENTIAL TERMINATION EVENT. The
Agent shall not be deemed to have knowledge or notice of the occurrence of a
Potential Termination Event or
68
<PAGE>
a Termination Event unless the Agent has received written notice from the
Company, a Bank Investor or the Transferor specifying such Potential
Termination Event or Termination Event and stating that such notice is a
"Notice of Termination Event or Potential Termination Event". In the event
that the Agent receives such a notice of the occurrence of a Potential
Termination Event or Termination Event, the Agent shall give prompt notice
thereof to the Company and the Bank Investors. The Agent shall (subject to
Section 9.2 hereof) take such action with respect to such Potential
Termination Event or Termination Event as shall reasonably be directed by the
Majority Investors, PROVIDED that, unless and until the Agent shall have
received such directions, the Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such
Potential Termination Event or Termination Event as it shall deem advisable
in the best interest of the Company and the Bank Investors.
SECTION 9.4. RIGHTS AS BANK INVESTOR. With respect to its Commitment,
NationsBank (and any successor acting as Agent) in its capacity as a Bank
Investor hereunder shall have the same rights and powers hereunder as any other
Bank Investor and may exercise the same as though it were not acting as the
Agent, and the term "Bank Investor" or "Bank Investors" shall, unless the
context otherwise indicates, include the Agent in its individual capacity.
NationsBank (and any successor acting as Agent) and its affiliates may (without
having to account therefor to the Company or any Bank Investor) accept deposits
from, lend money to, make investments in, provide services to, and generally
engage in any kind of lending, trust, or other business with any of the
Transferor, the Parent and the Servicer or any of their Subsidiaries or
affiliates as if it were not acting as Agent, and NationsBank (and any successor
acting as Agent) and its affiliates may accept fees and other consideration from
any of the Transferor, the Parent and the Servicer or any of their Subsidiaries
or Affiliates for services in connection with this Agreement or otherwise
without having to account for the same to the Company or any Bank Investor.
SECTION 9.5. INDEMNIFICATION OF THE AGENT. The Bank Investors agree to
indemnify the Agent (to the extent not reimbursed by the Transferor), ratably in
accordance with their Pro Rata Shares, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including attorneys' fees), or disbursements of any kind or nature
whatsoever which may be imposed on, incurred by, or asserted against the Agent
(including by the Company or any Bank Investor) in any way relating to or
arising out of this Agreement or any other Transaction Document or the
transactions contemplated thereby or any action taken or omitted by the Agent
under this Agreement or any other Transaction Document, PROVIDED that no Bank
Investor shall be liable for any of the foregoing to the extent they arise from
the gross negligence or willful misconduct of the Person indemnified. Without
limitation of the foregoing, the Bank Investors agree to reimburse the Agent,
ratably in accordance with their Pro Rata Shares, promptly upon demand for any
out-of-pocket expenses (including attorneys' fees) incurred by the Agent in
connection with the administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement and the
other Transaction Documents, to the extent that such expenses are incurred in
the interests of or otherwise in respect of the Bank Investors hereunder and/or
thereunder and to the extent that the Agent is not reimbursed for such expenses
by the Transferor. The agreements contained in this
69
<PAGE>
Section shall survive payment in full of the Net Investment and all other
amounts payable under this Agreement.
SECTION 9.6. NON-RELIANCE. Each of the Company and each Bank
Investor agrees that it has, independently and without reliance on the Agent
or the Company or any Bank Investor, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Receivables, the Transferor, the Parent, the Servicer and their respective
Subsidiaries and decision to enter into this Agreement and that it will,
independently and without reliance upon the Agent, the Company or any Bank
Investor, and based on such documents and information as it shall deem
appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under the Transaction Documents. Except for
notices, reports, and other documents and information expressly required to
be furnished to the Company and the Bank Investors by the Agent hereunder,
the Agent shall not have any duty or responsibility to provide the Company or
any Bank Investor with any credit or other information concerning the
affairs, financial condition, or business of any of the Transferor, the
Parent or the Servicer or any of their Subsidiaries or affiliates that may
come into the possession of the Agent or any of its affiliates.
SECTION 9.7. RESIGNATION OF AGENT. The Agent may resign at any time by
giving notice thereof to the Company, the Bank Investors and the Transferor.
Upon any such resignation, the Majority Investors shall have the right to
appoint a successor Agent. If no such successor Agent shall have been so
appointed by the Majority Investors and shall have accepted such appointment
within thirty (30) days after the retiring Agent's giving of notice of
resignation, then the retiring Agent may, on behalf of the Company and the Bank
Investors, appoint a successor Agent which shall be a commercial bank organized
under the laws of the United States having combined capital and surplus of at
least $100,000,000. Upon the acceptance of any appointment as Agent hereunder by
a successor, such successor shall thereupon succeed to and become vested with
all the rights, powers, discretion, privileges, and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article IX shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
SECTION 9.8. PAYMENTS BY THE AGENT. Unless specifically allocated to a
Bank Investor pursuant to the terms of this Agreement, all amounts received by
the Agent on behalf of the Bank Investors shall be paid by the Agent to the Bank
Investors (at their respective accounts specified in their respective Assignment
and Assumption Agreements) in accordance with their respective related pro rata
interests in the Net Investment on the Business Day received by the Agent,
unless such amounts are received after 12:00 noon on such Business Day, in which
case the Agent shall use its reasonable efforts to pay such amounts to the Bank
Investors on such Business Day, but, in any event, shall pay such amounts to the
Bank Investors in accordance with their respective related pro rata interests in
the Net Investment not later than the following Business Day.
SECTION 9.9. BANK COMMITMENT; ASSIGNMENT TO BANK INVESTORS.
70
<PAGE>
(a) BANK COMMITMENT. At any time on or prior to the
Commitment Termination Date, in the event that the Company does not effect an
Incremental Transfer as requested under Section 2.2(a), then at any time, the
Transferor shall have the right to require the Company to assign its interest
in the Transferred Interest and the Net Investment in whole to the Bank
Investors pursuant to this Section 9.9(a). In addition, at any time on or
prior to the Commitment Termination Date (i) upon the occurrence of a
Termination Event (including a Conduit Termination Event) that results in the
Termination Date (which, for purposes of this clause (i) only, shall include
clauses (ii) and (iii) of the definition of "Termination Date") or (ii) the
Company elects to give notice to the Transferor of an Investment Termination
Date, the Transferor hereby requests and directs that the Company assign, and
the Company does hereby assign, its interest in the Transferred Interest and
the Net Investment in whole to the Bank Investors pursuant to this Section
9.9(a) and the Bank Investors hereby accept such assignment. The Transferor
hereby agrees to pay the amounts described in Section 9.9(c) below. No
further documentation or action on the part of the Company shall be required
to exercise the rights set forth in the immediately preceding sentence, other
than, in the case of clause (i) of such sentence, receipt of notice by the
Bank Investors from the Agent that a Termination Date has occurred or, in the
case of clause (ii) of such sentence, the giving of the notice set forth in
such clause and the delivery by the Agent of a copy of such notice to each
Bank Investor (the date of the receipt of a notice referred to in such
clauses being the "EFFECTIVE DATE"). Each Bank Investor hereby agrees,
unconditionally and irrevocably and under all circumstances, without setoff,
counterclaim or defense of any kind, to pay the full amount of its Assignment
Amount on such Effective Date to the Company in immediately available funds
to an account designated by the Agent. Upon payment of its Assignment Amount,
each Bank Investor shall acquire its Pro Rata Share of the Transferred
Interest and the Net Investment and shall assume its respective portion of
the Company's obligations hereunder, and the Company shall be released from
such portion of such obligations. If, by 2:00 P.M. (New York time) on the
Effective Date, one or more Bank Investors (each, a "DEFAULTING BANK
INVESTOR", and each Bank Investor other than any Defaulting Bank Investor
being referred to as a "NON-DEFAULTING BANK INVESTOR") fails to pay its
Assignment Amount (the aggregate amount not so made available to the Company
being herein called the "ASSIGNMENT AMOUNT DEFICIT"), then the Agent shall,
by no later than 2:30 P.M. (New York time) on the Effective Date, instruct
each Non-Defaulting Bank Investor to pay, by no later than 3:00 P.M. (New
York time) on the Effective Date, in immediately available funds, to the
account designated by the Company, an amount equal to the lesser of (x) such
Non-Defaulting Bank Investor's proportionate share (based upon the relative
Commitments of the Non-Defaulting Bank Investors) of the Assignment Amount
Deficit and (y) its unused Commitment. A Defaulting Bank Investor shall
forthwith, upon demand, pay to the Agent for the ratable benefit of the
Non-Defaulting Bank Investors all amounts paid by each Non-Defaulting Bank
Investor on behalf of such Defaulting Bank Investor, together with interest
thereon for each day from the date a payment was made by a Non-Defaulting
Bank Investor until the date such Non-Defaulting Bank Investor has been paid
such amounts in full at a rate per annum equal to the rate determined in
accordance with clause (i) of the definition of "Base Rate" plus two percent
(2%). In addition, if, after giving effect to the provisions of the
immediately preceding sentence, any Assignment Amount Deficit continues to
exist, each such Defaulting Bank Investor shall pay interest to the Agent on
such Defaulting Bank Investor's portion of such remaining Assignment Amount
Deficit, at a rate per annum equal to the rate determined in accordance with
clause (i) of the definition of
71
<PAGE>
"Base Rate" plus two percent (2%), for each day from the Effective Date until
the date such Defaulting Bank Investor shall pay its portion of such
remaining Assignment Amount Deficit in full to the Company. Upon any
assignment by the Company to the Bank Investors contemplated hereunder, the
Company shall cease to make any additional Incremental Transfers hereunder.
(b) Assignment by a Bank Investor.
(i) No Bank Investor may assign all or any
portion of its Commitment or interest in the Transferred Interest or Net
Investment and its rights and obligations hereunder to any Person unless
approved in writing by the Transferor (which approval shall not be
unreasonably withheld), the Administrative Agent, on behalf of the Company,
and the Agent. In connection with any such assignment by a Bank Investor to
another Person, the assignor shall deliver to the assignee an Assignment and
Assumption Agreement, duly executed, assigning to such assignee all or any
portion of (A) such assignor's Commitment and other obligations hereunder and
(B) such assignor's pro rata interest in the Transferred Interest and Net
Investment and other rights hereunder, and such assignor shall promptly
execute and deliver all further instruments and documents, and take all
further action, that the assignee may reasonably request, in order to
protect, or more fully evidence the assignee's right, title and interest in
and to such interest and to enable the Agent, on behalf of such assignee, to
exercise or enforce any rights hereunder and under the other Transaction
Documents to which such assignor is or, immediately prior to such assignment,
was a party. Upon any such assignment, (i) the assignee shall have all of the
rights and obligations of the assignor hereunder and under the other
Transaction Documents to which such assignor is or, immediately prior to such
assignment, was a party with respect to such assignor's Commitment and
interest in the Transferred Interest and Net Investment for all purposes of
this Agreement and under the other Transaction Documents to which such
assignor is or, immediately prior to such assignment, was a party and (ii)
the assignor shall have no further obligations with respect to the portion of
its Commitment hereunder which has been assigned and shall relinquish its
rights with respect to the portion of its interest in the Transferred
Interest and the Net Investment which has been assigned for all purposes of
this Agreement and under the other Transaction Documents to which such
assignor is or, immediately prior to such assignment, was a party. No such
assignment shall be effective unless a fully executed copy of the related
Assignment and Assumption Agreement shall be delivered to the Agent and the
Transferor. All costs and expenses of the Agent incurred in connection with
any assignment hereunder shall be borne by the Transferor. No Bank Investor
shall enter into any Assignment and Assumption Agreement hereunder without
also simultaneously assigning an equal portion of its interest in the
Liquidity Provider Agreement.
(ii) By executing and delivering an Assignment
and Assumption Agreement, the assignor and assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Assumption Agreement, the assignor makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement, the other Transaction Documents or any other instrument or document
furnished pursuant hereto or thereto or the execution, legality, validity,
enforceability, genuineness, sufficiency or value or this Agreement, the other
Transaction Documents or any such other instrument or document; (ii) the
assignor makes no representation or warranty and assumes no
72
<PAGE>
responsibility with respect to the financial condition of the Transferor, the
Parent or the Servicer or the performance or observance by the Transferor,
the Parent or the Servicer of any of their respective obligations under this
Agreement, the Receivables Purchase Agreement, the other Transaction
Documents or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of this Agreement,
the Receivables Purchase Agreement, and such other instruments, documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Assumption Agreement and to
purchase such interest; (iv) such assignee will, independently and without
reliance upon the Agent, or any of its Affiliates, or the assignor and based
on such agreements, documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under this Agreement and the other Transaction Documents; (v) such
assignee appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement, the other
Transaction Documents and any other instrument or document furnished pursuant
hereto or thereto as are delegated to the Agent by the terms hereof or
thereof, together with such powers as are reasonably incidental thereto and
to enforce its respective rights and interests in and under this Agreement,
the other Transaction Documents, the Receivables, the Contracts and the
Related Security; (vi) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement and the other Transaction Documents are required to be performed by
it as the assignee of the assignor; and (vii) such assignee agrees that it
will not institute against the Company any proceeding of the type referred to
in Section 10.9 prior to the date which is one year and one day after the
payment in full of all Commercial Paper issued by the Company.
(c) TRANSFEROR'S OBLIGATION TO PAY CERTAIN AMOUNTS;
ADDITIONAL ASSIGNMENT AMOUNT. The Transferor shall pay to the Agent, for the
account of the Company, in connection with any assignment by the Company to the
Bank Investors pursuant to Section 9.9(a), an aggregate amount equal to all
Discount to accrue through the end of each outstanding Tranche Period plus all
other Aggregate Unpaids (other than the Net Investment). If the Transferor fails
to make payment of such amounts at or prior to the time of assignment by the
Company to the Bank Investors, such amount shall be paid by the Bank Investors
(in accordance with their respective Pro Rata Shares) to the Company as
additional consideration for the interests assigned to the Bank Investors and
the amount of the "Net Investment" hereunder held by the Bank Investors shall be
increased by an amount equal to the additional amount so paid by the Bank
Investors.
(d) ADMINISTRATION OF AGREEMENT AFTER ASSIGNMENT BY
COMPANY TO BANK INVESTORS. After any assignment by the Company to the Bank
Investors pursuant to Section 9.9(a) (and the payment of all amounts owing to
the Company in connection therewith), all rights of the Administrative Agent and
the Collateral Agent set forth herein shall be deemed to be afforded to the
Agent on behalf of the Bank Investors instead of either such party.
(e) PAYMENTS AFTER ASSIGNMENT BY COMPANY TO BANK
INVESTORS. After any assignment by the Company to the Bank Investors pursuant to
Section 9.9(a), all payments to be made hereunder by the Transferor or the
Servicer to the Company shall be made to the Agent's account as such account
shall have been notified to the Transferor and the Servicer. In the event that
the aggregate of the Assignment Amounts paid by the Bank Investors pursuant to
Section
73
<PAGE>
9.9(a) is less than the Net Investment of the Company on the date of such
assignment, then to the extent payments made hereunder in respect of the Net
Investment exceed the aggregate of the Assignment Amounts, such excess shall
be remitted by the Agent to the Collateral Agent.
(f) DOWNGRADE OF BANK INVESTOR. If at any time prior
to any assignment by the Company to the Bank Investors as contemplated
pursuant to Section 9.9(a), the short term debt rating of any Bank Investor
shall be "A-2" or "P-2" from Standard & Poor's or Moody's, respectively, with
negative credit implications, such Bank Investor, upon request of the Agent,
shall, within thirty (30) days of such request, assign its rights and
obligations hereunder to another financial institution (which institution's
short term debt shall be rated at least "A-2" and "P-2" from Standard &
Poor's and Moody's, respectively, and which shall not be so rated with
negative credit implications and which is acceptable to the Company and the
Agent). If the short term debt rating of a Bank Investor shall be "A-3" or
"P-3", or lower, from Standard & Poor's or Moody's, respectively (or such
rating shall have been withdrawn by Standard & Poor's or Moody's), such Bank
Investor, upon request of the Agent, shall, within five (5) Business Days of
such request, assign its rights and obligations hereunder to another
financial institution (which institution's short term debt shall be rated at
least "A-2" and "P-2" from Standard & Poor's and Moody's, respectively, and
which shall not be so rated with negative credit implications and which is
acceptable to the Company and the Agent). In either such case, if any such
Bank Investor shall not have assigned its rights and obligations under this
Agreement within the applicable time period described above, the Company
shall have the right to require such Bank Investor to pay to the Agent an
amount equal to such Bank Investor's Commitment for deposit by the Agent into
an account, in the name of the Agent, which shall be in satisfaction of such
Bank Investor's obligations to make Incremental Transfers and to pay its
Assignment Amount upon an assignment from the Company in accordance with
Section 9.9(a) hereof. The amount on deposit in such account shall be
invested by the Agent in Eligible Investments and such Eligible Investments
shall be selected by the Agent in its sole discretion. The Agent shall remit
to such Bank Investor, monthly, the income thereon. Nothing in the three
preceding sentences shall affect or diminish in any way any such downgraded
Bank Investor's Commitment to the Transferor or the Company or such
downgraded Bank Investor's other obligations and liabilities hereunder and
under the other Transaction Documents.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. TERM OF AGREEMENT. This Agreement shall terminate on the date
following the Termination Date upon which either (a) the Net Investment has
been reduced to zero, all accrued Discount and Servicing Fees have been paid
in full and all other Aggregate Unpaids have been paid in full, in each case,
in cash; or (b) all Receivables sold hereunder, have been written-off after
all commercially reasonable efforts to collect such Receivables have been
exhausted or such Receivables have been collected, whichever is earlier,
PROVIDED, HOWEVER, that (i) the rights and remedies of the Agent, the
Company, the Bank Investors and the Administrative Agent with respect to any
representation and warranty made or deemed to be made by the Transferor
pursuant to this Agreement, (ii) the indemnification and payment provisions
of Article VIII, and (iii) the agreement set forth in Section 10.9 hereof,
shall be continuing and shall survive any termination of this Agreement.
