<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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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 OCTOBER 30, 1999
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 000-26207
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BELK, INC.
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(Exact Name of Registrant as Specified In Its Charter)
<TABLE>
<S> <C>
Delaware 56-2058574
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(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.)
2801 West Tyvola Road, Charlotte, North Carolina 28217-4500
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(Address of Principal Executive Offices) (Zip Code)
</TABLE>
Registrant's Telephone Number, including Area Code (704) 357-1000
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Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report.
Indicate by check [X] 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 [ ]
At December 2, 1999, the registrant had issued and outstanding 54,134,919 shares
of class A common stock and 776,144 shares of class B common stock.
<PAGE> 2
BELK, INC.
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
Page
Number
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited, except where otherwise noted)
Condensed Consolidated Statements of Income for the Three and
Nine Months Ended October 30, 1999 and October 31, 1998 4
Condensed Consolidated Balance Sheets as of
October 30, 1999 and January 30, 1999 5
Condensed Consolidated Statement of Changes in Stockholders' Equity
for the Nine Months Ended October 30, 1999 6
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
October 30, 1999 and October 31, 1998 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk 15
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
2
<PAGE> 3
THIS INFORMATION CONTAINS FORWARD-LOOKING STATEMENTS
Certain statements made in this report, and other written or oral
statements made by or on behalf of the Company, may constitute "forward-looking
statements" within the meaning of the federal securities laws. Statements
regarding future events and developments and the Company's future performance,
as well as our expectations, beliefs, plans, estimates or projections relating
to the future, are forward-looking statements within the meaning of these laws.
You can identify these forward-looking statements through our use of words such
as "may," "will," "intend," "project," "expect," "anticipate," "believe,"
"estimate," "continue," or other similar words. Forward-looking statements in
this document include information concerning possible future cost savings
resulting from restructuring and consolidating thirteen of our operating
divisions and our ability to address Y2K issues. These forward-looking
statements are subject to the completion and implementation of the Company's
strategic and operating plans as well as risks and uncertainties which may cause
our actual results to differ significantly from the results we discuss in such
forward-looking statements. These forward-looking statements are reasonable;
however, you should not place undue reliance on such statements.
For a more detailed explanation of the risks and uncertainties that
might cause our results to differ from those we project in our forward-looking
statements, we refer you to the section captioned "This Information Contains
Forward-Looking Statements" in our Annual Report on Form 10-K that we filed with
the Securities and Exchange Commission on April 30, 1999. Our other filings with
the Securities and Exchange Commission may contain additional information
concerning the risks and uncertainties listed above, and other factors you may
wish to consider. Upon request, we will provide copies of these filings to you
free of charge.
Our forward-looking statements are based on current expectations and
speak only as of the date of such statements. We undertake no obligation to
publicly update or revise any forward-looking statement, even if future events
or new information may impact the validity of such statements.
3
<PAGE> 4
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
BELK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------- -------------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 490,140 $ 479,183 $ 1,474,483 $ 1,382,391
Cost of goods sold (including occupancy
and buying expenses) 343,852 334,889 1,012,598 950,073
Selling, general and administrative expenses 132,176 127,850 390,333 371,908
Restructuring charge 442 -- 7,510 --
------------ ------------ ------------ ------------
Income from operations 13,670 16,444 64,042 60,410
Interest expense, net (9,200) (8,747) (27,597) (26,748)
Gain (loss) on sale of property and equipment (260) 153 73 759
Gain (loss) on sale of investment securities 1,995 449 2,038 (451)
Other income, net 390 464 1,083 844
------------ ------------ ------------ ------------
Income from operations before income taxes and
equity in earnings of unconsolidated entities 6,595 8,763 39,639 34,814
Income taxes 2,500 3,505 15,060 13,925
------------ ------------ ------------ ------------
Income from operations before equity in
earnings of unconsolidated entities 4,095 5,258 24,579 20,889
Equity in earnings of unconsolidated entities, net of
income taxes -- -- -- 188
------------ ------------ ------------ ------------
Net income before extraordinary item 4,095 5,258 24,579 21,077
Extraordinary item - loan prepayment penalty,
net of income tax benefit of $670 -- -- -- (1,004)
------------ ------------ ------------ ------------
Net income $ 4,095 $ 5,258 $ 24,579 $ 20,073
============ ============ ============ ============
Basic income per share
Net income before extraordinary item $ 0.07 $ 0.09 $ 0.44 $ 0.37
============ ============ ============ ============
Extraordinary item $ -- $ -- $ -- $ (0.02)
============ ============ ============ ============
Net income $ 0.07 $ 0.09 $ 0.44 $ 0.35
============ ============ ============ ============
Dividends per share $ -- $ -- $ 0.234 N/A
============ ============ ============ ============
Weighted average shares outstanding 55,226,783 56,682,252 55,526,725 56,682,252
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
4
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BELK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
October 30, January 30,
1999 1999
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Assets (audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 21,874 $ 18,313
Accounts receivable, net 306,340 351,143
Merchandise inventory 633,717 482,247
Prepaid expenses and other current assets 16,569 29,852
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Total current assets 978,500 881,555
Investment securities 23,604 24,164
Property and equipment, net 586,660 560,949
Prepaid pension costs 101,359 101,352
Other assets 30,061 25,898
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Total assets $ 1,720,184 $1,593,918
=========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 314,479 $ 228,328
Lines of credit and notes payable 269,722 4,264
Accrued income taxes -- 20,993
Current installments of long-term
debt and capital lease obligations 9,388 5,001
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Total current liabilities 593,589 258,586
Long-term debt and capital lease obligations,
excluding current installments 192,317 398,712
Deferred compensation and other noncurrent liabilities 152,633 148,685
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Total liabilities 938,539 805,983
=========== ==========
Stockholders' equity:
Common stock, 55.2 million and 56.7 million shares
issued and outstanding at October 30, 1999
and January 30, 1999, respectively 552 567
Paid-in capital 569,346 586,641
Retained earnings 211,804 200,203
Accumulated other comprehensive income (loss) (57) 524
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Total stockholders' equity 781,645 787,935
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Total liabilities and stockholders' equity $ 1,720,184 $1,593,918
=========== ==========
</TABLE>
See accompanying notes to financial statements.