74
<PAGE>
SECTION 10.2. WAIVERS; AMENDMENTS. (a) No failure or delay on the part
of the Agent, the Company, the Administrative Agent or any Bank Investor in
exercising any power, right or remedy under this Agreement shall operate as a
waiver thereof, nor shall any single or partial exercise of any such power,
right or remedy preclude any other further exercise thereof or the exercise of
any other power, right or remedy. The rights and remedies herein provided shall
be cumulative and nonexclusive of any rights or remedies provided by law.
(b) Any provision of this Agreement or any other
Transaction Document may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Transferor, the Servicer, the
Company and the Majority Investors (and, if Article IX or the rights or
duties of the Agent are affected thereby, by the Agent); PROVIDED that no
such amendment or waiver shall, unless signed by each Bank Investor directly
affected thereby, (i) increase the Commitment of a Bank Investor, (ii) reduce
the Net Investment or rate of interest to accrue thereon or any fees or other
amounts payable hereunder, (iii) postpone any date fixed for the payment of
any scheduled distribution in respect of the Net Investment or interest with
respect thereto or any fees or other amounts payable hereunder or for
termination of any Commitment, (iv) change the percentage of the Commitments
of Bank Investors which shall be required for the Bank Investors or any of
them to take any action under this Section or any other provision of this
Agreement, (v) release all or substantially all of the property with respect
to which a security or ownership interest therein has been granted hereunder
to the Agent or the Bank Investors except as specifically permitted by the
Transaction Documents or (vi) extend or permit the extension of the
Commitment Termination Date. In the event the Agent requests the Company's or
a Bank Investor's consent pursuant to the foregoing provisions and the Agent
does not receive a consent (either positive or negative) from the Company or
such Bank Investor within 10 Business Days of the Company's or Bank
Investor's receipt of such request, then the Company or such Bank Investor
(and its percentage interest hereunder) shall be disregarded in determining
whether the Agent shall have obtained sufficient consent hereunder.
SECTION 10.3. NOTICES. Except as provided below, all communications and
notices provided for hereunder shall be in writing (including telecopy or
electronic facsimile transmission or similar writing) and shall be given to the
other party at its address or telecopy number set forth below or at such other
address or telecopy number as such party may hereafter specify for the purposes
of notice to such party. Each such notice or other communication shall be
effective (i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section 10.3 and confirmation is received,
(ii) if given by mail, three (3) Business Days following such posting, if
postage prepaid, or if sent via U.S. certified or registered mail, (iii) if
given by overnight courier, one (1) Business Day after deposit thereof with a
national overnight courier service, or (iv) if given by any other means, when
received at the address specified in this Section 10.3. However, anything in
this Section 10.3 to the contrary notwithstanding, the Transferor hereby
authorizes the Company to effect Transfers, Tranche Period and Tranche Rate
selections based on telephonic notices made by any Person which the Company in
good faith believes to be acting on behalf of the Transferor. The Transferor
agrees to deliver promptly to the Company a written confirmation of each
telephonic notice signed by an authorized officer of Transferor. However, the
absence of such confirmation shall not affect the validity of such notice. If
the written confirmation differs in any material respect from the action taken
by the Company, the records of the Company shall govern absent manifest error.
75
<PAGE>
If to the Company:
Enterprise Funding Corporation
c/o Global Securitization Services, LLC
25 West 43rd Street
Suite 704
New York, New York 10036
Attention: Kevin Burns, Vice President
Telephone: (212) 302-8331
Telecopy: (212) 302-8767
(with a copy to the Administrative Agent)
If to the Transferor:
KCH FUNDING, L.L.C.
21900 Burbank Boulevard, Suite 112
Woodland Hills, CA 91367-7418
Attention: Treasurer
Telephone: (818) 992-2890
Telecopy: (818) 992-2673
Payment Information:
Bank of America
333 So. Beaudry Ave.
Los Angeles, California
ABA: 121000358
Account: 12571-26616
Reference: EFC Facility
If to the Parent or the Servicer:
UNOVA, Inc.
21900 Burbank Boulevard
Woodland, Hills, CA 91367-7418
Attention: Treasurer
Telephone: (818) 992-2880
Telecopy: (818) 992-2627
If to the Agent or the Administrative Agent:
NationsBank, N.A.
NationsBank Corporate Center, 10th Floor
Charlotte, North Carolina 28255
Attention: Michelle M. Heath,
Asset Backed Securitization Group
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
Payment Information:
NationsBank, N.A.
ABA 053-000-196
for the account of NationsBank Charlotte
Account No. 109360165000
Attn.: Camille Zerbinos
76
<PAGE>
SECTION 10.4. GOVERNING LAW; SUBMISSION TO JURISDICTION; INTEGRATION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
CONFLICTS OF LAW PRINCIPLES THEREOF. EACH OF THE TRANSFEROR, THE PARENT AND THE
SERVICER HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE
COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY. Each of the Transferor, Parent and Servicer hereby irrevocably waives,
to the fullest extent it may effectively do so, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum. Nothing in this Section 10.4 shall affect
the right of the Company to bring any action or proceeding against any of the
Transferor, the Parent or the Servicer or its respective property in the courts
of other jurisdictions.
(b) EACH OF THE PARTIES HERETO HEREBY WAIVES ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE AMONG ANY OF THEM ARISING OUT OF, CONNECTED WITH, RELATING TO
OR INCIDENTAL TO THE RELATIONSHIP BETWEEN THEM IN CONNECTION WITH THIS AGREEMENT
OR THE OTHER TRANSACTION DOCUMENTS.
(c) This Agreement contains the final and complete
integration of all prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire Agreement among the
parties hereto with respect to the subject matter hereof superseding all prior
oral or written understandings.
(d) The Transferor, the Parent and the Servicer each
hereby appoint National Registered Agents, Inc. located at 440 Ninth Avenue, New
York, New York 10001 as the authorized agent upon whom process may be served in
any action arising out of or based upon this Agreement, the other Transaction
Documents to which such Person is a party or the transactions contemplated
hereby or thereby that may be instituted in the United States District Court for
the Southern District of New York and of any New York State court sitting in The
City of New York by the Company, the Agent, any Bank Investor, the
Administrative Agent, the Collateral Agent or any assignee of any of them.
Process may also be served by any other legal means.
77
<PAGE>
SECTION 10.5. 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 10.6. SUCCESSORS AND ASSIGNS. (a) This Agreement shall be
binding on the parties hereto and their respective successors and assigns;
PROVIDED, HOWEVER, that neither the Transferor, the Servicer nor the Parent
may assign any of its rights or delegate any of its duties hereunder or under
the Receivables Purchase Agreement or under any of the other Transaction
Documents to which it is a party without the prior written consent of the
Agent. No provision of this Agreement shall in any manner restrict the
ability of the Company or any Bank Investor to assign, participate, grant
security interests in, or otherwise transfer any portion of the Transferred
Interest.
(b) Without limiting the foregoing, the Company may, from
time to time, with prior or concurrent notice to Transferor and Servicer, in one
transaction or a series of transactions, assign all or a portion of the
Transferred Interest and the Net Investment and its rights and obligations under
this Agreement and any other Transaction Documents to which it is a party to a
similarly rated Conduit Assignee. Upon and to the extent of such assignment by
the Company to a Conduit Assignee, (i) such Conduit Assignee shall be the owner
of the assigned portion of the Transferred Interest and the Net Investment, (ii)
the related administrative agent for such Conduit Assignee will act as the
Administrative Agent for such Conduit Assignee, with all corresponding rights
and powers, express or implied, granted to the Administrative Agent hereunder or
under the other Transaction Documents, (iii) such Conduit Assignee and its
liquidity support provider(s) and credit support provider(s) and other related
parties shall have the benefit of all the rights and protections provided to the
Company and its Liquidity Support Provider(s) and Credit Support Provider(s),
respectively, herein and in the other Transaction Documents (including, without
limitation, any limitation on recourse against such Conduit Assignee or related
parties, any agreement not to file or join in the filing of a petition to
commence an insolvency proceeding against such Conduit Assignee, and the right
to assign to another Conduit Assignee as provided in this paragraph), (iv) such
Conduit Assignee shall assume all (or the assigned or assumed portion) of the
Company's obligations, if any, hereunder or any other Transaction Document, and
the Company shall be released from such obligations, in each case to the extent
of such assignment, and the obligations of the Company and such Conduit Assignee
shall be several and not joint, (v) all distributions in respect of the Net
Investment shall be made to the applicable agent or administrative agent, as
applicable, on behalf of the Company and such Conduit Assignee on a pro rata
basis according to their respective interests, (vi) the definition of the term
"CP Rate" with respect to the portion of the Net Investment funded with
commercial paper issued by the Company from time to time shall be determined in
the manner set forth in the definition of "CP Rate" applicable to the Company on
the basis of the interest rate or discount applicable to commercial paper issued
by such Conduit Assignee (rather than the Company), (vii) the defined terms and
other terms and provisions of this Agreement and the other Transaction Documents
shall be interpreted in accordance with the foregoing, and (viii) if requested
by the Agent or administrative agent with respect to the Conduit Assignee, the
parties will execute and deliver such further agreements and documents and take
such other actions as the Agent or such administrative agent may reasonably
request to evidence and give effect to the foregoing. No
78
<PAGE>
assignment by the Company to a Conduit Assignee of all or any portion of the
Net Investment shall in any way diminish the related Bank Investors'
obligation under Section 9.9 hereof or otherwise to fund any Incremental
Transfer not funded by the Company or such Conduit Assignee or to acquire
from the Company or such Conduit Assignee all or any portion of the Net
Investment.
(c) In the event that the Company makes an assignment to
a Conduit Assignee in accordance with Section 10.6 (b) hereof, the Bank
Investors: (i) if requested by NationsBank, shall terminate their participation
in the Liquidity Provider Agreement to the extent of such assignment, (ii) if
requested by NationsBank, shall execute a participation agreement with respect
to the liquidity provider agreement related to such Conduit Assignee, to the
extent of such assignment, the terms of which shall be substantially similar to
those of the participation agreement entered into by such Bank Investor with
respect to the Liquidity Provider Agreement (or which shall be otherwise
reasonably satisfactory to NationsBank and the Bank Investors), (iii) if
requested by the Company, shall enter into such agreements as requested by the
Company pursuant to which they shall be obligated to provide funding to the
Conduit Assignee on substantially the same terms and conditions as is provided
for in this Agreement in respect of the Company (or which agreements shall be
otherwise reasonably satisfactory to the Company and the Bank Investors), and
(iv) shall take such actions as the Agent shall reasonably request in connection
therewith.
(d) Each of the Transferor, the Parent and the Servicer
hereby agrees and consents to the assignment by the Company from time to time of
all or any part of its rights under, interest in and title to this Agreement and
the Transferred Interest to any Liquidity Provider. In addition, each of the
Transferor, the Parent and the Servicer hereby consents to and acknowledges the
assignment by the Company of all of its rights under, interest in and title to
this Agreement and the Transferred Interest to the Collateral Agent.
SECTION 10.7. WAIVER OF CONFIDENTIALITY. Each of the Transferor, the
Parent and the Servicer hereby consents to the disclosure of any non-public
information with respect to it received by the Company, the Agent, any Bank
Investor or the Administrative Agent to any of the Company, the Agent, any
nationally recognized rating agency rating the Company's Commercial Paper, the
Administrative Agent, the Collateral Agent, any Bank Investor or potential Bank
Investor, the Liquidity Provider or the Credit Support Provider in relation to
this Agreement, PROVIDED that with respect to any such disclosure to a potential
Bank Investor, such Persons shall inform such potential Bank Investor of the
non-public nature of such information and, where practicable, obtain a
confidentiality agreement from such Bank Investor.
SECTION 10.8. CONFIDENTIALITY AGREEMENT. Each of the Transferor, the
Parent and the Servicer hereby agrees that it will not disclose the contents of
this Agreement or any other proprietary or confidential information identified
as such of the Company, the Agent, the Administrative Agent, the Collateral
Agent, any Liquidity Provider or any Bank Investor to any other Person except
(i) its auditors and attorneys, employees or financial advisors (other than any
commercial bank) and any nationally recognized rating agency, provided such
auditors, attorneys, employees, financial advisors or rating agencies are
informed of the highly confidential nature of
79
<PAGE>
such information or (ii) as otherwise required by applicable law or order of
a court of competent jurisdiction.
SECTION 10.9. NO BANKRUPTCY PETITION AGAINST THE COMPANY. Each of
the Transferor, the Servicer and the Parent hereby covenants and agrees that,
prior to the date which is one year and one day after the payment in full of
all outstanding Commercial Paper or other indebtedness of the Company, it
will not institute against, or join any other Person in instituting against,
the Company any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other similar proceeding under the laws of the
United States or any state of the United States.
SECTION 10.10. CHARACTERIZATION OF THE TRANSACTIONS CONTEMPLATED BY THE
AGREEMENT. It is the intention of the parties that the transactions contemplated
hereby constitute the sale of the Transferred Interest, conveying good title
thereto free and clear of any Adverse Claims to the Agent, on behalf of the
Company and the Bank Investors, and that the Transferred Interest not be part of
the Transferor's estate in the event of an insolvency. If, notwithstanding the
foregoing, the transactions contemplated hereby should be deemed a financing,
the parties intend that the Transferor shall be deemed to have granted to the
Agent, on behalf of the Company and the Bank Investors, and the Transferor
hereby grants to the Agent, on behalf of the Company and the Bank Investors, a
first priority perfected and continuing security interest in all of the
Transferor's right, title and interest in, to and under the Receivables,
together with Related Security, Collections and Proceeds with respect thereto,
and together with all of the Transferor's rights under the Receivables Purchase
Agreement with respect to the Receivables and with respect to any obligations
thereunder of the Parent with respect to the Receivables, and that this
Agreement shall constitute a security agreement under applicable law. The
Transferor hereby assigns to the Agent, on behalf of the Company and the Bank
Investors, all of its rights and remedies under the Receivables Purchase
Agreement with respect to the Receivables and with respect to any obligations
thereunder of the Parent with respect to the Receivables. For federal and state
income tax purposes, the Transferor and the Agent agree to treat the
transactions hereunder as a financing.
80
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Transfer and Administration Agreement as of the date first
written above.
ENTERPRISE FUNDING
CORPORATION,
as Company
By: /S/ ANDREW L. STIDD
-----------------------
Andrew L. Stidd
President
KCH FUNDING, L.L.C.,
as Transferor
By: /S/ ELMER C. HULL, JR.
-----------------------
Elmer C. Hull, Jr.
Treasurer
UNOVA, INC.,
as Parent and Servicer
By: /S/ CHARLES A. CUSUMANO
-----------------------
Charles A. Cusumano
Vice President
COMMITMENT NATIONSBANK, N.A., as Agent
$102,000,000 and a Bank Investor
By: /S/ ROBERT R. WOOD
-----------------------
Robert R. Wood
Vice President
81
<PAGE>
ANNEX 1
SPECIAL CONCENTRATION OBLIGORS
<TABLE>
<CAPTION>
NAME OF DESIGNATED OBLIGOR CONCENTRATION FACTOR MOODY'S RATING S&P RATING
- -------------------------- -------------------- -------------- ----------
<S> <C> <C> <C>
General Motors 10% A3 A-
Ford 10% A3 A-
DaimlerChrysler 10% A3 A-
Caterpillar 10% A3 A-
Cummins Engine 7% Baa3 BBB-
</TABLE>
82
<PAGE>
EXHIBIT 4.11
RECEIVABLES PURCHASE AGREEMENT
between
UNOVA, INC.
as Seller
and
KCH FUNDING, L.L.C.
as Purchaser
Dated as of June 18, 1999
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT, dated as of June 18, 1999
(as amended, supplemented or otherwise modified and in effect from time to time,
this "AGREEMENT"), between UNOVA, INC., a Delaware corporation, as seller (the
"SELLER") and KCH FUNDING, L.L.C., a Delaware limited liability company, as
purchaser (the "PURCHASER").
W I T N E S S E T H :
WHEREAS, the Purchaser desires to purchase from the Seller
from time to time certain accounts receivable owing from Obligors which are
purchased from the divisions listed on Annex 1 hereto of UNOVA Industrial
Automation Systems, Inc., a Delaware corporation ("IAS") (as Annex 1 may from
time to time be amended by the written agreement of the parties hereto) and
Intermec Technologies Corporation, a Washington corporation ("INTERMEC,"
together with such divisions of IAS, collectively, the "ORIGINATOR
SUBSIDIARIES") and which are generated in the normal course of the Originator
Subsidiaries' business pursuant to, or evidenced by, purchase orders, invoices
or other written agreements or with invoices on open accounts;
WHEREAS, the Seller desires to sell and assign from time to
time such certain accounts receivable to the Purchaser upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is hereby agreed by
and between the Purchaser and the Seller as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITIONS. All capitalized terms used herein shall have the
meanings specified herein or, if not so specified, the meaning specified in,
or incorporated by reference into, the Transfer Agreement, and shall include
in the singular number the plural and in the plural number the singular:
"ADVANCE" shall have the meaning specified in Section 3.2(a).
"ELIGIBLE RECEIVABLE" means, at any time, any Receivable:
(i) which has been originated by an Originator
Subsidiary and with respect to which the Seller, immediately
prior to the transfer hereunder, has good title, free and
clear of all Adverse Claims;
1
<PAGE>
(ii) the Obligor of which is a United States
resident at the time of the initial creation of an interest
therein hereunder, is not an Affiliate or employee of any of
the parties hereto, and is not a government or a governmental
subdivision or agency;
(iii) which is not a Defaulted Receivable at the
time of the initial creation of an interest therein hereunder;
(iv) which is not a Delinquent Receivable at the
time of the initial creation of an interest therein hereunder,
provided that, for the initial purchase only, the term
"Eligible Receivable" shall be deemed not to include this
clause;
(v) which, (A) arises pursuant to a Contract
with respect to which the Seller and the applicable Originator
Subsidiary has performed all obligations required to be
performed by it thereunder, including without limitation
shipment of the merchandise and/or the performance of the
services purchased thereunder; (B) has been billed; and (C)
according to the Contract related thereto, is required to be
paid in full within sixty (60) days of the original invoice
date therefor;
(vi) which is an "eligible asset" as defined in
Rule 3a-7 under the Investment Company Act of 1940, as
amended;
(vii) a purchase of which with the proceeds of
Commercial Paper would constitute a "current transaction"
within the meaning of Section 3(a)(3) of the Securities Act of
1933, as amended;
(viii) which is an "account" or "chattel paper" and
is not evidenced by instruments within the meaning of Article
9 of the UCC of all applicable jurisdictions;
(ix) which is denominated and payable only in
United States dollars in the United States;
(x) which, arises under a Contract that together
with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the
related Obligor enforceable against such Obligor in accordance
with its terms and is not subject to any litigation, dispute,
offset, counterclaim or other defense;
(xi) which, together with the Contract related
thereto, does not contravene in any material respect any laws,
rules or regulations applicable thereto (including, without
limitation, laws, rules and regulations relating to truth in
lending, fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and
privacy) and with respect to which no part of the Contract
2
<PAGE>
related thereto is in violation of any such law, rule or
regulation in any material respect;
(xii) which (A) satisfies all applicable
requirements of the applicable Credit and Collection Policy,
and (B) is assignable without the consent of, or notice (which
has not been given) to, the Obligor thereunder;
(xiii) which was generated in the ordinary course
of the applicable Originator Subsidiary's business;
(xiv) the Obligor of which has been directed to
make all payments to a specified account of the Servicer with
respect to which there shall be a Lock-Box Agreement in
effect, except as permitted pursuant to Section 4.1(n) of the
Transfer Agreement;
(xv) [Reserved]
(xvi) the assignment of which under this Agreement
by the Seller to the Purchaser does not violate, conflict or
contravene any applicable laws, rules, regulations, orders or
writs or any contractual or other restriction, limitation or
encumbrance;
(xvii) except as permitted by Section 6.2(a) of the
Transfer Agreement, which has not been compromised, adjusted
or modified (including by the extension of time for payment or
the granting of any discounts, allowances or credits);
provided, however, that only such portion of such Receivable
that is the subject of such compromise, adjustment or
modification shall be deemed to be ineligible pursuant to the
terms of this clause (xvii); and
(xviii) which is not a Receivable originated by the
Cincinnati Machine Division of UNOVA Industrial Automation
Systems, Inc. until such time as the Purchaser and the Seller
shall have mutually agreed in writing that this clause is no
longer effective.
"ORIGINATOR SUBSIDIARY" shall have the meaning set forth in
the recitals hereto.
"PURCHASE PERCENTAGE" shall mean for any day the fair market
value discount rate as mutually agreed between the Purchaser and the Seller for
each month during the term hereof (the application of such rate to result in a
Purchase Price which constitutes fair consideration and approximate fair market
value for the Receivables and related property then conveyed hereunder
reasonably approximate to an arms length transaction between unaffiliated
parties as determined by the Purchaser and the Seller) or, in the absence of
such agreement for such month, the quotient (expressed as a percentage) of (a)
one DIVIDED by (b) the sum of (i) one, plus (ii) the product of (A) the prime
rate (as announced by NationsBank, N.A.) on such date and (B) a fraction, the
3
<PAGE>
numerator of which is the average scheduled number of days to maturity for such
Receivables pursuant to the related Contracts, and the denominator of which is
365.
"PURCHASE DATE" means each day on which the Seller sells and
Purchaser purchases any Receivables hereunder.
"PURCHASE PRICE" shall have the meaning set forth in Section
3.1 hereof.
"PURCHASER" means KCH Funding, L.L.C., a Delaware limited
liability company, and its successors and assigns.
"RECEIVABLE" means the indebtedness, obligation or liability
owed to the Seller or any Originator Subsidiary by any Obligor under a Contract,
whether constituting an account, chattel paper, instrument, investment property
or general intangible, arising in connection with the sale or lease of
merchandise or the rendering of services by the applicable Originator Subsidiary
and includes the right to payment of any Finance Charges and other obligations
of such Obligor with respect thereto; PROVIDED, HOWEVER, that only Receivables
of IAS which are generated from the divisions listed on Annex 1 hereto (as such
annex may be modified from time to time by the written agreement of the parties
hereto), shall be included within the scope of this Agreement and all other
receivables generated from other divisions of IAS are excluded hereunder.
Notwithstanding the foregoing, once a Receivable has been repurchased pursuant
to Section 6.1 hereof, it shall no longer constitute a Receivable hereunder.
"RELATED SECURITY" means with respect to any Receivable, all
of the Seller's rights, title and interest in, to and under:
(i) the merchandise (including returned or
repossessed merchandise), if any, the sale of which by an
Originator Subsidiary gave rise to such Receivable;
(ii) all other security interests or liens and
property subject thereto from time to time, if any, purporting
to secure payment of such Receivable, whether pursuant to the
Contract related to such Receivable or otherwise, together
with all financing statements signed by an Obligor describing
any collateral securing such Receivable;
(iii) all guarantees, indemnities, warranties,
insurance (and proceeds and premium refunds thereof) or other
agreements or arrangements of any kind from time to time
supporting or securing payment of such Receivable whether
pursuant to the Contract related to such Receivable or
otherwise;
(iv) all Records related to such Receivable;
(v) all Lock-Box Accounts and Lock-Box
Agreements; and
4
<PAGE>
(vi) all Proceeds of any of the foregoing.
"RELEVANT UCC" shall mean the Uniform Commercial Code as in
effect in the States of New York and California.
"SELLER" shall mean UNOVA, Inc., a Delaware corporation, and
its successors and assigns.
"TRANSFER AGREEMENT" shall mean the Transfer and
Administration Agreement, dated as of June 18, 1999, by and among the Purchaser,
the Seller, the Servicer, the Company and the Agent, as such agreement may be
amended, modified or supplemented from time to time.
SECTION 1.2. OTHER TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles. All terms used in Article 9 of the Relevant UCC,
and not specifically defined herein, are used herein as defined in such Article
9.
SECTION 1.3. COMPUTATION OF TIME PERIODS. Unless otherwise
stated in this Agreement, in the computation of a period of time from a
specified date to a later specified date, the word "from" means "from and
including" and the words "to" and "until" each means "to but excluding."
ARTICLE II
PURCHASE, CONVEYANCE AND SERVICING OF RECEIVABLES
SECTION 2.1. SALE.
(a) Upon the terms and subject to the conditions set
forth herein, the Seller hereby agrees to sell, convey, transfer and assign to
the Purchaser, and the Purchaser hereby agrees to purchase and accept such
conveyance, transfer and assignment from the Seller, on the terms and subject to
the conditions specifically set forth herein, of all of the Seller's right,
title and interest, whether now owned or hereafter acquired, in, to and under
certain Receivables and the Related Security, Collections and proceeds relating
thereto, provided that the Termination Date has not occurred. Any such foregoing
sale, assignment, transfer and conveyance does not constitute an assumption by
the Purchaser of any obligations of the Seller or any other Person to Obligors
or to any other Person in connection with such Receivables and the Related
Security, Collections and proceeds relating thereto or other agreement and
instrument relating thereto. The parties hereto shall execute a transfer
certificate in the form of Exhibit A attached hereto.
(b) In connection with any such foregoing sale, the
Seller agrees to record and file on or prior to the Closing Date, at its own
expense, a financing statement or statements with respect to the Receivables and
the other property described in Section 2.1(a) sold and to be sold by the Seller
hereunder meeting the requirements of applicable state law in such manner and in
5
<PAGE>
such jurisdictions as are necessary to perfect and protect the interests of the
Purchaser created hereby under the Relevant UCC (subject, in the case of Related
Security constituting returned inventory, to the applicable provisions of
Section 9-306 of the Relevant UCC) against all creditors of and purchasers from
the Seller, and to deliver either the originals of such financing statements or
a file-stamped copy of such financing statements or other evidence of such
filings to the Purchaser on the Closing Date.
(c) The Seller agrees that from time to time, at its
expense, it will promptly execute and deliver all instruments and documents and
take all actions as may be necessary or as the Purchaser may reasonably request
in order to perfect or protect the interest of the Purchaser in the Receivables
and other property purchased hereunder or to enable the Purchaser to exercise or
enforce any of its rights hereunder. Without limiting the foregoing, the Seller
will, in order to accurately reflect any purchase and sale transaction, execute
and file such financing or continuation statements or amendments thereto or
assignments thereof (as permitted pursuant hereto) as may be reasonably
requested by the Purchaser, and upon the request of the Purchaser, mark its aged
trial balances computerized records with a legend describing the purchase by the
Purchaser of Receivables and the subsequent transfer thereof to the Company
pursuant to the Transfer Agreement and stating "An interest in these accounts
receivable has been conveyed to the Company pursuant to a Transfer and
Administration Agreement dated as of June 18, 1999." The Seller shall, upon the
reasonable request of the Purchaser, obtain such additional search reports as
the Purchaser shall request. To the fullest extent permitted by applicable law,
the Purchaser shall be permitted to sign and file continuation statements and
amendments thereto and assignments thereof without the Seller's signature.
Carbon, photographic or other reproduction of this Agreement or any financing
statement shall be sufficient as a financing statement.
(d) It is the express intent of the Seller and the
Purchaser that the transactions contemplated hereby shall be a purchase by the
Purchaser and a sale by the Seller of Receivables and any conveyance of
Receivables by the Seller to the Purchaser pursuant to this Agreement be
construed as a sale of such Receivables by the Seller to the Purchaser. Further,
it is not the intention of the Seller and the Purchaser that such conveyance be
deemed a grant of a security interest in any Receivables by the Seller to the
Purchaser to secure a debt or other obligation of the Seller. However, in case
that, notwithstanding the intent of the parties, any Receivables conveyed
hereunder are construed to constitute property of the Seller, then (i) this
Agreement also shall be deemed to be, and hereby is, a security agreement within
the meaning of the Relevant UCC; and (ii) the conveyance by the Seller provided
for in this Agreement shall be deemed to be, and the Seller hereby grants to the
Purchaser, a security interest in, to and under all of the Seller's right, title
and interest in, to and under all Receivables conveyed by the Seller to the
Purchaser, to secure the rights of the Purchaser set forth in this Agreement or
as may be determined in connection therewith by applicable law. The Seller and
the Purchaser shall, to the extent consistent with this Agreement, take such
actions as may be necessary to ensure that, if this Agreement were deemed to
create a security interest in, and not a sale of, Receivables, such security
interest would be deemed to be a perfected security interest in favor of the
Purchaser under applicable law and will be maintained as such throughout the
term of this Agreement.
6
<PAGE>
SECTION 2.2. SERVICING OF RECEIVABLES. The servicing,
administering and collection of the Receivables conveyed hereunder shall be
conducted by the Servicer as set forth and in accordance with the Transfer
Agreement. The Purchaser hereby appoints the Servicer as its agent to enforce
the Purchaser's rights and interests in, to and under the Receivables, the
Related Security, Collections and proceeds with respect thereto.
7
<PAGE>
ARTICLE III
CONSIDERATION AND PAYMENT; RECEIVABLES
SECTION 3.1. PURCHASE PRICE.
(a) The purchase price for any Receivable and related
property conveyed, transferred and assigned to the Purchaser by the Seller under
this Agreement shall be a dollar amount equal to the product of (i) the
aggregate outstanding balance of the Receivables sold pursuant to such
conveyance, and (ii) the Purchase Percentage at such time (the "PURCHASE
PRICE").
SECTION 3.2. PAYMENT OF PURCHASE PRICE.
(a) The Purchase Price for any Receivables and related
property conveyed hereunder shall be paid in the following manner: (i) by
payment of cash in immediately available funds, or (ii) with the consent of the
Seller, capital contributed by the Seller to Purchaser in the form of a
contribution of the additional Receivables or (iii) any combination of the
foregoing.
SECTION 3.3. MONTHLY REPORT. On or before the fifteenth (15th)
Business Day of each fiscal month, the Seller shall prepare or cause to be
prepared and forward to the Purchaser (i) an Investor Report as of the end of
the last day of the immediately preceding fiscal month, (ii) if requested by the
Purchaser, a listing by Obligor of all Receivables together with an aging of
such Receivables and (iii) such other information pertaining to the Receivables
or the transactions hereunder as the Purchaser may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. SELLER'S REPRESENTATIONS AND WARRANTIES. On the Closing Date
and on each Purchase Date, the Seller represents and warrants to the
Purchaser that:
(a) CORPORATE EXISTENCE AND POWER. The Seller is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all corporate power and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business in each jurisdiction in which its business is now conducted and
the Seller is duly qualified to do business in, and is in good standing in,
every other jurisdiction in which the nature of its business requires it to be
so qualified, except where the failure to have such items or to be so qualified
or in good standing would not have a material adverse effect on the ability of
the Seller to perform its obligations hereunder.
8
<PAGE>
(b) CORPORATE AND GOVERNMENTAL AUTHORIZATION;
CONTRAVENTION. The execution, delivery and performance by the Seller of this
Agreement is within the Seller's corporate powers, have been duly authorized by
all necessary corporate action, require no action by or in respect of, or filing
with, any Official Body or official thereof (except as contemplated hereby or by
the Transfer Agreement), and do not contravene, or constitute a default under,
any provision of applicable law, rule or regulation or of the certificate of
incorporation of the Seller or of any agreement, judgment, injunction, order,
writ, decree or other instrument binding upon the Seller or result in the
creation or imposition of any Adverse Claim on the assets of the Seller or any
of its Subsidiaries, except where such failure would not have a material adverse
effect on the ability of the Seller to perform its obligations hereunder.
(c) BINDING EFFECT. This Agreement has been duly executed
and delivered and constitutes the legal, valid and binding obligation of the
Seller, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally.
(d) PERFECTION OF SALE. Immediately preceding each sale
hereunder, the Seller shall be the legal and beneficial owner of all of the
Receivables and the Related Security and Collections to be sold hereunder, free
and clear of all Adverse Claims. On or prior to each sale hereunder, all
financing statements and other documents required to be recorded or filed under
the UCC in order to perfect and protect the interest of the Purchaser in the
Receivables against all creditors of and purchasers from the Seller or any
Originator Subsidiary will have been duly filed in each filing office necessary
for such purpose and all filing fees and taxes, if any, payable in connection
with such filings shall have been paid in full.
(e) ACCURACY OF INFORMATION. All information heretofore
furnished by the Seller or any Originator Subsidiary (including without
limitation, the Investor Reports, any reports delivered pursuant to Section 2.10
of the Transfer Agreement and the Seller's financial statements) for purposes of
or in connection with this Agreement or any transaction contemplated hereby is,
and all such information hereafter furnished by the Seller to the Purchaser or
to any party pursuant to the Transfer Agreement will be complete and accurate as
of such date in every material respect, and neither the Seller nor any
Originator Subsidiary has omitted to disclose any information which is material
to the transaction, on the date such information is stated or certified.
(f) TAX STATUS. The Seller has filed all tax returns
(federal, state and local) required to be filed and has paid or made adequate
provision for the payment of all taxes and assessments due pursuant to such
returns or pursuant to any assessment received in respect thereof, and other
governmental charges payable by it other than any such filings or payments which
the failure to make or pay would not have a material adverse effect on the
ability of the Seller to perform its obligations hereunder.
(g) ACTION, SUITS. There are no actions, suits or
proceedings pending, or to the knowledge of the Seller threatened, against or
affecting the Seller or any Originator Subsidiary of
9
<PAGE>
the Seller or their respective properties, in or before any court, arbitrator
or other body which could reasonably be expected to have a material adverse
effect on the ability of the Seller to perform its obligations hereunder; the
Seller is not in violation of any material order of any court, arbitrator or
Official Body.