5
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BELK, INC.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Other
Common Paid-in Retained Comprehensive
Stock Capital Earnings Income(Loss) Total
-------- --------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C>
Balance at January 30, 1999 $ 567 $ 586,641 $ 200,203 $ 524 $ 787,935
Comprehensive income:
Net income -- -- 24,579 -- 24,579
Unrealized loss on investments,
net of income tax benefit of $356 -- -- -- (581) (581)
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Total comprehensive income 23,998
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Cash dividends -- -- (12,978) -- (12,978)
Repurchase and retirement of stock (15) (17,295) -- -- (17,310)
-------- --------- --------- ----- ---------
Balance at October 30, 1999 $ 552 $ 569,346 $ 211,804 $ (57) $ 781,645
======== ========= ========= ===== =========
</TABLE>
See accompanying notes to financial statements.
6
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BELK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
October 30, October 31,
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 24,579 $ 20,073
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 48,501 40,147
Restructuring charge 7,510
Gain on sale of property and equipment and investments (2,111) (308)
Equity in earnings of unconsolidated
entities, net of income taxes -- (188)
Change in:
Accounts receivable, net 44,803 47,935
Merchandise inventory (151,470) (168,052)
Prepaid expenses and other current assets 9,193 (17,058)
Accounts payable and accrued expenses 60,430 95,901
Other assets and liabilities 4,229 (2,701)
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Net cash provided by operating activities 45,664 15,749
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Cash flows from investing activities:
Purchases of property, equipment and investments (80,269) (101,510)
Cash acquired from Belk-Simpson Reorganization -- 11,861
Proceeds from sale of property and equipment 3,636 1,387
Proceeds from sale of investments 7,502 19,444
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Net cash used by investing activities (69,131) (68,818)
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Cash flows from financing activities:
Proceeds from notes payable 19,998 238,980
Proceeds from issuance of long-term debt 42,000 125,000
Principal payments on long-term debt and
capital lease obligations (62,132) (290,830)
Net proceeds from lines of credit 57,450 --
Dividends paid (12,978) (8,854)
Repurchase of common stock (17,310) (4,009)
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Net cash provided by financing activities 27,028 60,287
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Net increase in cash and cash equivalents 3,561 7,218
Cash and cash equivalents at beginning of period 18,313 16,263
----------- -----------
Cash and cash equivalents at end of period $ 21,874 $ 23,481
=========== ===========
Supplemental schedule of noncash investing
and financing activities:
Increase in property and equipment through
assumption of capital leases $ 6,135 $ 18,922
Increase in assets and liabilities due to reorganization -- 39,307
</TABLE>
See accompanying notes to financial statements.
7
<PAGE> 8
BELK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands)
(1) ACQUISITION AND BASIS OF PRESENTATION
On April 15 and 16, 1998, the shareholders of the 112 companies previously
comprising the Belk Companies (the "Predecessor Companies") voted to approve the
reorganization (the "Reorganization") of the Predecessor Companies into a single
operating entity, Belk, Inc. (the "Company"), pursuant to a Plan and Agreement
of Reorganization, dated November 25, 1997, as amended, among the Company, Belk
Acquisition Co. and the Predecessor Companies (the "Reorganization Agreement").
The accompanying consolidated balance sheets as of October 30, 1999 and January
30, 1999 and the statements of income, stockholders' equity and cash flows for
the three month and nine month periods ended October 30, 1999 reflect the
adjustments to merge the companies pursuant to the Reorganization. The
statements of income, stockholders' equity and cash flows for the nine month
period ended October 31, 1998 include three months of pre-Reorganization
historical combined results of operations of the Predecessor Companies and six
months of post-Reorganization consolidated results of operations of the Company.
The calculation of net income per share for the nine months ended October 31,
1998 assumes that the Belk, Inc. shares of common stock issued in connection
with the Reorganization have been outstanding since February 1, 1998.
On May 2, 1998, a majority of the shareholders of one of the Predecessor
Companies, Belk-Simpson Company, Greenville, South Carolina ("Belk-Simpson"),
redeemed their shares in Belk-Simpson (the "Belk-Simpson Reorganization"). Prior
to the Belk-Simpson Reorganization, the 37% investment in Belk- Simpson was
accounted for under the equity method of accounting. Subsequent to the
Belk-Simpson Reorganization, Belk-Simpson is included in the consolidated
financial statements as a wholly-owned subsidiary.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(2) RESTRUCTURING CHARGE
During the nine months ended October 30, 1999, the Company recorded a charge
of $7.5 million in connection with the consolidation of its thirteen operating
divisions into four expanded regional divisions. During the second quarter, the
Company closed the excess facilities and eliminated 340 positions as a result of
streamlining operations related to the restructuring. The excess property and
equipment is being disposed of or sold. The restructuring charge and its
utilization are as follows:
<TABLE>
<CAPTION>
Restructuring Balance at
Charge Adjustments Utilized October 30, 1999
------------- ----------- -------- ----------------
<S> <C> <C> <C> <C>
Employee Severance Costs $3,424 $ 442 $ 3,602 $ 264
Disposal of Excess Property and Equipment 3,644 -- 3,090 554
------ ----------- --------- ----------------
Total $7,068 $ 442 $ 6,692 $ 818
====== =========== ========= ================
</TABLE>
8
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BELK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS)
(3) ACCOUNTING POLICIES
The condensed financial statements included herein as of October 30, 1999
and for the three and nine months ended October 30, 1999 and October 31, 1998
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission with respect to Form 10-
Q. Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. The
accompanying financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Form 10-K for
the fiscal year ended January 30, 1999. In the opinion of management, all
adjustments necessary for a fair presentation of quarterly operating results are
reflected herein and are of a normal, recurring nature.
Due to the seasonal nature of the retail industry, earnings for periods,
which exclude the holiday season, are not necessarily indicative of the results
that may be expected for the full fiscal year.
Certain reclassifications have been made to the prior year's financial
statements to conform to the classification used in the financial statements for
the three and nine month periods ended October 30, 1999.
(4) EFFECT OF NEW ACCOUNTING STANDARDS AND STATEMENTS
As of January 31, 1999, the Company has adopted Statement of Position
("SOP") No. 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use," which establishes standards for the costs of
computer software developed or obtained for internal use. The Company currently
anticipates that adoption of the standard will result in capitalization of
approximately $2.2 million of fiscal year 2000 expenditures that historically
would have been expensed. The Company has capitalized $1.9 million of costs for
internal use software during the first nine months of fiscal year 2000.
(5) BORROWINGS
The Company's accounts receivable securitization financing agreement expires
on April 27, 2000 and, accordingly, the outstanding balance as of October 30,
1999 of $208,009 has been included in current liabilities. However, the
agreement may be renewed by mutual consent of the parties and it is the
Company's intent to renew the accounts receivable securitization agreement. The
Company utilizes this facility as long-term financing.
The Company utilizes interest rate swaps to manage the interest rate risk
associated with its borrowings. As of October 30, 1999, the interest rate swap
agreements had a net fair market value of approximately $6.1 million.
9
<PAGE> 10
BELK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(dollars in thousands)
On April 30, 1999, the Company sold certain leasehold improvements for $42
million and is leasing them back over the next nine years. The Company is
required to repurchase the leasehold improvements at the end of the lease. In
accordance with Statement of Financial Accounting Standards ("SFAS") No. 98,
"Accounting for Leases," and SFAS No. 66, "Accounting for Sales of Real Estate,"
the Company is accounting for the sale-leaseback as financing. The agreement
contains restrictions consistent with those of existing loan agreements. Future
minimum lease payments are as follows:
<TABLE>
<CAPTIN>
Fiscal Year
-----------
<S> <C>
2000 $ 1,592
2001 6,368
2002 6,368
2003 6,368
2004 6,368
After 2004 26,928
--------
Total 53,992
Less imputed interest (13,390)
--------
Present value of future minimum lease payments $ 40,602
========
</TABLE>
(6) Comprehensive Income
The following table sets forth the computation of comprehensive income.
Other Comprehensive Income (Loss) is comprised of net unrealized losses on
investments, net of income tax benefit of $356 and $784 for the nine months
ended October 30, 1999 and October 31, 1998, respectively, and income tax
expense of $14 and income tax benefit of $527 for the three months ended October
30, 1999 and October 31, 1998, respectively.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
-------------------------- --------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Income $ 4,095 $ 5,258 $ 24,579 $ 20,073
Other Comprehensive Income (Loss) 23 (824) (581) (1,227)
------------ ------------ ------------ ------------
Total Comprehensive Income $ 4,118 $ 4,434 $ 23,998 $ 18,846
============ ============ ============ ============
</TABLE>
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS:
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to revenues of certain items in the Company's statements of income.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------- --------------------------
October 30, October 31, October 30, October 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 70.2% 69.9% 68.7% 68.7%
Selling, general and administrative expenses 27.0% 26.7% 26.5% 26.9%
Restructuring charge 0.1% 0.0% 0.5% 0.0%
Income from operations 2.8% 3.4% 4.3% 4.4%
Interest expense, net 1.9% 1.8% 1.9% 1.9%
Net income 0.8% 1.1% 1.7% 1.5%
Comparable stores revenues increase 1.0% 0.3% 3.5% 1.6%
</TABLE>
COMPARISON OF THE THREE MONTHS AND NINE MONTHS ENDED OCTOBER 30, 1999 AND
OCTOBER 31, 1998
Revenues. The Company's revenues for the third quarter of fiscal year 2000
increased 2.3%, or $10.9 million, to $490.1 million from $479.2 million over the
same period in fiscal year 1999. The increase was attributable to a 1.0%
increase in revenue from comparable stores as well as an increase in selling
square footage due to new stores and store expansions during the latter part of
last year and the first nine months of the current fiscal year. Although
revenues increased for the quarter, the amount of increase was adversely
affected by Hurricane Floyd and the resulting floods.