(h) USE OF PROCEEDS. No proceeds of any sale hereunder
will be used by the Seller to acquire any security in any transaction which is
subject to Section 12 of the Securities Exchange Act of 1934, as amended or for
any purpose that violates any applicable law, rule or regulation, including
Regulation U of the Federal Reserve Board.
(i) PLACE OF BUSINESS. The principal place of business
and chief executive office (as such terms are defined in the UCC) of the Seller
are located at the address of the Seller indicated in Section 9.3 hereof and the
offices where the Seller and each Originator Subsidiary keeps all its Records
relating to the Receivables, are located at the address(es) described on Exhibit
B annexed hereto or such other locations notified to the Purchaser in accordance
with Section 5.1 hereof in jurisdictions where all action required by Section
2.1 hereof has been taken and completed.
(j) GOOD TITLE. Upon each sale, the Purchaser shall
acquire a valid ownership interest in each Receivable that exists on the date of
such sale and in the Related Security and Collections with respect thereto free
and clear of any Adverse Claim.
(k) TRADENAMES, ETC. As of the date hereof: (i) the
Seller has no Subsidiaries or divisions except those set forth on Exhibit C
annexed hereto; and (ii) the Seller and each Originator Subsidiary has, within
the last eighteen (18) months, operated only under the tradenames identified in
Exhibit D annexed hereto, and, within the last eighteen (18) months, has not
changed its name, merged with or into or consolidated with any other corporation
or been the subject of any proceeding under the Bankruptcy Code, except as
disclosed in Exhibit D annexed hereto.
(l) NATURE OF RECEIVABLES. Each Receivable (x)
represented by the Seller to be an Eligible Receivable (including in any
Investor Report or other report delivered pursuant to Section 3.3 hereof or (y)
included in the calculation of the Net Receivables Balance, in fact satisfies at
such time the definition of "Eligible Receivable" set forth herein and, in the
case of clause (y) above, is not a Receivable of the type described in clause
(i) of the definition of "Net Receivables Balance".
(m) AMOUNT OF RECEIVABLES. As of May 31, 1999, the
aggregate outstanding balance of the Receivables in existence was $207,588,629
and the Net Receivable Balance was $132,323,430.
(n) CREDIT AND COLLECTION POLICY. Since June 4, 1999,
there have been no material changes in any Credit and Collection Policy other
than as permitted hereunder.
10
<PAGE>
(o) COLLECTIONS AND SERVICING. Since June 4, 1999, there
has been no material adverse change in the ability of the Seller or any
Originator Subsidiary to service and collect the Receivables.
(p) NO PURCHASE TERMINATION DATE. No Purchase Termination
Date has occurred.
(q) NOT AN INVESTMENT COMPANY OR A HOLDING COMPANY. The
Seller is not, and is not controlled by, an "investment company" within the
meaning of the Investment Company Act of 1940, as amended, or is exempt from all
provisions of such Act. The Seller is not a "holding company", or a subsidiary
or affiliate of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
(r) COMPLIANCE WITH ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal Revenue Code or (iii)
incurred any liability under Title IV of ERISA other than a liability to the
PBGC for premiums under Section 4007 of ERISA.
(s) LOCK-BOX ACCOUNTS. The names and addresses of all the
Lock-Box Banks, together with the account numbers of the Lock-Box Accounts at
such Lock-Box Banks, are specified in Exhibit C to the Transfer Agreement (or at
such other Lock-Box Banks and/or with such other Lock-Box Accounts as will have
been notified to the Servicer and for which Lock-Box Agreements will have been
executed and delivered to the Servicer). All Obligors have been instructed to
make payment to a Lock-Box Account and only Collections are deposited into the
Lock-Box Accounts.
(t) BULK SALES. No transaction contemplated hereby
requires compliance with any bulk sales act or similar law.
(u) PREFERENCE; VOIDABILITY. The Purchaser has given
reasonably equivalent value to the Seller in consideration for the transfer to
the Purchaser of the Receivables and Related Security by the Seller, and each
such transfer has not been made for or on account of an antecedent debt owed by
the Seller to the Purchaser.
(v) YEAR 2000 COMPLIANCE. The Seller and each Originator
Subsidiary has (i) initiated a review and assessment of all areas within its and
each of its Subsidiaries' business and operations (including those affected by
suppliers and vendors) that could be adversely affected by
11
<PAGE>
the Year 2000 Problem, (ii) developed a plan and timeline for addressing the
Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan
in accordance with that timetable. The Seller reasonably believes that all
computer applications (including those of its suppliers and vendors) that are
material to its or any of the Originator Subsidiaries' business and
operations will on a timely basis be Year 2000 Compliant on or before
September 30, 1999 and thereafter, except to the extent that a failure to do
so could not reasonably be expected (a) to have a material adverse effect on
the ability of the Seller to perform its obligations hereunder or (b) to
result in a Purchase Termination Date.
The Seller (i) has completed a review and assessment of all
the Receivables Systems and (ii) has determined that such Receivable Systems are
Year 2000 Compliant or will be Year 2000 Compliant on or before September 30,
1999 and thereafter.
The costs of all necessary assessment, remediation, testing
and integration related to the Seller's plan for becoming Year 2000 Compliant
will not have a material adverse effect on the financial condition or operations
of the Seller.
SECTION 4.2. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES
BY THE SELLER; NOTICE OF BREACH. On each date that Receivables are conveyed
hereunder, the Seller, by accepting the proceeds of such conveyance, shall be
deemed to have certified that all representations and warranties described in
Section 4.1 are true and correct on and as of such day as though made on and as
of such day. The representations and warranties set forth in Section 4.1 shall
survive the conveyance of Receivables to the Purchaser, and termination of the
rights and obligations of the Purchaser and the Seller under this Agreement.
Upon discovery by the Purchaser or the Seller of a breach of any of the
foregoing representations and warranties, the party discovering such breach
shall give prompt written notice to the other within three Business Days of such
discovery.
ARTICLE V
COVENANTS OF THE SELLER
SECTION 5.1. AFFIRMATIVE COVENANTS OF THE SELLER. At all times from the
date hereof to the Purchase Termination Date:
(a) CONDUCT OF BUSINESS. The Seller will, and will cause
each of the Originator Subsidiaries to do all things necessary to remain duly
incorporated, validly existing and in good standing as a domestic corporation in
its jurisdiction of incorporation and maintain all requisite authority to
conduct its business in each jurisdiction in which its business is conducted
except where the failure to do so would not have a material adverse effect on
the ability of the Seller or any Originator Subsidiary's ability to perform
their respective obligations hereunder. The Seller will cause each of the
Originator Subsidiaries to carry on and conduct its business in substantially
the same manner and in substantially the same fields of enterprise as it is
presently conducted.
12
<PAGE>
(b) COMPLIANCE WITH LAWS. The Seller will, and will cause
each of the Originator Subsidiaries to, comply with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it or its respective properties may be subject, except where the failure to do
so would not have a material adverse effect on the ability of the Seller or any
Originator Subsidiary's ability to perform their respective obligations
hereunder.
(c) FURNISHING OF INFORMATION AND INSPECTION OF RECORDS.
The Seller will, and will cause each Originator Subsidiary to, furnish to the
Purchaser from time to time such information with respect to the Receivables as
the Purchaser may reasonably request, including, without limitation, listings
identifying the Obligor and the outstanding balance for each Receivable. The
Seller will, and will cause each Originator Subsidiary to, at any time and from
time to time during regular business hours permit, upon reasonable notice, the
Purchaser, or its agents or representatives, (i) to examine and make copies of
and take abstracts from all Records and (ii) to visit the offices and properties
of the Seller or the applicable Originator Subsidiary, for the purpose of
examining such Records, and to discuss matters relating to Receivables or the
Seller's or such Originator Subsidiary's performance under the Transfer
Agreement with any of the officers, directors, employees or independent public
accountants of the Seller or such Originator Subsidiary having knowledge of such
matters.
(d) OFFICES, RECORDS AND BOOKS OF ACCOUNT. The Seller
will, and will cause each Originator Subsidiary to (i) keep its principal place
of business and chief executive office (as such terms or similar terms are used
in the UCC) and the office where it keeps its records concerning the Receivables
at the addresses set forth in Section 9.3 hereof or at any other locations in
jurisdictions where all actions reasonably requested by the Purchaser to protect
and perfect the interest of the Purchaser in the Receivables and the Related
Collateral have been taken and completed and (ii) shall provide the Purchaser
with at least 30 days' written notice before making any change in its name or
making any other change in its identity or corporate structure that could render
any UCC financing statement filed in connection with the Transfer Agreement
seriously misleading as such term (or similar term) is used in the Relevant UCC;
each notice to the Purchaser pursuant to this sentence shall set forth the
applicable change and the effective date thereof. The Seller will, and will
cause each Originator Subsidiary to, maintain and implement (or cause to be
maintained and implemented) administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing Receivables in the
event of the destruction of the originals thereof), and keep and maintain (or
cause to be maintained and implemented), all documents, books, records and other
information reasonably necessary or advisable for the collection of all
Receivables (including, without limitation, records adequate to permit the daily
identification of each new Receivable and all Collections of and adjustments to
each existing Receivable in accordance with its Credit and Collection Policy).
The Seller will give notice to the Purchaser of any material change in the
administrative and operating procedures of the Seller referred to in the
previous sentence.
(e) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND
CONTRACTS. The Seller will, and will cause each Originator Subsidiary to, timely
and fully perform and comply with all
13
<PAGE>
material provisions, covenants and other promises required to be observed by
the Seller or such Originator Subsidiary under the Contracts related to the
Receivables.
(f) CREDIT AND COLLECTION POLICIES. The Seller will, and
will cause each Originator Subsidiary to, comply in all material respects with
the relevant Credit and Collection Policy in regard to each Receivable and the
related Contract.
(g) COLLECTIONS. The Seller will instruct all Obligors,
or cause all Obligors to be instructed, to cause all Collections to be deposited
directly to a Lock-Box Account.
(h) COLLECTIONS RECEIVED. The Seller will, and will cause
each Originator Subsidiary to, hold in trust, and deposit, immediately, but in
any event not later than two (2) Business Days of its receipt thereof, to a
Lock-Box Account all Collections received from time to time by the Seller;
provided, that if the Seller or an Originator Subsidiary receives any
Collections, the Seller shall, and shall cause such Originator Subsidiary to, as
applicable, immediately, but in any event within two (2) Business Days of
receipt, remit such Collections to a Lock-Box Account; PROVIDED, FURTHER, that
the Seller and the Originator Subsidiaries may initially deposit any checks
which it receives pursuant to this sentence into its operating account if such
Collections are transferred from such operating account to a Lock-Box Account
within two (2) Business Days and the aggregate amount of such Collections in all
such operating accounts does not exceed at any one time $10,000,000.
(i) SALE TREATMENT. The Seller will treat this conveyance
for accounting purposes as a sale and to the extent any such reporting is
required, will report the transactions contemplated by this Agreement on all
relevant books, records, financial statements and other applicable documents
(other than for tax purposes) as a sale of Receivables to the Purchaser. Without
limiting the foregoing, the Seller will disclose (in a footnote or otherwise) in
all of its respective financial statements (including any such financial
statements consolidated with any other Persons' financial statements) the
existence and nature of the transaction contemplated hereby and the interest of
the Purchaser in the Receivables sold hereunder and the Related Security.
(j) YEAR 2000 COMPLIANCE. The Seller will promptly notify
the Purchaser in the event the Seller discovers or determines that any
Receivables System (including those of its suppliers and vendors) (i) that is
necessary for the origination, collection, management, or servicing of the
Receivables will not be Year 2000 Compliant on or before September 30, 1999 and
thereafter, or (ii) that is otherwise material to its or any of the Originator
Subsidiaries' business and operations will not be Year 2000 Compliant on a
timely basis, except to the extent that, in the case of (ii) above, such failure
could not reasonably be expected (a) to have a material adverse effect on the
ability of the Seller to perform its obligations hereunder, or (b) to result in
a Purchase Termination Date.
(k) OWNERSHIP INTEREST, ETC. The Seller will, at its
expense, take all action necessary to establish and maintain a valid and
enforceable ownership interest in the Receivables
14
<PAGE>
and the Related Security, free and clear of any Adverse Claim, in favor of
the Purchaser or the Agent, including taking such action to perfect, protect
or more fully evidence the interest of the Purchaser, as the Purchaser may
reasonably request.
SECTION 5.2. NEGATIVE COVENANTS OF THE SELLER. At all times
from the date hereof to the Purchase Termination Date:
(a) NO SALES, LIENS, ETC. Except as otherwise provided
herein or under the Transfer Agreement, the Seller will not, nor will it permit
any Originator Subsidiary to, sell, assign (by operation of law or otherwise) or
otherwise dispose of, or create or suffer to exist any Adverse Claim upon (or
the filing of any financing statement) or with respect to (x) any of the
Receivables sold hereunder and the Related Security, (y) any inventory or goods,
the sale of which gives rise to a Receivable (other than sales in the ordinary
course of its business), or (z) any account which concentrates in a Lock-Box
Bank to which the Collections of Receivables sold hereunder and the Related
Security are sent, or assign any right to receive income in respect thereof.
(b) NO EXTENSION OR AMENDMENT OF RECEIVABLES. Except as
otherwise permitted in Section 6.2 of the Transfer Agreement, the Seller will
not, nor will it permit any Originator Subsidiary to, extend, amend or otherwise
modify the terms of any Receivable, or amend, modify or waive terms or
conditions of Contract related thereto.
(c) NO CHANGE IN CREDIT AND COLLECTION POLICY. The Seller
will not, nor will it permit any Originator Subsidiary to, make any change in
its Credit and Collection Policy, which change would impair the collectibility
of any material portion of the Receivables or otherwise have a material adverse
effect on the ability of the Seller to perform its obligations hereunder.
(d) NO MERGERS, ETC. The Seller will not (i) consolidate
or merge with or into any other Person or (ii) sell, lease or otherwise transfer
directly or indirectly all or any substantial part of the assets of the Seller
and its Subsidiaries taken as a whole to any other Person; provided that the
Seller may merge with another Person if the Seller is the surviving corporation
and, after giving effect thereto, no Purchase Termination Date exists.
(e) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. The
Seller will not, nor will it permit any Originator Subsidiary to, add or
terminate any bank as a Lock-Box Bank or any account as a Lock-Box Account to or
from those listed in Exhibit C to the Transfer Agreement or make any change in
its instructions to Obligors regarding payments to be made to any Lock-Box
Account, unless (i) such instructions are to deposit such payments to another
existing Lock-Box Account or (ii) the Agent shall have received written notice
of such addition, termination or change at least 30 days prior thereto and the
Agent shall have received a Lock-Box Agreement executed by each new Lock-Box
Bank or an existing Lock-Box Bank with respect to each new Lock-Box Account, as
applicable.
15
<PAGE>
(f) DEPOSITS TO LOCK-BOX ACCOUNTS. The Seller will not,
nor will it permit any Originator Subsidiary to, deposit or otherwise credit, or
cause or permit to be so deposited or credited, to any Lock-Box Account cash or
cash proceeds other than Collections of Receivables unless such other cash and
proceeds are removed from such Lock-Box Account within two (2) Business Days.
(g) CHANGE OF NAME, ETC. The Seller will not, nor will it
permit any Originator Subsidiary to, change its name, identity or structure or
the location of its chief executive office, unless at least ten (10) days prior
to the effective date of any such change the Seller delivers to the Purchaser
(i) such documents, instruments or agreements, executed by the Seller or such
Originator Subsidiary as are necessary to reflect such change and to continue
the perfection of the Purchaser's ownership interests in the Affected Assets and
(ii) new or revised Lock-Box Agreements executed by the Lock-Box Banks which
reflect such change and enable the Agent to continue to exercise its rights
contained in Section 2.7 of the Transfer Agreement.
(h) AMENDMENTS TO LOCK-BOX AGREEMENTS. The Seller will
not, nor will it permit any Originator Subsidiary to, amend, modify, or
supplement any Lock-Box Agreement or waive any provision thereof, in each case
except with the prior written consent of the Agent; nor shall the Seller or any
Originator Subsidiary take any other action under any Lock-Box Agreement that
could have a material adverse effect on the Agent, the Company or any Bank
Investor or which is inconsistent with the terms of the Transfer Agreement.
ARTICLE VI
REPURCHASE OBLIGATION; DEEMED COLLECTIONS;INDEMNITIES
SECTION 6.1. MANDATORY REPURCHASE. (a) If on any day the outstanding balance
of a Receivable conveyed hereunder and included at any time as an Eligible
Receivable on an Investor Report is either (x) reduced as a result of any
defective, rejected or returned merchandise or services, any discount,
credit, dispute, warranty claim, repossessed or returned goods, charge-back,
allowance, any billing adjustment, similar dilutive factor or other similar
adjustment or (y) reduced or canceled as a result of a setoff or offset in
respect of any claim by any Person against the Seller, any Originator
Subsidiary or the Servicer (whether such claim arises out of the same or a
related transaction or an unrelated transaction), the Seller shall be deemed
to have received on such day a Collection of such Receivable in the amount of
such reduction or cancellation and the Seller shall pay to the Purchaser an
amount equal to such reduction or cancellation.
(b) If on any day any representation or warranty of
the Seller in this Agreement was or becomes untrue with respect to a
Receivable (whether on or after the date of any transfer of such Receivable
to the Purchaser), the Seller shall be deemed to have received on such day a
Collection of such Receivable in full and the Seller shall on such day pay to
the Purchaser an amount equal to the outstanding balance of such Receivable.