For the nine months ended October 30, 1999, the Company's revenues were
$1,474.5 million, a 6.7% increase from $1,382.4 million for the same period of
the prior fiscal year. The increase resulted primarily from a 3.5% increase in
revenue from comparable stores, an increase in selling square footage and the
inclusion of Belk-Simpson's first quarter revenues of $16.3 million in the
consolidated operating results during the current fiscal year as a result of the
Reorganization, which increased revenues for the nine months ended October 30,
1999 by 1.1%.
Cost of goods sold. As a percentage of revenues, cost of goods sold
increased to 70.2% for the three months ended October 30, 1999. This compares to
69.9% for the same period in fiscal year 1999. The increase is primarily due to
increases in markdowns.
Selling, general and administrative expenses. As a percentage of revenues,
SG&A expenses increased to 27.0% for the three months ended October 30, 1999,
from 26.7% for the same period in fiscal year 1999. The increase is attributable
to $2.1 million of incremental costs incurred in excess of expense savings
during the three months ended October 30, 1999 in connection with establishing
the Company's four expanded regional divisions. These incremental costs consist
primarily of one-time expenses for hiring and relocating employees partially
offset by reductions in personnel costs due to improved operating efficiencies
and higher late fee income and reduced bad debt losses on the Company's
proprietary credit card receivables.
As a percentage of revenues, SG&A expenses decreased to 26.5% for the nine
months ended October 30, 1999, from 26.9% for the same period in fiscal year
1999. The decrease is attributable to reductions in personnel costs due to
improved operating efficiencies and higher late fee income and reduced bad debt
11
<PAGE> 12
losses on the Company's proprietary credit card receivables partially offset by
$3.8 million of incremental costs incurred in excess of expense savings during
the nine months ended October 30, 1999 in connection with establishing the
Company's four expanded regional divisions. These incremental costs consist
primarily of one-time expenses for hiring and relocating employees and
converting the Company's systems to support the larger division size.
Restructuring charge. During the nine months ended October 30, 1999, the
Company recorded a $7.5 million charge in connection with the consolidation of
its thirteen operating divisions into four expanded regional divisions. The
charge consisted of $3.9 million of employee severance costs and $3.6 million
related to the disposal of excess assets in the closing division offices.
Income from operations. The Company's income from operations for the third
quarter of fiscal year 2000 includes a $.4 million restructuring charge related
to the consolidation of its operating divisions and $2.1 million of incremental
selling, general and administrative expenses associated with establishing its
four expanded regional divisions. Excluding the impact of these additional
costs, income from operations for the third quarter of fiscal year 2000
decreased .2 million, or 1.4%, over the corresponding period in fiscal year
1999.
The Company's income from operations for the nine months ended October 30,
1999 includes a $7.5 million restructuring charge related to the consolidation
of its operating divisions and $3.8 million of incremental selling, general and
administrative expenses associated with establishing its four expanded regional
divisions. Excluding the impact of these additional costs, income from
operations for the first nine months of fiscal year 2000 increased $14.9
million, or 25%, over the corresponding period in fiscal year 1999.
Net income. Net income for the third quarter of fiscal year 2000 decreased
by $1.2 million over the same period of last fiscal year. However, the third
quarter of fiscal year 2000 includes a $.3 million restructuring charge, net of
income taxes of $.2 million and $1.3 million of incremental selling, general and
administrative expenses, net of income taxes of $.8 million associated with
establishing the Company's four expanded regional divisions. Excluding these
items, net income in the third quarter of fiscal year 2000 increased by $.4
million, or 7.8%, over the corresponding period in fiscal year 1999.
Net income for the first nine months of fiscal year 2000 increased by $4.5
million over the same period of last fiscal year. However, the first nine months
of fiscal year 2000 includes a $4.7 million restructuring charge, net of income
taxes of $2.8 million and $2.4 million of incremental selling, general and
administrative expenses, net of income taxes of $1.4 million associated with
establishing the Company's four expanded regional divisions. The first nine
months of fiscal year 1999 included a $1.0 million extraordinary charge, net of
income taxes of $.7 million. Excluding these items, net income in the first nine
months of fiscal year 2000 increased by $10.6 million, or 50%, over the
corresponding period in fiscal year 1999.
12
<PAGE> 13
SEASONALITY AND QUARTERLY FLUCTUATIONS
The retail business is highly seasonal with approximately one-third of
annual revenues being generated in the fourth quarter, which includes the
Christmas selling season. As a result, a disproportionate amount of the
Company's operating and net income is realized during the fourth quarter and
significant variations can occur when comparing the Company's financial
condition between quarters.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity are cash on hand, cash flow from
operations, and borrowings under debt facilities.