16
<PAGE>
(c) Any payment by an Obligor in respect of any
indebtedness, obligation or liability owed by it to the Seller or any Originator
Subsidiary shall, except as otherwise specified by such Obligor or otherwise
required by contract or law be applied as a Collection of any Receivable of such
Obligor included in the Receivables transferred hereunder (starting with the
oldest such Receivable) to the extent of any amounts then due and payable
thereunder before being applied to any other receivable or other indebtedness of
such Obligor to the Seller.
SECTION 6.2. INDEMNIFICATION. The Seller agrees to
indemnify, defend and hold the Purchaser harmless from and against any and
all losses, liabilities, damages, judgments, claims, deficiencies, or
expenses (including interest, penalties, reasonable attorneys' fees and
amounts paid in settlement) ("INDEMNIFIED AMOUNTS") to which the Purchaser or
any assignee thereof may become subject insofar as any such Indemnified
Amount arises out of or is based upon a breach by the Seller of its
representations, warranties and covenants contained herein, or any
information certified in any schedule or certificate delivered by the Seller
hereunder, being untrue in any material respect at any time; excluding,
however, Indemnified Amounts resulting from (i) recourse for uncollectible
Receivables and Related Security or (ii) the gross negligence or willful
misconduct on the part of Purchaser or such assignee. The obligations of the
Seller under this Section 6.2 shall be considered to have been relied upon by
the Purchaser, the Company and the Bank Investors and shall survive the
execution, delivery, performance and termination of this Agreement,
regardless of any investigation made by the Purchaser, the Company, any Bank
Investor or on behalf of any of them.
SECTION 6.3. NO RECOURSE. Except as otherwise provided in this
Article VI, the purchase and sale of Receivables under this Agreement shall be
without recourse to the Seller.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1. CONDITIONS TO THE PURCHASER'S OBLIGATIONS REGARDING RECEIVABLES.
The obligations of the Purchaser to purchase any Receivables on any sale date
(except clause (e), which shall apply only on the initial sale date) shall be
subject to the satisfaction of the following conditions:
(a) All representations and warranties of the Seller
contained in this Agreement shall be true and correct in all material respects
on each sale date with the same effect as though such representations and
warranties had been made on such date;
(b) All information concerning such Receivables provided
to the Purchaser shall be true and correct in all material respects as of any
sale date;
(c) The Seller shall have substantially performed all
other obligations required to be performed by the provisions of this Agreement;
17
<PAGE>
(d) The Seller shall have filed or caused to be filed the
financing statement(s) required to be filed pursuant to Section 2.1(b); and
(e) All corporate and legal proceedings and all
instruments in connection with the transactions contemplated by this Agreement
shall be satisfactory in form and substance to the Purchaser, and the Purchaser
shall have received from the Seller copies of all documents (including, without
limitation, records of corporate proceedings) relevant to the transactions
herein contemplated as the Purchaser may reasonably have requested.
ARTICLE VIII
TERM AND TERMINATION
SECTION 8.1. TERM. This Agreement shall commence as of the date of execution
and delivery hereof and shall continue in full force and effect until the
date following the earlier of (i) the date designated by the Purchaser or the
Seller as the termination date at any time following sixty (60) day's written
notice to the other (with a copy thereof to the Agent), (ii) the date on
which the Termination Date (other than a Termination Date caused by a Conduit
Termination Event) occurs or is declared pursuant to Section 7.2 of the
Transfer Agreement, (iii) the day on which the Investment Termination Date
shall occur under the Transfer Agreement unless the Transferred Interest
shall have been assigned (or concurrently is so assigned) to the Bank
Investors under Section 9.9 of the Transfer Agreement, (iv) upon the
occurrence of an Event of Bankruptcy with respect to either the Purchaser or
the Seller, or (v) the date on which either the Purchaser or the Seller
becomes unable for any reason to purchase or re-purchase any Receivable in
accordance with the provisions of this Agreement or defaults on its material
obligations hereunder, which inability to purchase or default continues
unremedied for more than thirty (30) days after written notice by the other
party hereto (any such date being a "PURCHASE TERMINATION DATE"); PROVIDED,
HOWEVER, that the occurrence of the Purchase Termination Date pursuant to
this Section 8.1 hereof shall not discharge any Person from any obligations
incurred prior to the Purchase Termination Date, including, without
limitation, any obligations to make any payments with respect to the interest
of the Purchaser in any Receivable sold prior to the Purchase Termination
Date.
SECTION 8.2. EFFECT OF PURCHASE TERMINATION DATE.
Following the occurrence of the Purchase Termination Date pursuant to Section
8.1 hereof, the Seller shall not sell, and the Purchaser shall not purchase,
any Receivables. No termination or rejection or failure to assume the
executory obligations of this Agreement in any Event of Bankruptcy with
respect to the Seller or the Purchaser shall be deemed to impair or affect
the obligations pertaining to any executed sale or executed obligations,
including, without limitation, pre-termination breaches of representations
and warranties by the Seller or the Purchaser. Without limiting the
foregoing, prior to the Purchase Termination Date, the failure of the Seller
to deliver computer records of any Receivables or any reports regarding any
Receivables shall not render such transfer or
18
<PAGE>
obligation executory, nor shall the continued duties of the parties pursuant
to Article V or Section 9.1 of this Agreement render an executed sale
executory.
ARTICLE IX
MISCELLANEOUS PROVISIONS
SECTION 9.1. AMENDMENT. This Agreement and the rights and obligations of the
parties hereunder may not be changed orally, but only by an instrument in
writing signed by the Purchaser and the Seller and consented to in writing by
the Agent. Any reconveyance executed in accordance with the provisions hereof
shall not be considered amendments to this Agreement.
SECTION 9.2. GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) The parties hereto hereby submit to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York state court sitting in The City of New York for
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. Each party hereto hereby irrevocably
waives, to the fullest extent it may effectively do so, any objection which it
may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum. Nothing in this Section 9.2
shall affect the right of the Purchaser to bring any other action or proceeding
against the Seller or its property in the courts of other jurisdictions.
SECTION 9.3. NOTICES. Except as provided below, all
communications and notices provided for hereunder shall be in writing (including
telecopy or electronic facsimile transmission or similar writing) and shall be
given to the other party at its address or telecopy number set forth below or at
such other address or telecopy number as such party may hereafter specify for
the purposes of notice to such party. Each such notice or other communication
shall be effective (i) if given by telecopy, when such telecopy is transmitted
to the telecopy number specified in this Section 9.3 and confirmation is
received, (ii) if given by mail 3 Business Days following such posting, postage
prepaid, U.S. certified or registered, (iii) if given by overnight courier, one
(1) Business Day after deposit thereof with a national overnight courier
service, or (iv) if given by any other means, when received at the address
specified in this Section 9.3.
19
<PAGE>
(a) in the case of the Purchaser:
KCH Funding, L.L.C.
21900 Burbank Boulevard, Suite 112
Woodland Hills, CA 91367-7418
Attention: Treasurer
Telephone: (818) 992-2890
Telecopy: (818) 992-2673
with a copy to:
NationsBank, N.A.
NationsBank Corporate Center
100 North Tryon Street
NC1-007-10-07
Charlotte, NC 28255
Attention: Michelle M. Heath
Asset Backed Securitization Group
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
(b) in the case of the Seller:
UNOVA, Inc.
21900 Burbank Blvd.
Woodland Hills, CA 91367-7418
Attention: Treasurer
Telephone: (818) 992-2880
Telecopy: (818) 992-2627
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party.
SECTION 9.4. SEVERABILITY OF PROVISIONS. If any one or more of
the covenants, agreements, provisions or terms of this 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 this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement.
SECTION 9.5. ASSIGNMENT. This Agreement may not be assigned by
the parties hereto, except that the Purchaser may assign its rights hereunder
pursuant to the Transfer Agreement to the Agent, for the benefit of the Company
and the Bank Investors, and that the
20
<PAGE>
Company may assign any or all of its rights to any Liquidity Provider or to a
Conduit Assignee. The Purchaser hereby notifies (and the Seller hereby
acknowledges that) the Purchaser, pursuant to the Transfer Agreement, has
assigned its rights hereunder to the Agent. All rights of the Purchaser
hereunder may be exercised by the Agent or its assignees, to the extent of
their respective rights pursuant to such assignments.
SECTION 9.6. FURTHER ASSURANCES. The Purchaser and the Seller
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 other party
more fully to effect the purposes of this Agreement, including, without
limitation, the execution of any financing statements or continuation statements
or equivalent documents relating to the Receivables conveyed hereunder for
filing under the provisions of the Relevant UCC or other laws of any applicable
jurisdiction.
SECTION 9.7. NO WAIVER; CUMULATIVE REMEDIES. No failure to
exercise and no delay in exercising, on the part of the Purchaser, the Seller or
the Agent, 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 privilege provided by law.
SECTION 9.8. COUNTERPARTS. This Agreement may be executed in
two or more counterparts including telecopy transmission thereof (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 9.9. BINDING EFFECT; THIRD-PARTY BENEFICIARIES. This
Agreement shall inure to the benefit of and be binding upon the parties hereto
and their respective successors and permitted assigns. The Agent, on behalf of
the Company and its assignees and the Bank Investors, and any Liquidity Provider
is intended by the parties hereto to be a third-party beneficiary of this
Agreement.
SECTION 9.10. MERGER AND INTEGRATION. Except as specifically
stated otherwise herein, this 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. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
SECTION 9.11. HEADINGS. The headings herein are for purposes
of reference only and shall not otherwise affect the meaning or interpretation
of any provision hereof.
SECTION 9.12. EXHIBITS. The schedules and exhibits referred to
herein shall constitute a part of this Agreement and are incorporated into this
Agreement for all purposes.
21
<PAGE>
IN WITNESS WHEREOF, the Purchaser and the Seller each have
caused this Receivables Purchase Agreement to be duly executed by their
respective officers as of the day and year first above written.
UNOVA, INC.,
as Seller
By: /S/ CHARLES A. CUSUMANO
---------------------------
Charles A. Cusumano
Vice President
KCH FUNDING, L.L.C.,
as Purchaser
By: /S/ ELMER C. HULL, JR.
---------------------------
Elmer C. Hull, Jr.
Treasurer
Acknowledged and agreed as
of the date first above written:
ENTERPRISE FUNDING CORPORATION
By: /S/ ANDREW L. STIDD
---------------------------
Andrew L. Stidd
President
NATIONSBANK, N.A., as Agent
By: /S/ ROBERT R. WOOD
---------------------------
Robert R. Wood
Vice President
<PAGE>
EXHIBIT A
[Form of Transfer Certificate]
TRANSFER CERTIFICATE
Reference is made to the Receivables Purchase Agreement
dated as of June 18, 1999 (such agreement as amended, modified or
supplemented from time to time, the "Agreement") among KCH Funding, L.L.C.,
as purchaser (the "Purchaser") and UNOVA, Inc., as seller (the "Seller").
Terms defined in the Agreement are used herein as therein defined.
The Seller hereby sells, conveys, transfers and assigns to
the Purchaser, all of its right, title and interest, whether now owned or
hereafter acquired, in, to and under certain Receivables and the Related
Security, Collections and proceeds relating thereto, (the "Transfer"). Each
Transfer by the Seller to the Purchaser and evidenced hereby shall be
indicated by the Purchaser on the grid attached hereto which is part of this
Transfer Certificate.
This Transfer Certificate is made without recourse except
as otherwise provided in the Agreement.
This Transfer Certificate shall be governed by, and
construed in accordance with, the laws of the State of New York, without
giving effect to the conflicts of law provisions thereof.
IN WITNESS WHEREOF, the undersigned has caused this
Transfer Certificate to be duly executed and delivered by its duly authorized
officer as of the date first above written.
UNOVA, INC.
By:
------------------------------
Name:
Title:
A-1
<PAGE>
GRID
<TABLE>
<CAPTION>
DATE OF AMOUNT OF TOTAL
TRANSFER TRANSFER TRANSFER
- -------- --------- --------
<S> <C> <C>
</TABLE>
A-2
<PAGE>
EXHIBIT 4.12
ORIGINATOR RECEIVABLES PURCHASE AGREEMENT
among
UNOVA Industrial Automation Systems, Inc.
and
Intermec Technologies Corporation
as Sellers
and
UNOVA, Inc.
as Purchaser
Dated as of June 18, 1999
<PAGE>
ORIGINATOR RECEIVABLES PURCHASE AGREEMENT
This ORIGINATOR RECEIVABLES PURCHASE AGREEMENT, dated as of
June 18, 1999 (as amended, supplemented or otherwise modified and in effect
from time to time, this "AGREEMENT"), among UNOVA Industrial Automation
Systems, Inc., a Delaware corporation, as seller ("IAS"), Intermec
Technologies Corporation, a Washington corporation, as seller ("INTERMEC",
collectively with IAS, the "SELLERS"), and UNOVA, Inc., as purchaser (the
"PURCHASER").
W I T N E S S E T H :
WHEREAS, the Purchaser desires to purchase from each of the
Sellers from time to time certain accounts receivable owing from Obligors and
which are generated in the normal course of each of the Sellers' businesses,
pursuant to, or evidenced by purchase orders, invoices or other written
agreements or with invoices on open accounts;
WHEREAS, each of the Sellers desire to sell and assign from
time to time such certain accounts receivable to the Purchaser upon the terms
and conditions hereinafter set forth;
WHEREAS, concurrently herewith, the Purchaser, as seller, will
sell and transfer the Receivables to KCH Funding, L.L.C. ("KCH") pursuant to
that certain Receivables Purchase Agreement (the "Receivables Purchase
Agreement") dated as of the date hereof;
WHEREAS, concurrently herewith, KCH will transfer certain of
the Receivables to Nationsbank, N.A., as agent, pursuant to the Transfer
Agreement;
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is hereby agreed by
and between the Purchaser and each of the Sellers as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. DEFINITIONS.
All capitalized terms used herein shall have the meanings
specified herein or, if not so specified, the meaning specified in, or
incorporated by reference into, the Transfer Agreement, and shall include in the
singular number the plural and in the plural number the singular:
"ADVANCE" shall have the meaning specified in Section 3.2(a).
"ELIGIBLE RECEIVABLE" means, at any time, any Receivable:
(i) which has been originated by a Seller and with
respect to which the applicable Seller, immediately
prior to the transfer hereunder, has good title, free
and clear of all Adverse Claims;
<PAGE>
(ii) the Obligor of which is a United States resident at
the time of the initial creation of an interest
therein hereunder, is not an Affiliate or employee of
any of the parties hereto, and is not a government or
a governmental subdivision or agency;
(iii) which is not a Defaulted Receivable at the time of
the initial creation of an interest therein
hereunder;
(iv) which is not a Delinquent Receivable at the time of
the initial creation of an interest therein
hereunder; provided, that for the initial purchase
only, the term "eligible receivable" shall be deemed
not to include this clause;
(v) which, (A) arises pursuant to a Contract with respect
to which the applicable Seller has performed all
obligations required to be performed by it
thereunder, including without limitation shipment of
the merchandise and/or the performance of the
services purchased thereunder; (B) has been billed;
and (C) according to the Contract related thereto, is
required to be paid in full within sixty (60) days of
the original invoice date therefor;
(vi) which is an "eligible asset" as defined in Rule 3a-7
under the Investment Company Act of 1940, as amended;
(vii) a purchase of which with the proceeds of Commercial
Paper would constitute a "current transaction" within
the meaning of Section 3(a)(3) of the Securities Act
of 1933, as amended;
(viii) which is an "account" or "chattel paper" and is not
evidenced by instruments within the meaning of
Article 9 of the UCC of all applicable jurisdictions;
(ix) which is denominated and payable only in United
States dollars in the United States;
(x) which, arises under a Contract that together with
such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation
of the related Obligor enforceable against such
Obligor in accordance with its terms and is not
subject to any litigation, dispute, offset,
counterclaim or other defense (other than the
bankruptcy of the Obligor) known to the applicable
Seller;
(xi) which, together with the Contract related thereto,
does not contravene in any material respect any laws,
rules or regulations applicable thereto (including,
without limitation, laws, rules and regulations
relating to truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair
debt collection practices and privacy) and with
respect to which no part of the Contract related
thereto is in violation of any such law, rule or
regulation in any material respect;
-2-
<PAGE>
(xii) which (A) satisfies all applicable requirements of
the applicable Credit and Collection Policy, and (B)
is assignable without the consent of the Obligor
thereunder;
(xiii) which was generated in the ordinary course of the
applicable Seller's business;
(xiv) the Obligor of which has been directed to make all
payments to a specified Lock-Box Account;
(xv) the assignment of which under this Agreement by the
applicable Seller to the Purchaser does not violate,
conflict or contravene any applicable laws, rules,
regulations, orders or writs or any contractual or
other restriction, limitation or encumbrance in any
material respect;
(xvi) except as permitted by Section 6.2 of the Transfer
Agreement, which has not been compromised, adjusted
or modified (including by the extension of time for
payment or the granting of any discounts, allowances
or credits); provided, however, that only such
portion of such Receivable that is the subject of
such compromise, adjustment or modification shall be
deemed to be ineligible pursuant to the terms of this
clause (xvi); and
(xvii) which is not a Receivable originated by the
Cincinnati Machine Division of IAS until such time as
the Purchaser shall have notified IAS that this
clause is no longer effective.