Expenditures for property and equipment were $76.4 million for the nine
months ended October 30, 1999, compared to $95.4 million in the first nine
months of last fiscal year. During the first nine months of fiscal year 2000,
the Company relocated and expanded five stores in existing markets to new
facilities in Clinton, North Carolina; Morganton, North Carolina; Mt. Pleasant,
South Carolina; Paragould, Arkansas, and Greenville, Texas. Store expansions
were completed in three locations: Bluefield, West Virginia; Jacksonville,
Florida; and Kill Devil Hills, North Carolina. Minor renovations were completed
in the Greer, South Carolina; Middlesboro, Kentucky; Somerset, Kentucky; and
Beckley, West Virginia stores. The Company plans to complete renovations and/or
expansions at 7 stores during the current fiscal year, which, when combined with
other categories will result in fiscal year 2000 capital expenditures of
approximately $100 million.
On April 30, 1999, the Company sold certain leasehold improvements for $42
million and is leasing them back over the next nine years. The Company is
required to repurchase the leasehold improvements at the end of the lease. In
accordance with SFAS No. 98, "Accounting for Leases," and SFAS No. 66
"Accounting for Sales of Real Estate," the Company is accounting for the
sale-leaseback as financing. The Company used the proceeds from the sale to
reduce borrowings under its existing debt facilities.
The Company's accounts receivable securitization financing agreement expires
on April 27, 2000, and accordingly, the outstanding balance as of October 30,
1999 of $208.0 million has been included in current liabilities. However, the
agreement may be renewed by mutual consent of the parties and it is the
Company's intent to renew the facility and utilize it as long-term financing.
Management of the Company believes that cash flows from operations and the
Company's existing credit facilities will be sufficient to cover working capital
needs, capital expenditures and debt service requirements.
BELK NATIONAL BANK
During the first quarter of fiscal year 2000, the Company formed Belk
National Bank ("BNB"), a wholly-owned subsidiary, in order to standardize the
interest rate terms of Belk charge customer accounts across the thirteen states
in which Belk operates and to set competitive interest rates comparable to other
retailers. BNB began operations in May 1999.
YEAR 2000 ISSUES
In January 1996, the Company began converting its computer systems to be
Y2K compliant. This was necessary due to the use of two digit fields to
represent the year in many computer systems, which could cause the year "00" to
be recognized as 1900 instead of 2000. Failure to obtain Y2K compliance could
result in significant disruption to the Company's operations and information
processing.
13
<PAGE> 14
A Y2K executive steering committee was designated to oversee all aspects
of the Company's progress towards Y2K compliancy. Under direction of the
steering committee, the Company developed a Y2K compliance plan that focuses on
5 major areas as follows:
1. Information systems.
2. Imbedded chip devices.
3. Merchandise vendors.
4. Service providers.
5. User developed or installed software.
The plan generally covers the following 6 phases:
1. Inventory the Company's systems (including all equipment with
imbedded chips), merchandise vendors, service providers, and user
developed or installed software.
2. Assess whether Y2K compliance issues exist for each system,
device or provider identified.
3. Establish a timetable and detailed plans for obtaining compliance.
4. Repair and replace systems and/or devices requiring modification
5. Validate Y2K compliance through testing of modifications.
6. Develop contingency plans
(*)Phases 1, 2, 3 and 6 above apply to merchandise vendors and service
providers as well as to Company systems.
The Company has completed testing of all key information technology
("IT") systems and has implemented "Clean Management" procedures to ensure that
any new systems or modifications to current systems are tested before
implementation to ensure compliance. The Company has also completed upgrading,
replacing and testing all essential non-IT systems. These systems, such as PBX,
security, and heating and air-conditioning systems, include imbedded chip
processors that may be affected by the Y2K issue.
The Company has surveyed its key merchandise vendors as to their Y2K
readiness and obtained responses from all of them. Responses were scored and
follow-up conference calls conducted for all vendors who obtained a low
confidence score. Contingency Plans have been developed for low confidence
merchandise vendors. In addition, all of the Company's key EDI trading partners
have successfully passed a basic Y2K purchase order and invoice translator test.
The Company has also surveyed all critical non-merchandise providers as
to their Y2K readiness. These providers include energy and utility companies,
real estate firms, advertising and sales promotion vendors, supply vendors,
transportation and logistics companies, technology providers, credit services
providers and others. The Company has received responses from over 99% of these
providers. The responses were scored and follow-ups were conducted with those
vendors who obtained a low confidence score. Contingency plans have been updated
for those providers who remained at a low confidence rating or refused to
respond.
The Company has created Y2K contingency plans for all critical business
processes. The plans address internal Y2K failures, as well as failures of key
external business providers to support the merchandise and services needs of the
Company. Plans have been tested and updated as necessary throughout 1999, as the
Company monitors the Y2K readiness progress of key business partners.
The total cost of the Y2K project is estimated to be $5.9 million and is
being funded through operating cash flows. This cost primarily consists of
internal labor costs to repair and test IT and non-IT systems. The Company is
expensing all costs associated with the project as incurred. At October 30,
1999,
14
<PAGE> 15
$5.8 million had been expensed. The Company has not experienced any significant
delays in other IT projects due to the implementation of the Y2K plan as of
October 30, 1999.