"PURCHASE PERCENTAGE" shall mean for any day the fair market
value discount rate as mutually agreed between the Purchaser and the Seller for
each month during the term hereof (the application of such rate to result in a
Purchase Price which constitutes fair consideration and approximate fair market
value for the Receivables and related property then conveyed hereunder
reasonably approximate to an arms length transaction between unaffiliated
parties as determined by the Purchaser and the Seller) or, in the absence of
such agreement for such month, the quotient (expressed as a percentage) of (a)
one DIVIDED by (b) the sum of (i) one, plus (ii) the product of (A) the prime
rate (as announced by NationsBank, N.A.) on such date and (B) a fraction, the
numerator of which is the average scheduled number of days to maturity for such
Receivables pursuant to the related Contracts, and the denominator of which is
365.
"PURCHASE DATE" means each day on which either of the Sellers
sells and Purchaser purchases any Receivables hereunder.
"PURCHASE PRICE" shall have the meaning set forth in Section
3.1 hereof.
"PURCHASER" means UNOVA, Inc., a Delaware corporation, and its
successors and assigns.
-3-
<PAGE>
"RECEIVABLE" means the indebtedness, obligation or liability
owed to a Seller by any Obligor under a Contract, whether constituting an
account, chattel paper, instrument, investment property or general intangible,
arising in connection with the sale or lease of merchandise or the rendering of
services by the applicable Seller and includes the right to payment of any
Finance Charges and other obligations of such Obligor with respect thereto;
provided, however, that only Receivables of IAS which are generated from the
divisions listed on Annex I, attached hereto (as such Annex may be modified from
time to time), shall be included within the scope of this Agreement and all
other receivables generated from other divisions of IAS are excluded hereunder).
Notwithstanding the foregoing, once a Receivable has been repurchased pursuant
to Section 6.1 hereof, it shall no longer constitute a Receivable hereunder.
"RELATED SECURITY" means with respect to any Receivable, all
of the applicable Seller's rights, title and interest in, to and under:
(i) the merchandise (including returned or repossessed
merchandise), if any, the sale of which by a Seller
gave rise to such Receivable;
(ii) all other security interests or liens and property
subject thereto from time to time, if any, purporting
to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable
or otherwise, together with all financing statements
signed by an Obligor describing any collateral
securing such Receivable;
(iii) all guarantees, indemnities, warranties, insurance
(and proceeds and premium refunds thereof) or other
agreements or arrangements of any kind from time to
time supporting or securing payment of such
Receivable whether pursuant to the Contract related
to such Receivable or otherwise;
(iv) all Records related to such Receivable;
(v) all Lock-Box Accounts and Lock-Box Agreements; and
(vi) all Proceeds of any of the foregoing.
"RELEVANT UCC" shall mean the Uniform Commercial Code as in
effect in the States of New York, California, Michigan and Washington.
"SELLER" shall mean either of IAS or Intermec, its successors
and assigns.
"SUBORDINATED NOTE" shall have the meaning specified in
Section 3.2(a).
"TRANSFER AGREEMENT" shall mean the Transfer and
Administration Agreement, dated as of June 18, 1999, by and among the Purchaser,
KCH Funding, L.L.C., Enterprise Funding Corporation and Nationsbank, N.A., as
such agreement may be amended, modified or supplemented from time to time.
-4-
<PAGE>
Section 1.2. OTHER TERMS.
All accounting terms not specifically defined herein shall be
construed in accordance with generally accepted accounting principles. All terms
used in Article 9 of the Relevant UCC, and not specifically defined herein, are
used herein as defined in such Article 9.
Section 1.3. COMPUTATION OF TIME PERIODS. Unless otherwise stated in
this Agreement, in the computation of a period of time from a specified date to
a later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding."
ARTICLE II.
PURCHASE, CONVEYANCE AND SERVICING OF RECEIVABLES
Section 2.1. SALE.
(a) Upon the terms and subject to the conditions set forth
herein, each of the Sellers hereby agrees to sell, convey, transfer and assign
to the Purchaser, and the Purchaser hereby agrees to purchase and accept such
conveyance, transfer and assignment from each of the Sellers, on the terms and
subject to the conditions specifically set forth herein, of all of the
applicable Sellers right, title and interest, whether now owned or hereafter
acquired, in, to and under certain Receivables and the Related Security,
Collections and proceeds relating thereto, provided that the Termination Date
has not occurred. Any such foregoing sale, assignment, transfer and conveyance
does not constitute an assumption by the Purchaser of any obligations of the
applicable Seller or any other Person to Obligors or to any other Person in
connection with such Receivables and the Related Security, Collections and
proceeds relating thereto or other agreement and instrument relating thereto. In
evidence of such sale, the parties hereto shall execute a certificate of sale in
the form of Exhibit C annexed hereto.
(b) In connection with any such foregoing sale, each of the
Sellers agrees to record and file on, prior to or contemporaneously with the
Closing Date, at its own expense, a financing statement or statements with
respect to the Receivables and the other property described in Section 2.1(a)
sold and to be sold by the applicable Seller hereunder meeting the requirements
of applicable state law in such manner and in such jurisdictions as are
necessary to perfect and protect the interests of the Purchaser created hereby
under the Relevant UCC (subject, in the case of Related Security constituting
returned inventory, to the applicable provisions of Section 9-306 of the
Relevant UCC) against all creditors of and purchasers from the applicable
Seller, and to deliver either the originals of such financing statements or a
file-stamped copy of such financing statements or other evidence of such filings
to the Purchaser on the Closing Date.
(c) Each of the Sellers agrees that from time to time, at its
expense, it will promptly execute and deliver all instruments and documents and
take all actions as may be necessary or as the Purchaser may reasonably request
in order to perfect or protect the interest of the Purchaser in the Receivables
and other property purchased hereunder or to enable the Purchaser to exercise or
enforce any of its rights hereunder. Without limiting the foregoing, the
-5-
<PAGE>
applicable Seller will, in order to accurately reflect any purchase and sale
transaction, execute and file such financing or continuation statements or
amendments thereto or assignments thereof (as permitted pursuant hereto) as
may be reasonably requested by the Purchaser, and upon the request of the
Purchaser, mark its month-end aged trial balance computerized records with a
legend describing the purchase by the Purchaser of Receivables and the
subsequent transfer thereof to KCH and the further subsequent transfer to the
Company pursuant to the Transfer Agreement and stating "An interest in these
accounts receivable has been conveyed to the Company pursuant to a Transfer
and Administration Agreement dated as of June 18, 1999." The applicable
Seller shall, upon the reasonable request of the Purchaser, obtain such
additional search reports as the Purchaser shall request. To the fullest
extent permitted by applicable law, the Purchaser shall be permitted to sign
and file continuation statements and amendments thereto and assignments
thereof without the applicable Seller's signature. Carbon, photographic or
other reproduction of this Agreement or any financing statement shall be
sufficient as a financing statement.
(d) It is the express intent of each of the Sellers and the
Purchaser that the transactions contemplated hereby shall be a purchase by the
Purchaser and a sale by the applicable Seller of Receivables and any conveyance
of Receivables by such Seller to the Purchaser pursuant to this Agreement be
construed as a sale of such Receivables by such Seller to the Purchaser.
Further, it is not the intention of each of the Sellers and the Purchaser that
such conveyance be deemed a grant of a security interest in any Receivables by
the applicable Seller to the Purchaser to secure a debt or other obligation of
such Seller. However, in case that, notwithstanding the intent of the parties,
any Receivables conveyed hereunder are construed to constitute property of the
applicable Seller, then (i) this Agreement also shall be deemed to be, and
hereby is, a security agreement within the meaning of the Relevant UCC; and (ii)
the conveyance by such Seller provided for in this Agreement shall be deemed to
be, and such Seller hereby grants to the Purchaser, a security interest in, to
and under all of such Seller's right, title and interest in, to and under all
Receivables conveyed by such Seller to the Purchaser, to secure the rights of
the Purchaser set forth in this Agreement or as may be determined in connection
therewith by applicable law. Each of the Sellers and the Purchaser shall, to the
extent consistent with this Agreement, take such actions as may be necessary to
ensure that, if this Agreement were deemed to create a security interest in, and
not a sale of, Receivables, such security interest would be deemed to be a
perfected security interest in favor of the Purchaser under applicable law and
will be maintained as such throughout the term of this Agreement.
ARTICLE III.
CONSIDERATION AND PAYMENT; RECEIVABLES
Section 3.1. PURCHASE PRICE.
(a) The purchase price for any Receivable and related property
conveyed, transferred and assigned to the Purchaser by the applicable Seller
under this Agreement shall be a dollar amount equal to the product of (i) the
aggregate outstanding balance of the Receivables sold pursuant to such
conveyance, and (ii) the Purchase Percentage at such time (the "PURCHASE
PRICE").
-6-
<PAGE>
Section 3.2. PAYMENT OF PURCHASE PRICE.
(a) The Purchase Price for any Receivables and related
property conveyed hereunder shall be paid in the following manner: (i) by
payment of cash in immediately available funds, or (ii) by means of an advance
under the Subordinated Note (each such advance and any other advance under the
Subordinated Note, an "ADVANCE") or (iii) any combination of the foregoing. All
Advances made by the applicable Seller to Purchaser shall be evidenced by a
single subordinated note, duly executed on behalf of Purchaser, in substantially
the form of Exhibit A annexed hereto, delivered and payable to each such Seller
(the "SUBORDINATED NOTE"). Each of the Sellers is hereby authorized by the
Purchaser to endorse on the applicable schedule attached to the Subordinated
Note (or a continuation of such schedule attached thereto and made a part
thereof) an appropriate notation evidencing the date and amount of each Advance,
as well as the date and amount of each payment with respect thereto; PROVIDED,
HOWEVER, that the failure of any Person to make such a notation shall not affect
any obligations of Purchaser thereunder. Any such notation shall be conclusive
and binding as to the date and amount of such Advance, or payment of principal
or interest thereon, absent manifest error.
(b) The terms and conditions of the Subordinated Note and all
Advances thereunder shall be as follows:
(i) REPAYMENT OF ADVANCES. Advances shall be repaid
on such dates as mutually agreed to by Purchaser and the
applicable Seller. All amounts paid by the Purchaser with
respect to the Advances shall be allocated first to the
repayment of accrued interest until all such interest is paid,
and then to the outstanding principal amount of the Advances.
Subject to the provisions of this Agreement, the Purchaser may
borrow, repay and reborrow Advances on and after the date
hereof and prior to the termination of this Agreement, subject
to the terms, provisions and limitations set forth herein.
(ii) INTEREST. The Subordinated Note shall bear
interest from its date on the outstanding principal balance
thereof at a rate per annum equal to then Eurodollar Rate.
Interest on each Advance shall be computed based on the number
of days elapsed in a year of 360 days.
(iii) SUBORDINATION. The Subordinated Note shall be
fully subordinated to any rights of the Company, the Bank
Investors and their permitted assigns pursuant to the Transfer
Agreement, and shall not evidence any rights in the
Receivables.
(iv) OFFSETS, ETC. The Purchaser may offset any
amount due and owing by the applicable Seller against any
amount due and owing by Purchaser to such Seller under the
terms of the Subordinated Note.
Section 3.3. MONTHLY REPORT. Prior to the fifteenth (15th) Business Day
of each fiscal month, each of the Sellers shall prepare or cause to be prepared
and forward to the Purchaser (i) an Investor Report as of the end of the last
day of the immediately preceding fiscal month, (ii) if
-7-
<PAGE>
requested by the Purchaser, a listing by Obligor of all Receivables of the
applicable Seller together with an aging of such Receivables and (iii) such
other information pertaining to the Receivables or the transactions hereunder
as the Purchaser may reasonably request.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
Section 4.1. SELLERS REPRESENTATIONS AND WARRANTIES. On the Closing
Date and on each Purchase Date, each Seller represents and warrants to the
Purchaser that:
(a) CORPORATE EXISTENCE AND POWER. Each of the Sellers is a
corporation duly incorporated, validly existing and in good standing under the
laws of the state of its incorporation and has all corporate power and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business in each jurisdiction in which its business is now
conducted and each such Seller is duly qualified to do business in, and is in
good standing in, every other jurisdiction in which the nature of its business
requires it to be so qualified, except where the failure to have such items or
to be so qualified or in good standing would not have a material adverse effect
on the ability of such Seller to perform its obligations hereunder.
(b) CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION.
The execution, delivery and performance by each of the Sellers of this Agreement
is within its corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
Official Body or official thereof (except as contemplated hereby, by the
Receivables Purchase Agreement or by the Transfer Agreement), and do not
contravene, or constitute a default under, any provision of applicable law, rule
or regulation or of the certificate of incorporation of such Seller or of any
agreement, judgment, injunction, order, writ, decree or other instrument binding
upon the Seller or result in the creation or imposition of any Adverse Claim on
the assets of any Seller except where the same would not constitute a Material
Adverse Effect.
(c) BINDING EFFECT. This Agreement has been duly executed and
delivered and constitutes the legal, valid and binding obligation of each of the
Sellers, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other similar laws affecting
the rights of creditors generally.
(d) PERFECTION OF SALE. Immediately preceding each sale
hereunder, each of the Sellers shall be the legal and beneficial owner of all of
the Receivables and the Related Security and Collections to be sold hereunder,
free and clear of all Adverse Claims. On or prior to each sale hereunder, all
financing statements and other documents required to be recorded or filed under
the UCC in order to perfect and protect the interest of the Purchaser in the
Receivables against all creditors of and purchasers from the applicable Seller
will have been duly filed in each filing office necessary for such purpose and
all filing fees and taxes, if any, payable in connection with such filings shall
have been paid in full.
(e) ACCURACY OF INFORMATION. All information heretofore
furnished by any Seller (including without limitation, the Investor Reports, any
reports delivered pursuant to
-8-
<PAGE>
Section 2.10 of the Transfer Agreement and the Sellers' financial statements)
for purposes of or in connection with this Agreement or any transaction
contemplated hereby is, and all such information hereafter furnished by each
Seller to the Purchaser or to any party pursuant to the Transfer Agreement
will be complete and accurate in every material respect, and the applicable
Seller has not omitted to disclose any information as of such date which is
material to the transaction on the date such information is stated or
certified, unless corrected by such Seller promptly after becoming aware of
such inaccuracy.
(f) TAX STATUS. Each of the Sellers has filed all material tax
returns (federal, state and local) required to be filed and has paid or made
adequate provision for the payment of all taxes and assessments due pursuant to
such returns or pursuant to any assessment received in respect thereof, and
other governmental charges payable by it.
(g) ACTION, SUITS. There are no actions, suits or proceedings
pending, or to the knowledge of any Seller threatened, against or affecting such
Seller or its respective properties, in or before any court, arbitrator or other
body which could reasonably be expected to have a material adverse effect on the
ability of the Seller to perform its obligations hereunder; each of the Sellers
is not in violation of any material order of any court, arbitrator or Official
Body.
(h) USE OF PROCEEDS. No proceeds of any sale hereunder will be
used by any Seller to acquire any security in any transaction which is subject
to Section 12 of the Securities Exchange Act of 1934, as amended or for any
purpose that violates any applicable law, rule or regulation, including
Regulation U of the Federal Reserve Board.
(i) PLACE OF BUSINESS. The principal place of business and
chief executive office (as such terms are defined in the UCC) of each of the
Sellers are located at the address of the Seller indicated in Section 9.3 hereof
and the offices where each Seller keeps all its Records relating to the
Receivables, are located at the address(es) described on Exhibit B annexed
hereto or such other locations notified to the Purchaser in accordance with
Section 5.1 hereof in jurisdictions where all action required by Section 2.1
hereof has been taken and completed.
(j) GOOD TITLE. Upon each sale, the Purchaser shall acquire a
valid ownership interest in each Receivable that exists on the date of such sale
and in the Related Security and Collections with respect thereto free and clear
of any Adverse Claim.
(k) AMOUNT OF RECEIVABLES. As of May 31, 1999, the aggregate
outstanding balance of the Receivables of the Sellers was $207,588,629, and the
Net Receivable Balance was $132,323,430.
(l) LOCK-BOX ACCOUNTS. The names and addresses of all the
Lock-Box Banks, together with the account numbers of the Lock-Box Accounts at
such Lock-Box Banks, are specified in Exhibit C to the Transfer Agreement (or at
such other Lock-Box Banks and/or with such other Lock-Box Accounts as have been
notified to the Servicer and for which Lock-Box Agreements will be executed and
delivered to the Servicer within 60 days thereof). All Obligors have been
instructed to make payment to a Lock-Box Account and only Collections are
deposited
-9-
<PAGE>
into the Lock-Box Accounts unless any non-Collections are removed within two
(2) Business Days.
(m) BULK SALES. No transaction contemplated hereby requires
compliance with any bulk sales act or similar law.
(n) PREFERENCE; VOIDABILITY. The Purchaser has given
reasonably equivalent value to the applicable Seller in consideration for the
transfer to the Purchaser of the Receivables and Related Security by the
applicable Seller, and each such transfer has not been made for or on account of
an antecedent debt owed by the applicable Seller to the Purchaser.