Although the Company has substantially achieved full Y2K readiness,
there is the potential for certain of the Company's systems to experience Y2K
failures. This is due to the uncertainties inherent in the Y2K problem,
including key business partner failures, failure to identify all systems
affected, failure to successfully remediate all systems affected, and other
similar uncertainties. A worst case scenario could include disruption in the
Company's ability to advertise, purchase and sell merchandise, extend customer
credit, compensate associates, keep accurate accounting records, and perform
customer service. Should this occur, the Company's liquidity, future operating
results and financial position may be materially impacted.
Readers are cautioned that forward-looking statements contained in this
Y2K discussion should be read in conjunction with the cautionary statement
included in this 10-Q under "This Information Contains Forward-Looking
Statements."
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes to the Company's quantitative and
qualitative market risk disclosures.
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Form of Amended and Restated Certificate of Incorporation of the
Company (incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-4, File No. 333- 42935).
3.2 Form of Amended and Restated Bylaws of the Company (incorporated by
reference to Exhibit 3.4 to the Company's Registration Statement on
Form S-4, File No. 333-42935).
10.1 Receivables Purchase Agreement among Belk, Inc., as Seller, and Belk
National Bank, as Purchaser, and The Belk Center, Inc., as Servicer
dated as of May 3, 1999.
10.2 Receivables Purchase Agreement among Belk, Inc., as Seller, and Belk
Accounts Receivable LLC, as Purchaser, and The Belk Center, Inc., as
Servicer dated as of May 3, 1999.
10.3 Receivables Purchase Agreement among Belk National Bank, as Seller,
and Belk Accounts Receivable LLC, as Purchaser, and Belk, Inc. and
The Belk Center, Inc., as Servicer dated as of May 3, 1999.
10.4 Guaranty and Security Agreement, dated as of May 3, 1999, between
Belk Accounts Receivable LLC, as Guarantor, The Belk Center, Inc.,
as Servicer, Belk, Inc., as Debtor, NationsBank, N.A., as agent for
Enterprise Funding Corporation, and the Bank Investors party to the
Note Purchase Agreement.
10.5 Note Purchase Agreement, dated as of May 3, 1999, by and among Belk,
Inc., as Debtor, The Belk Center, Inc., as Servicer, Enterprise
Funding Corporation, and NationsBank, N.A., as agent for Enterprise
Funding Corporation and the Bank Investors and as a Bank Investor.
27.1 Financial Data Schedules (for SEC use only)
(b) Reports on Form 8-K
None.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
BELK, INC.
Dated: December 14, 1999 By: /s/ Ralph A. Pitts
------------------------------------------
Ralph A. Pitts
Executive Vice President, General Counsel
and Corporate Secretary
(Authorized Officer of the Registrant)
By: /s/ Bill R. Walton
------------------------------------------
Bill R. Walton
Senior Vice President, Treasurer
and Controller
(Principal Accounting Officer)
16
<PAGE> 1
- --------------------------------------------------------------------------------
RECEIVABLES PURCHASE AGREEMENT
among
BELK, INC.,
as Seller
and
BELK NATIONAL BANK,
as Purchaser
and
THE BELK CENTER, INC.
as Servicer
Dated as of May 3, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT, dated as of May 3, 1999 (as
amended, supplemented or otherwise modified and in effect from time to time,
this "Agreement"), among BELK, INC., a Delaware corporation, as seller (in such
capacity, the "Seller"), BELK NATIONAL BANK, a national banking association, as
purchaser (in such capacity, the "Purchaser"), and THE BELK CENTER, INC., a
North Carolina corporation, as servicer (the "Servicer" or "Belk Center").
W I T N E S S E T H :
WHEREAS, the Purchaser desires to purchase certain accounts receivable
existing on the Closing Date generated in the normal course of the business of
Seller or a Designated Seller pursuant to certain revolving consumer credit card
accounts;
WHEREAS, the Seller desires to sell and assign from time to time such
accounts receivable to the Purchaser upon the terms and conditions hereinafter
set forth;
WHEREAS, the Servicer has agreed to service the accounts receivable
sold to the Purchaser by the Seller hereunder;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed by and among
the Purchaser, the Seller and the Servicer as follows:
2
<PAGE> 3
ARTICLE 1
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 Note Purchase Agreement, and shall
include in the singular number the plural and in the plural number the singular:
"Agent" shall mean NationsBank, N.A., as agent on behalf of Enterprise
and the Bank Investors pursuant to the Note Purchase Agreement, and any
successor thereto appointed pursuant to Article IX thereof.
"Bank Investors" shall have the meaning specified in the Note Purchase
Agreement.
"Belk Center" shall mean The Belk Center, Inc.
"Closing Date" shall mean May 3, 1999.
"Designated Seller" shall have the meaning specified in the Note
Purchase Agreement.
"Eligible Receivable" shall have the meaning specified in the Note
Purchase Agreement.
"Enterprise" shall mean Enterprise Funding Corporation, a Delaware
corporation, and its successors and assigns.
"Event of Bankruptcy" shall have the meaning specified in the Note
Purchase Agreement.
"Guaranty Agreement" shall mean the Guaranty and Security Agreement
dated as of May 3, 1999 by and among Belk Accounts Receivable LLC, Belk Center,
Seller and NationsBank, N.A., as Agent and as a Bank Investor, as such agreement
may be amended, modified or supplemented from time to time.
"Non-Past Due Receivable" shall mean any Receivable other than a Past
Due Receivable.
"Note Purchase Agreement" shall mean the Note Purchase and Security
Agreement, dated as of May 3, 1999, by and among the Seller, Belk Center, as
Servicer, Enterprise Funding Corporation and NationsBank, N.A., as Agent and
Bank Investor, as such agreement may be amended, modified or supplemented from
time to time.
"Outstanding Principal Balance" shall have the meaning specified in the
Note Purchase Agreement.
3
<PAGE> 4
"Past Due Receivable" means any Receivable that is more than 150 days
past due as of the Closing Date.
"Purchase Price" shall have the meaning set forth in Section 3.1
hereof.
"Purchaser" shall mean Belk National Bank, a national banking
association, and its successors and assigns hereunder.
"Receivable" shall mean, for purposes of this Agreement, the
indebtedness owed to the Seller or to any Designated Seller by any Obligor under
an Account (whether such Account is in existence as of the Cut-Off Date or
thereafter created), 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, and which in all cases
shall include the right to payment of any Finance Charges and other obligations
of such Obligor with respect thereto.
"Related Security" means with respect to any Receivable, all of the
Seller's rights, title and interest in, to and under:
(1) all of the Seller's interest, if any, in the
merchandise (including returned or repossessed merchandise),
if any, the sale of which gave rise to such Receivable;
(2) 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
Account related to such Receivable or otherwise, together with
all financing statements signed by an Obligor describing any
collateral securing such Receivable;
(3) 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 Account related to such Receivable or
otherwise;
(4) all Records related to such Receivable; and
(5) all Proceeds of any of the foregoing.
"Relevant UCC" shall mean the Uniform Commercial Code as in effect in
the State of New York; provided, however, that if by reason of mandatory
provisions of law, the perfection or non-perfection of a security interest in
any property conveyed hereunder is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New York, "UCC" shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such perfection or non-perfection.
4
<PAGE> 5
"Secured Obligations" shall have the meaning set forth in Section
2.1(d) hereof.
"Termination Date" shall have the meaning specified in Section 4.1.
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 2
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 sells, assigns, transfers and conveys to the
Purchaser, and the Purchaser hereby purchases from the Seller, on the terms and
subject to the conditions specifically set forth herein, all of the Seller's
right, title and interest, whether now owned or hereafter acquired, in, to and
under the Non-Past Due Receivables outstanding on the Closing Date, together
with all Related Security and Collections with respect thereto and all proceeds
of the foregoing. The 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 the
Receivables or under any Related Security, Account Agreement or other agreement
and instrument relating to the Receivables. With respect to Receivables sold by
the Seller to Purchaser on the Closing Date, such Receivables shall be deemed to
be all the Non-Past Due Receivables of the Seller that exist as of the close of
business on the Closing Date.
(1) In connection with the foregoing sale, the Seller agrees
to deliver to the Purchaser on or prior to the Closing Date, a
financing statement or statements with respect to the Receivables and
the other property described in Section 2.1(a) sold by the 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 against all creditors of and purchasers from the Seller.
Any expenses of the filing of such financing statements shall be borne
solely by the Seller.
(2) 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 purchased hereunder or to enable the
5
<PAGE> 6
Purchaser to exercise or enforce any of its rights hereunder. Without
limiting the foregoing, the Seller will, in order to accurately reflect
this 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 requested by the Purchaser,
and upon the request of the Purchaser, mark its master data processing
records and other documents with a legend describing the purchase by
the Purchaser of the Receivables purchased hereunder, the subsequent
sale of such Receivables to Belk Accounts Receivable LLC, and the
subsequent grant of a security interest therein to the Agent pursuant
to the Guaranty Agreement, and stating "THE RECEIVABLES IN THESE FILES
HAVE BEEN ACQUIRED BY AND CONVEYED TO BELK ACCOUNTS RECEIVABLE LLC, AND
SUCH RECEIVABLES HAVE BEEN PLEDGED BY BELK ACCOUNTS RECEIVABLE LLC TO
NATIONSBANK, N.A., AS AGENT FOR THE BENEFIT OF ENTERPRISE FUNDING
CORPORATION AND THOSE CERTAIN BANK INVESTORS PURSUANT TO THE GUARANTY
AND SECURITY AGREEMENT, DATED AS OF MAY 3, 1999, AS AMENDED FROM TIME
TO TIME, AMONG BELK ACCOUNTS RECEIVABLE LLC, THE BELK CENTER, INC. AND
NATIONSBANK, N.A." The Seller shall, upon 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.