Section 4.2. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES BY THE
APPLICABLE SELLER; NOTICE OF BREACH. On each date that Receivables are conveyed
hereunder by any Seller by accepting the proceeds of such conveyance, such
Seller shall be deemed to have certified that all representations and warranties
described in Section 4.1 are true and correct on and as of such day as though
made on and as of such day. The representations and warranties set forth in
Section 4.1 shall survive the conveyance of Receivables to the Purchaser, and
termination of the rights and obligations of the Purchaser and the applicable
Seller under this Agreement. Upon discovery by the Purchaser or the applicable
Seller of a breach of any of the foregoing representations and warranties, the
party discovering such breach shall give prompt written notice to the other
within three Business Days of such discovery.
ARTICLE V.
COVENANTS OF THE SELLER
Section 5.1. AFFIRMATIVE COVENANTS OF THE SELLER. At all times from the
date hereof to the Purchase Termination Date:
(a) CONDUCT OF BUSINESS. Each of the Sellers will do all
things necessary to remain duly incorporated, validly existing and in good
standing as a domestic corporation in its jurisdiction of incorporation and
maintain all requisite authority to conduct its business in each jurisdiction in
which its business is conducted except where the failure to do so would not have
a material adverse effect on the ability of the applicable Seller to perform
their respective obligations hereunder.
(b) COMPLIANCE WITH LAWS. Each of the Sellers will comply with
all laws, rules, regulations, orders, writs, judgments, injunctions, decrees or
awards to which it or its respective properties may be subject, except where the
failure to do so would not have a material adverse effect on the ability of such
Seller to perform its respective obligations hereunder.
(c) FURNISHING OF INFORMATION AND INSPECTION OF RECORDS. Each
of the Sellers will furnish to the Purchaser from time to time such information
with respect to the Receivables as the Purchaser may reasonably request,
including, without limitation, listings identifying the Obligor and the
outstanding balance for each Receivable. Each of the Sellers will at any time
and from time to time during regular business hours permit, upon reasonable
notice, the Purchaser, or its agents or representatives, (i) to examine and make
copies of and take abstracts from all
-10-
<PAGE>
Records and (ii) to visit the offices and properties of the applicable
Seller, for the purpose of examining such Records, and to discuss matters
relating to Receivables or the applicable Seller's performance under this
Agreement with any of the officers, directors, employees or independent
public accountants of the applicable Seller having knowledge of such matters.
(d) OFFICES, RECORDS AND BOOKS OF ACCOUNT. Each of the Sellers
will (i) keep its principal place of business and chief executive office (as
such terms or similar terms are used in the UCC) and the office where it keeps
its records concerning the Receivables at the addresses set forth in Section 9.3
hereof or at any other locations in jurisdictions where all actions reasonably
requested by the Purchaser to protect and perfect the interest of the Purchaser
in the Receivables and the Related Collateral have been taken and completed and
(ii) shall provide the Purchaser with at least 30 days' written notice before
making any change in its name or making any other change in its identity or
corporate structure that could render any UCC financing statement filed in
connection herewith or with the Transfer Agreement seriously misleading as such
term (or similar term) is used in the Relevant UCC; each notice to the Purchaser
pursuant to this sentence shall set forth the applicable change and the
effective date thereof. Each of the Sellers will maintain and implement (or
cause to be maintained and implemented) administrative and operating procedures
(including, without limitation, an ability to recreate records evidencing
Receivables in the event of the destruction of the originals thereof), and keep
and maintain (or cause to be maintained and implemented), all documents, books,
records and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records adequate
to permit the daily identification of each new Receivable and all Collections of
and adjustments to each existing Receivable in accordance with its Credit and
Collection Policy). Each of the Sellers will give notice to the Purchaser of any
material change in the administrative and operating procedures of the applicable
Seller referred to in the previous sentence.
(e) PERFORMANCE AND COMPLIANCE WITH RECEIVABLES AND CONTRACTS.
Each of the Sellers will timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by the
applicable Seller under the Contracts related to the Receivables.
(f) CREDIT AND COLLECTION POLICIES. Each of the Sellers will
comply in all material respects with the relevant Credit and Collection Policy
in regard to each Receivable and the related Contract.
(g) COLLECTIONS. Each of the Sellers will instruct all
Obligors, or cause all Obligors to be instructed, to cause all Collections to be
deposited directly to a Lock-Box Account.
(h) COLLECTIONS RECEIVED. Each of the Sellers will hold in
trust, and deposit, immediately, but in any event not later than two (2)
Business Days of its receipt thereof, to a Lock-Box Account all Collections
received from time to time by the Seller; provided that the applicable Seller
may initially deposit checks consisting of Collections which it receives into
its operating account if such operating account is swept daily or within two (2)
Business Days such
-11-
<PAGE>
Collections are transferred to a Lock-Box Account and the aggregate amount of
such Collections in all such operating accounts does not exceed at any one
time $10,000,000.
(i) SALE TREATMENT. Each of the Sellers will treat this
conveyance for all purposes as a sale and to the extent any such reporting is
required, will report the transactions contemplated by this Agreement on all
relevant books, records, financial statements and other applicable documents as
a sale of Receivables to the Purchaser.
(j) YEAR 2000 COMPLIANCE. Each of the Sellers will promptly
notify the Purchaser in the event the Seller discovers or determines that any
Receivables System (including those of its suppliers and vendors) (i) that is
necessary for the origination, collection, management, or servicing of the
Receivables will not be Year 2000 Compliant on or before September 30, 1999 and
thereafter, or (ii) that is otherwise material to its business and operations
will not be Year 2000 Compliant on a timely basis, except to the extent that, in
the case of (ii) above, such failure could not reasonably be expected (a) to
have a Material Adverse Effect, or (b) to result in a Purchase Termination Date.
(k) OWNERSHIP INTEREST, ETC. Each of the Sellers will, at its
expense, take all action necessary or desirable to establish and maintain a
valid and enforceable ownership interest in the Receivables and the Related
Security, free and clear of any Adverse Claim, in favor of the Purchaser, KCH or
the Agent, as applicable, including taking such action to perfect, protect or
more fully evidence the interest of the Purchaser, as the Purchaser may
reasonably request.
Section 5.2. NEGATIVE COVENANTS OF THE SELLER. At all times from the
date hereof to the Purchase Termination Date:
(a) NO SALES, LIENS, ETC. Except as otherwise provided herein,
in the Receivables Purchase Agreement or in the Transfer Agreement, each of the
Sellers will not sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist any Adverse Claim upon (or the filing
of any financing statement) or with respect to (x) any of the Receivables sold
hereunder and the Related Security, or (y) any account which concentrates in a
Lock-Box Bank to which the Collections of Receivables sold hereunder and the
Related Security are sent, or assign any right to receive income in respect
thereof.
(b) NO EXTENSION OR AMENDMENT OF RECEIVABLES. Each of the
Sellers will not extend, amend or otherwise modify the terms of any Receivable,
or amend, modify or waive terms or conditions of Contract related thereto which
extension, amendment or modification would materially adversely affect the
collectibility thereof.
(c) NO CHANGE IN CREDIT AND COLLECTION POLICY. Each of the
Sellers will not make any change in its Credit and Collection Policy, which
change would, in either case, impair the collectibility of any material portion
of the Receivables or otherwise have a material adverse effect on the ability of
the applicable Seller to perform its obligations hereunder.
(d) CHANGE IN PAYMENT INSTRUCTIONS TO OBLIGORS. Each of the
Sellers will not add or terminate any bank as a Lock-Box Bank or any account as
a Lock-Box Account to or
-12-
<PAGE>
from those listed in Exhibit C to the Transfer Agreement or make any change
in its instructions to Obligors regarding payments to be made to any Lock-Box
Account, unless (i) such instructions are to deposit such payments to another
existing Lock-Box Account or (ii) the Agent shall have received written
notice of such addition, termination or change at least 30 days prior thereto
and the Agent shall have received a Lock-Box Agreement executed by each new
Lock-Box Bank or an existing Lock-Box Bank with respect to each new Lock-Box
Account, as applicable.
(e) DEPOSITS TO LOCK-BOX ACCOUNTS. Each of the Sellers will
not deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box Account cash or cash proceeds other than Collections
of Receivables unless such other cash and proceeds are removed from such
Lock-Box Account within two (2) Business Days.
(f) CHANGE OF NAME, ETC. Each of the Sellers will not change
its name, identity or structure or the location of its chief executive office,
unless at least ten (10) days prior to the effective date of any such change the
applicable Seller delivers to the Purchaser (i) such documents, instruments or
agreements, executed by the applicable Seller as are necessary to reflect such
change and to continue the perfection of the Purchaser's ownership interests in
the Affected Assets and (ii) new or revised Lock-Box Agreements executed by the
Lock-Box Banks which reflect such change and enable the Agent to continue to
exercise its rights contained in Section 2.7 of the Transfer Agreement.
(g) AMENDMENTS TO LOCK-BOX AGREEMENTS. Each of the Sellers
will not amend, modify, or supplement any Lock-Box Agreement once effective or
waive any provision thereof, in each case except with the prior written consent
of the Agent; nor shall the Seller take any other action under any Lock-Box
Agreement that could have a material adverse effect on the Agent, the Company or
any Bank Investor or which is inconsistent with the terms of the Transfer
Agreement.
ARTICLE VI.
REPURCHASE OBLIGATION; DEEMED COLLECTIONS; INDEMNITIES
Section 6.1. MANDATORY REPURCHASE. (a)If on any day the outstanding
balance of a Receivable conveyed hereunder and included at any time as an
Eligible Receivable on an Investor Report is either (x) reduced as a result of
any defective, rejected or returned merchandise or services, any discount,
credit, dispute, warranty claim, repossessed or returned goods, charge-back,
allowance, any billing adjustment, similar dilutive factor or other similar
adjustment or (y) reduced or canceled as a result of a setoff or offset in
respect of any claim by any Person against the applicable Seller (whether such
claim arises out of the same or a related transaction or an unrelated
transaction), the applicable Seller shall be deemed to have received on such day
a Collection of such Receivable in the amount of such reduction or cancellation
and such Seller shall pay to the Purchaser an amount equal to such reduction or
cancellation.
(b) If on any day any representation or warranty of either
Seller in this Agreement was or becomes untrue with respect to a Receivable
(whether on or after the date of any transfer of such Receivable to the
Purchaser), such Seller shall be deemed to have received on
-13-
<PAGE>
such day a Collection of such Receivable in full and shall on such day pay to
the Purchaser an amount equal to the outstanding balance of such Receivable.
(c) Any payment by an Obligor in respect of any indebtedness,
obligation or liability owed by it to the applicable Seller shall, except as
otherwise specified by such Obligor or otherwise required by contract or law be
applied as a Collection of any Receivable of such Obligor included in the
Receivables transferred hereunder (starting with the oldest such Receivable) to
the extent of any amounts then due and payable thereunder before being applied
to any other receivable or other indebtedness of such Obligor to such Seller.
Section 6.2. INDEMNIFICATION. Each of the Sellers agrees to indemnify,
defend and hold the Purchaser harmless from and against any and all losses,
liabilities, damages, judgments, claims, deficiencies, or expenses (including
interest, penalties, reasonable attorneys' fees and amounts paid in settlement)
("Indemnified Amounts") to which the Purchaser or any assignee thereof may
become subject insofar as any such Indemnified Amount arises out of or is based
upon a breach by the applicable Seller of its representations, warranties and
covenants contained herein, or any information certified in any schedule or
certificate delivered by such Seller hereunder, being untrue in any material
respect at any time; excluding, however, Indemnified Amounts resulting from (i)
recourse for uncollectible Receivables and Related Security or (ii) the gross
negligence or willful misconduct on the part of Purchaser or such assignee. The
obligations of each of the Sellers under this Section 6.2 shall be considered to
have been relied upon by the Purchaser, the Company and the Bank Investors and
shall survive the execution, delivery, performance and termination of this
Agreement, regardless of any investigation made by the Purchaser, the Company,
any Bank Investor or on behalf of any of them.
Section 6.3. NO RECOURSE. Except as otherwise provided in this Article
VI, the purchase and sale of Receivables under this Agreement shall be without
recourse to the applicable Seller.
ARTICLE VII.
CONDITIONS PRECEDENT
Section 7.1. CONDITIONS TO THE PURCHASER'S OBLIGATIONS REGARDING
RECEIVABLES. The obligations of the Purchaser to purchase any Receivables on any
sale date (except clause (e), which shall apply only on the initial sale date)
shall be subject to the satisfaction of the following conditions:
(a) All representations and warranties of each of the Sellers
contained in this Agreement shall be true and correct in all material respects
on each sale date with the same effect as though such representations and
warranties had been made on such date;
(b) All information concerning such Receivables provided to
the Purchaser shall be true and correct in all material respects as of any sale
date;
(c) Each of the Sellers shall have substantially performed all
other obligations required to be performed by the provisions of this Agreement;
-14-
<PAGE>
(d) Each of the Sellers shall have delivered or filed or
caused to be delivered or filed the financing statement(s) required to be filed
pursuant to Section 2.1(b); and
(e) All corporate and legal proceedings and all instruments in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Purchaser, and the Purchaser shall
have received from each of the Sellers copies of all documents (including,
without limitation, records of corporate proceedings) relevant to the
transactions herein contemplated as the Purchaser may reasonably have requested.
ARTICLE VIII.
TERM AND TERMINATION
Section 8.1. TERM. This Agreement shall commence as of the date of
execution and delivery hereof and shall continue in full force and effect until
the date following the earlier of (i) the date designated by the Purchaser or
the applicable Seller as the termination date at any time following sixty (60)
day's written notice to the other parties (with a copy thereof to the Agent),
(ii) the date on which the Termination Date occurs or is declared pursuant to
Section 7.2 of the Transfer Agreement, (iii) the day on which the Investment
Termination Date shall occur under the Transfer Agreement unless the Transferred
Interest shall have been assigned (or concurrently is so assigned) to the Bank
Investors under Section 9.9 of the Transfer Agreement, (iv) upon the occurrence
of an Event of Bankruptcy with respect to either the Purchaser or the applicable
Seller, or (v) the date on which either the Purchaser or the applicable Seller
becomes unable for any reason to purchase or re-purchase any Receivable in
accordance with the provisions of this Agreement or defaults on its material
obligations hereunder, which inability to purchase or default continues
unremedied for more than thirty (30) days after written notice by the other
party hereto (any such date being a "PURCHASE TERMINATION DATE"); PROVIDED,
HOWEVER, that the occurrence of the Purchase Termination Date pursuant to this
Section 8.1 hereof shall not discharge any Person from any obligations incurred
prior to the Purchase Termination Date, including, without limitation, any
obligations to make any payments with respect to the interest of the Purchaser
in any Receivable sold prior to the Purchase Termination Date.
Section 8.2. EFFECT OF PURCHASE TERMINATION DATE. Following the
occurrence of the Purchase Termination Date pursuant to Section 8.1 hereof, the
Sellers shall not sell, and the Purchaser shall not purchase, any Receivables.
No termination or rejection or failure to assume the executory obligations of
this Agreement in any Event of Bankruptcy with respect to the applicable Seller
or the Purchaser shall be deemed to impair or affect the obligations pertaining
to any executed sale or executed obligations, including, without limitation,
pre-termination breaches of representations and warranties by such Seller or the
Purchaser. Without limiting the foregoing, prior to the Purchase Termination
Date, the failure of the applicable Seller to deliver computer records of any
Receivables or any reports regarding any Receivables shall not render such
transfer or obligation executory, nor shall the continued duties of the parties
pursuant to Article V or Section 9.1 of this Agreement render an executed sale
executory.
-15-
<PAGE>
ARTICLE IX.
MISCELLANEOUS PROVISIONS
Section 9.1. AMENDMENT. This Agreement and the rights and obligations
of the parties hereunder may not be changed orally, but only by an instrument in
writing signed by the Purchaser and the Sellers and consented to in writing by
the Agent. Any reconveyance executed in accordance with the provisions hereof
shall not be considered amendments to this Agreement.
Section 9.2. GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(b) The parties hereto hereby submit to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York state court sitting in The City of New York for
purposes of all legal proceedings arising out of or relating to this Agreement
or the transactions contemplated hereby. Each party hereto hereby irrevocably
waives, to the fullest extent it may effectively do so, any objection which it
may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such a
court has been brought in an inconvenient forum. Nothing in this Section 9.2
shall affect the right of the Purchaser to bring any other action or proceeding
against the applicable Seller or its property in the courts of other
jurisdictions.
Section 9.3. NOTICES. Except as provided below, all communications and
notices provided for hereunder shall be in writing (including telecopy or
electronic facsimile transmission or similar writing) and shall be given to the
other party at its address or telecopy number set forth below or at such other
address or telecopy number as such party may hereafter specify for the purposes
of notice to such party. Each such notice or other communication shall be
effective (i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section 9.3 and confirmation is received, (ii)
if given by mail 3 Business Days following such posting, postage prepaid, U.S.
certified or registered, (iii) if given by overnight courier, one (1) Business
Day after deposit thereof with a national overnight courier service, or (iv) if
given by any other means, when received at the address specified in this Section
9.3.
(a) in the case of the Purchaser:
UNOVA, Inc.
21900 Burbank Boulevard
Woodland Hills, CA 91367-7418
Attention: Treasurer
Telephone: (818) 992-2880
Telecopy: (818) 992-2627
with a copy to:
NationsBank, N.A.
NationsBank Corporate Center
100 North Tryon Street
NC1-007-10-07
Charlotte, NC 28255
Attention: Michelle M. Heath
-16-
<PAGE>
Asset Backed Securitization Group
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
(b) in the case of the Sellers:
UNOVA, Industrial Automation Systems, Inc.
5663 East Nine Mile Road
Warren, MI 48091
Attention: Treasurer
Telephone: (810) 497-6000
Telecopy: (810) 497-6082
Intermec Technologies Corp.
6001 36th Avenue West
P.O. Box 4280
Everett, WA 98203
Attention: Treasurer
Telephone: (425) 348-2600
Telecopy: (425) 385-9551
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party.
Section 9.4. SEVERABILITY OF PROVISIONS. If any one or more of the
covenants, agreements, provisions or terms of this 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 this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement.
Section 9.5. ASSIGNMENT. This Agreement may not be assigned by the
parties hereto, except that the Purchaser may assign its rights hereunder
pursuant to the Transfer Agreement to the Agent, for the benefit of the Company
and the Bank Investors, and that the Company may assign any or all of its rights
to any Liquidity Provider or to a Conduit Assignee.
Section 9.6. FURTHER ASSURANCES. The Purchaser and each of the Sellers
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 other party
more fully to effect the purposes of this Agreement, including, without
limitation, the execution of any financing statements or continuation statements
or equivalent documents relating to the Receivables conveyed hereunder for
filing under the provisions of the Relevant UCC or other laws of any applicable
jurisdiction.
-17-
<PAGE>
Section 9.7. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and
no delay in exercising, on the part of the Purchaser or the Sellers, 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 privilege provided by law.
Section 9.8. COUNTERPARTS. This Agreement may be executed in two or
more counterparts including telecopy transmission thereof (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 9.9. BINDING EFFECT; THIRD-PARTY BENEFICIARIES. This Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors and permitted assigns. The Agent, on behalf of the Company
and its assignees and the Bank Investors, and any Liquidity Provider is intended
by the parties hereto to be a third-party beneficiary of this Agreement.
Section 9.10. MERGER AND INTEGRATION. Except as specifically stated
otherwise herein, this 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. This Agreement may not be
modified, amended, waived or supplemented except as provided herein.
Section 9.11. HEADINGS. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
Section 9.12. EXHIBITS. The schedules and exhibits referred to herein
shall constitute a part of this Agreement and are incorporated into this
Agreement for all purposes.
-18-
<PAGE>
IN WITNESS WHEREOF, the Purchaser and the Seller each have
caused this Originator Receivables Purchase Agreement to be duly executed by
their respective officers as of the day and year first above written.
UNOVA INDUSTRIAL AUTOMATION
SYSTEMS, INC., as Seller
By: /s/ Elmer C. Hull, Jr.
----------------------------------
Name: Elmer C. Hull, Jr.
Title: Treasurer
INTERMEC TECHNOLOGIES
CORPORATION, as Seller
By: /s/ Elmer C. Hull, Jr.
----------------------------------
Name: Elmer C. Hull, Jr.
Title: Treasurer
UNOVA, INC. as Purchaser
By: /s/ Elmer C. Hull, Jr.
----------------------------------
Name: Elmer C. Hull, Jr.
Title: Treasurer
S-1
<PAGE>
EXHIBIT A
FORM OF SUBORDINATED NOTE
$________________ June __, 1999
FOR VALUE RECEIVED, the undersigned, UNOVA, INC., a Delaware
corporation (the "MAKER"), hereby promises to pay to the order of [UNOVA
Industrial Automation Systems, Inc.] [Intermec Technologies Corporation] (the
"PAYEE"), on the dates and as provided for in the Originator Receivables
Purchase Agreement dated as of the date hereof between the Maker and the Payee
(as such agreement may from time to time be amended, supplemented or otherwise
modified and in effect, the "ORIGINATOR RECEIVABLES PURCHASE AGREEMENT"), the
lesser of the principal sum of ________________Dollars ($____________) or the
aggregate unpaid principal amount of all Advances to the Maker from the Payee
pursuant to the terms of the Originator Receivables Purchase Agreement, in
lawful money of the United States of America in immediately available funds, and
to pay interest from the date thereof on the principal amount hereof from time
to time outstanding, in like funds, at the rate per annum set forth in the
Originator Receivables Purchase Agreement and shall be payable on the dates and
in the amounts set forth in the Originator Receivables Purchase Agreement.
The Maker hereby waives diligence, presentment, demand,
protest and notice of any kind whatsoever. The non-exercise by the holder hereof
of any of its rights hereunder in any particular instance shall not constitute a
waiver thereof in that or any subsequent instance.
All borrowings evidenced by this Subordinated Note and all
payments and prepayments of the principal hereof and interest hereon and the
respective dates thereof shall be endorsed by the holder hereof on the schedule
attached hereto and made a part hereof, or on a continuation thereof which shall
be attached hereto and made a part hereof, or otherwise recorded by such holder
in its internal records; PROVIDED, HOWEVER, that the failure of the holder
hereof to make such a notation or any error in such a notation shall not in any
manner affect the obligation of the Maker to make payments of principal and
interest in accordance with the terms of this Subordinated Note and the
Originator Receivables Purchase Agreement.
The Maker shall have the right to prepay and, subject to the
limitations set forth in the Originator Receivables Purchase Agreement, reborrow
Advances made to it without penalty or premium.
This Subordinated Note is the Subordinated Note referred to in
the Originator Receivables Purchase Agreement, which, among other things,
contains provisions for the subordination of this Subordinated Note to the
rights of certain parties under the Transfer Agreement, all upon the terms and
conditions therein specified.
S-1
<PAGE>
This Note shall be governed by, and construed in accordance
with, the laws of the State of New York.
UNOVA, INC.
By:
------------------------------
Name:
Title:
S-2
<PAGE>
Advances and Payments
<TABLE>
<CAPTION>
Amount of Payments Unpaid Principal Name of Person
Advance Principal/Interest Balance of Note Making Notation
- ---------- ------------------ ---------------- ---------------
<S> <C> <C> <C>
</TABLE>
S-3
<PAGE>
EXHIBIT B
Originator Subsidiaries' Principal Places of Business and
Location of Records
1. UNOVA Industrial Automation Systems, Inc.
5663 East Nine Mile Road
Warren, MI 48091 USA
Phone: (810) 497-6000
Fax: (810) 497-6082
Location of Records: Warren, MI; Cincinatti, OH
a) Lamb Technicon Machining Systems
5363 E. Nine Mile Road
Warren, MI 48091-2593
b) Lamb Technicon Body and Assembly Systems
5363 E. Nine Mile Road
Warren, MI 48091-2593
c) Cincinnati Machine
4701 Marburg Avenue
Cincinnati, OH 45209-1025
2. Intermec Technologies Corporation
6001 36th Avenue West
P.O. Box 4280
Everett, WA 98203-9280
Phone; (425) 348-2600
Fax: (425) 385-9551
Location of Records: Everett, WA; Cedar Rapids, IA; Fairfield, OH
In Cedar Rapids, IA
550 Second Street S.E.
Cedar Rapids, IA 52401
In Cincinnati, OH
9290 LeSaint Drive
Fairfield, OH 45014
S-4
<PAGE>
EXHIBIT C
Form of
CERTIFICATE OF SALE
Reference is made to the Originator Receivables Purchase
Agreement dated as of June __, 1999 (such agreement as amended, modified or
supplemented from time to time, the "AGREEMENT") among [Seller,] as seller (in
such capacity, the "Seller"), UNOVA, Inc., a Delaware corporation, as purchaser
(in such capacity, the "PURCHASER"). Terms defined in the Agreement are used
herein as therein defined.
The Seller hereby sells, conveys, transfers and assigns to the
Purchaser all of its right, interest and title in and to the Receivables and
Related Security, Collections and proceeds relating thereto existing as of the
date hereof and on each Purchase Date.
This Certificate of Sale is made without recourse except as
otherwise provided in the Agreement.
This Certificate of Sale shall be governed by, and construed
in accordance with, the laws of the State of New York, without giving effect to
the conflicts of law provisions thereof.
IN WITNESS WHEREOF, the undersigned has caused this
Certificate of Sale to be duly executed and delivered by its duly authorized
officer as of the date first above written.
[Seller]
By:
--------------------------------------
Name:
Title:
C-1
<PAGE>
EXHIBIT 10.11
AMENDMENT NO. 5
TO
EMPLOYMENT AGREEMENT
This Amendment No. 5, effective the 28th day of June, 1999, is made to
that certain Employment Agreement between Intermec Technologies Corporation and
Michael Ohanian, dated the 18th day of May, 1995 as amended (the "Agreement").
WHEREAS, the parties to the Agreement wish to modify the Agreement to
reflect the change in Michael Ohanian's title and duties associated with the
appointment of a new President of Intermec Technologies Corporation effective
June 28, 1999.
NOW THEREFORE, by mutual agreement of the parties, the Agreement is
hereby amended as follows:
1. TERM OF AGREEMENT:
Michael Ohanian hereby agrees to retire from Employment with Intermec
Technologies Corporation on December 31, 1999 and to resign as the President of
the Corporation on June 28, 1999.
2. TITLE AND DUTIES:
Effective June 28, 1999, Michael Ohanian will assume the title of
Special Assistant to the President of Intermec Technologies Corporation and
during the balance of the Employment Period through December 31, 1999 will
perform such duties as may be assigned to him by the President of the
Corporation or by the Chief Executive Officer of UNOVA, Inc.
3. OTHER TERMS AND CONDITIONS:
Except as modified herein all other terms and conditions of the
Agreement as amended by Amendments No. 1, 2, 3, and 4 shall remain in full force
and effect as originally written.
IN WITNESS WHEREOF, the parties hereto have signed and delivered this
Amendment No. 5 as of the date first written above.
INTERMEC TECHNOLOGIES EXECUTIVE
CORPORATION
By: /s/ Virginia S. Young By: /s/ Michael Ohanian
----------------------------------- ---------------------------
Virginia S. Young Michael Ohanian
Vice President and Secretary
<PAGE>
EXHIBIT 10.32
June 16, 1999
Larry D. Brady
1203 Whitebridge Hill
Winnetka, IL 60093
Dear Larry:
The purpose of this letter is to outline our offer being made to you for the
position of President, and Chief Operating Officer of UNOVA, Inc. Your date of
hire would be August 1, 1999 or earlier, if you can arrange to start at an
earlier date. This Offer of Employment is comprised of the following elements:
SALARY: Your annual base salary will be $600,000.00, payable on a weekly basis.
Annual salaries of all Corporate Officers are reviewed each year on July 1st.
HIRING BONUS: As a fixed sum Hiring Bonus you will receive the sum of
$600,000.00 less any bonus you receive in 1999 from your current employer for
your service in 1999. This bonus shall be payable within thirty (30) days after
your start date at UNOVA. Prior to making this payment you will provide the
Company data which shows the amount, if any, of the bonus you have received or
will receive from your current employer for service in 1999. Starting with
calendar year 2000 and thereafter all bonus payments shall be in accordance with
the UNOVA Management Incentive Compensation Plan.
RESTRICTED STOCK OPTIONS: In accordance with the UNOVA 1999 Stock Incentive Plan
you shall receive Restricted Stock in an equivalent value to replace the FMC
Restricted Stock previously awarded to you which is not vested at the time you
begin employment with UNOVA. This Restricted Stock shall vest in years 3, 4 and
5 of your employment with UNOVA, except that vesting shall be accelerated in the
event of your death, total disability, a Change of Control of UNOVA, as such
terms are defined in the 1999 Stock Incentive Plan, or Special Severance as this
term is defined below.
UNOVA COMMON STOCK OPTIONS: In accordance with the UNOVA 1999 Stock Incentive
Plan you shall also receive 400,000 Common Stock Options, awarded at market
price as such price is determined on the start date of your UNOVA employment.
RETIREMENT: It is our intention to provide you a Retirement Benefit which in
concept will provide you the same benefit that you would have received at
retirement from your current employer, FMC, upon reaching the age of 65, if you
had stayed at FMC.
<PAGE>
Larry D. Brady
June 16, 1999
Page 2
CHANGE OF CONTROL AGREEMENT: You shall be covered by a Change of Control
Agreement between you and UNOVA in the form set forth in Enclosure 1.
STANDARD UNOVA BENEFIT PROGRAMS: You are eligible for the Standard UNOVA benefit
plans such as the UNOVA Life and Health Plans as described in Enclosure 2. You
are also eligible to participate in the UNOVA Employee Stock Purchase Plan as
described in Enclosure 3.
SPECIAL CORPORATE OFFICER BENEFITS: You shall be eligible to receive the
following additional Special Corporate Officer Benefits:
1. Company Paid Executive Life Insurance equal to four times your base
salary.
2. Use of a Company Car.
3. Estate Planning assistance reimbursed by the Company.
4. Participation in the Company Incentive Loan Program that permits
Company loans to you of amounts up to your annual base salary at
an interest rate of 4% (with imputed income to you of the
difference between the federal rate and 4%).
5. A Unova Foundation matching gifts program for donations you choose
to make to colleges and universities up to a maximum of $25,000
per year.
SPECIAL SEVERANCE BENEFITS: It is contemplated that after one year of service
with UNOVA as President and Chief Operating Officer, you shall become Chief
Executive Officer of UNOVA. If for any reason, except a termination for cause,
you do not become designated the Chief Executive Officer of UNOVA within thirty
(30) days of the above date, then either you or the Company, upon a further
thirty (30) days written notice, shall have the option to sever any further
employment service with UNOVA. In the event this option is exercised, you shall
receive the following benefits:
1. The Restricted Stock awarded to you, as a replacement for the
unvested FMC Restricted Stock, shall be immediately vested.
However, the Company, in lieu thereof, reserves the right to pay
you in cash an amount equal to the fair market value of the
Company's Common Stock on the date such stock becomes vested.
2. A further cash payment equal to $2,500,000.00.
<PAGE>
Larry D. Brady
June 16, 1999
Page 3
In return for these additional benefits upon Severance you shall furnish the
Company a waiver of all claims against the Company which you have or may have as
a result of such severance of employment with the Company.
Once you are designated as the Chief Executive Officer of the Company, these
Special Severance Benefits terminate and are of no further force or effect.
RELOCATION ASSISTANCE: You shall be eligible to receive relocation assistance in
accordance with the Standard Relocation Assistance Provisions of the Company
applicable to the Corporate Office, a copy of which is enclosed as Enclosure 4.
In addition you shall be paid a fixed sum of $50,000.00 to cover all items not
specifically reimbursed by the Standard Relocation Assistance Provisions of the
Company or otherwise in this Offer. Please be advised that it is our
understanding that this amount in whole or part as well as other payments
received for relocating may be considered as taxable income by the Internal
Revenue Service. Such sums are the personal responsibility of the employee.
ADDITIONAL HOME SALE ASSISTANCE: It is our understanding that you intend to sell
the permanent home in which you now reside at an expected sale price of
approximately $2,500,000.00. In the event you are unable to sell this home
within two (2) months after it is listed for sale, the Company will assist you
by purchasing the home at a price to be established through an evaluation by
three licensed real estate appraisers. This price shall be established after a
review of your property and a comparison of like properties in the area. You and
the Company shall each select a licensed real estate appraiser and the two shall
then select a third. The evaluation reached by a majority of the three shall be
binding on each of us.
ADDITIONAL COMPANY POLICIES: Except as specifically modified by this letter,
this Offer of Employment is subject to all other standard Company Policies and
Procedures, in effect as of the date hereof, copies of which are available for
your review and examination.
EMPLOYMENT AT WILL: We both must understand that the employment contemplated by
this Offer is at the will of either of us. Except as specifically provided above
with regard to Special Severance Benefits, it is not for a specified term and
may be terminated at the will of either you or the Company.
MUTUAL AGREEMENT TO ARBITRATE CLAIMS: Any dispute which may arise from or
concerning this Offer of Employment shall be resolved in accordance with the
UNOVA Mutual Agreement to Arbitrate Claims, which is attached as Enclosure 5.
<PAGE>
Larry D. Brady
June 16, 1999
Page 4
If this Offer of Employment is satisfactory, please return a signed copy of this
letter Offer of Employment to me within the next thirty (30) days from the date
of this letter. If you have any questions regarding any of the above, please
feel free to call me at your convenience.
Sincerely,
/s/ Alton J. Brann
- -----------------------------------------
Alton J. Brann
Enclosures: As stated.
- ------------------------------------------------------------------------------
ACKNOWLEDGMENT
I hereby accept the above Offer of Employment.
/s/ Larry D. Brady June 19, 1999
- ----------------------------------------- -----------------------
Larry D. Brady Date
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 11,273
<SECURITIES> 0
<RECEIVABLES> 591,664
<ALLOWANCES> 0
<INVENTORY> 304,120
<CURRENT-ASSETS> 1,086,658
<PP&E> 482,500
<DEPRECIATION> 189,891
<TOTAL-ASSETS> 1,914,341
<CURRENT-LIABILITIES> 696,459
<BONDS> 587,119
0
0
<COMMON> 552
<OTHER-SE> 703,525
<TOTAL-LIABILITY-AND-EQUITY> 1,914,341
<SALES> 987,831
<TOTAL-REVENUES> 987,831
<CGS> 703,335
<TOTAL-COSTS> 703,335
<OTHER-EXPENSES> 254,150
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,519
<INCOME-PRETAX> 11,341
<INCOME-TAX> 4,536
<INCOME-CONTINUING> 6,805
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,805
<EPS-BASIC> .12
<EPS-DILUTED> .12
</TABLE>