(3) It is the express intent of the Seller and the Purchaser
that the conveyance of the 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 or the Purchaser that such conveyance be deemed a grant of a
security interest in such Receivables by the Seller to the Purchaser to
secure a debt or other obligation of the Seller. However, in the event,
that, notwithstanding the express intent of the parties, such
Receivables 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 the Non-Past Due Receivables outstanding on the
Closing Date and thereafter owned by the Seller, together with all
Related Security and Collections with respect thereto and all proceeds
of the foregoing, to secure the rights of the Purchaser set forth in
this Agreement or as may be determined in connection therewith by
applicable law (collectively, the "Secured Obligations"). 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 such 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> 7
SECTION 2.2. Servicing of Receivables. The servicing, administering and
collection of the Receivables sold hereunder shall be conducted by Belk Center,
which hereby agrees to perform, take or cause to be taken all such action as may
be necessary or advisable to collect each such Receivable from time to time, all
in accordance with applicable laws, rules and regulations and with the care and
diligence which Belk Center employs in servicing similar receivables, in
accordance with the Credit Guidelines. The Purchaser hereby appoints Belk Center
as its agent to enforce the Purchaser's rights and interests in, to and under
the Receivables sold hereunder, the Related Security and the Collections with
respect thereto. Belk Center shall hold in trust for the Purchaser, in
accordance with its interests, all Records which evidence or relate to such
Receivables or Related Security, Collections and proceeds with respect thereto.
Notwithstanding anything to the contrary contained herein, from and after the
occurrence of a Termination Event (other than a Termination Event described in
Section 6.1(o) or 6.1(p) of the Guaranty Agreement) or a Servicer Default (each
as defined in the Guaranty Agreement), the Agent or Enterprise shall have the
absolute and unlimited right to terminate Belk Center's servicing activities
described in this Section 2.2. In consideration of the foregoing, Belk Center
shall receive a servicing fee of 2.00% per annum on the aggregate Outstanding
Principal Balance of Receivables sold, payable monthly by Belk Accounts
Receivable LLC (pursuant to the Receivables Purchase Agreements to which Belk
Accounts Receivable LLC is a party), as well as an amount equal to all late
fees, returned check or NSF charges and similar charges received from Obligors
with respect to Receivables, for its performance of the duties and obligations
described in this Section 2.2.
ARTICLE 3
CONSIDERATION AND PAYMENT; RECEIVABLES
SECTION 3.1. Purchase Price. (a) The Purchase Price for the Receivables
and related property conveyed on the Closing Date to the Purchaser by the Seller
under this Agreement shall be a dollar amount equal to the product of the
aggregate Outstanding Principal Balance of such Receivables.
SECTION 3.2. Payment of Purchase Price. The Purchase Price for the
Receivables sold on the Closing Date shall be paid by payment of cash in
immediately available funds to the Seller.
ARTICLE 4
TERM AND TERMINATION
SECTION 4.1. 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
7
<PAGE> 8
close of business on the third Business Day following a conveyance of
Receivables by the Seller to the Purchaser for which the Purchaser does not pay
the Purchase Price in accordance with the provisions hereof, (iii) upon the
occurrence of an Event of Bankruptcy with respect to the Seller, (iv) the date
on which either the Purchaser or the Seller defaults on its obligations
hereunder, which default continues unremedied for more than thirty (30) days
after written notice, or (v) upon the occurrence of an Event of Bankruptcy with
respect to the Purchaser (any such date described above, being a "Termination
Date") ; provided, however, that the termination of this Agreement pursuant to
this Section 4.1 shall not discharge any Person from any obligations incurred
prior to such termination, including, without limitation, any obligations to
make any payments with respect to the interest of the Purchaser in any
Receivable sold prior to such termination.
SECTION 4.2. Effect of Termination. 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. Without limiting the foregoing, prior to termination, the failure
of the Seller to deliver computer records of Receivables or any reports
regarding the Receivables shall not render such transfer or obligation
executory, nor shall the continued duties of the parties pursuant to Section 5.1
of this Agreement render an executed sale executory.
ARTICLE 5
MISCELLANEOUS PROVISIONS
SECTION 5.1. 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 an amendment to this Agreement.
SECTION 5.2. GOVERNING LAW; Submission to Jurisdiction.
(1) THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
(2) The parties hereto hereby submit to the nonexclusive
jurisdiction of the United States District Court for the Western
District of North Carolina and of any North Carolina state court
sitting in Mecklenburg County 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 5.2 shall
8
<PAGE> 9
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 5.3. 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 5.3 and confirmation is received, (ii)
if given by mail three Business Days following such posting, postage prepaid,
U.S. certified or registered, (iii) if given by overnight courier, one 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
5.3.
If to the Seller:
Belk, Inc.
2801 West Tyvola Road
Charlotte, North Carolina 28217
Telephone: (704) 357-1064, ext: 4273
Telecopy: (704) 357-0711
Attn: Terry L. Scott
with a copy to:
NationsBank, N.A.
Bank of America Corporate Center
100 North Tryon Street
NC1-007-10-07
Charlotte, NC 28255
Attention: Michelle M. Heath, Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
If to the Purchaser:
Belk National Bank
2801 West Tyvola Road
Charlotte, North Carolina 28217
Telephone: (704) 357-1064, ext: 4273
Telecopy: (704) 357-8052
Attn: James M. Berry
9
<PAGE> 10
If to the Servicer:
The Belk Center, Inc.
2801 West Tyvola Road
Charlotte, North Carolina 28217
Telephone: (704) 357-1064, extension 7000
Telecopy: (704) 357-1861
Attn: Oakley Orser
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 5.4. 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 5.5. Assignment. This Agreement may not be assigned by the
parties hereto.
SECTION 5.6. 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 for filing under the provisions
of the Relevant UCC or other laws of any applicable jurisdiction.
SECTION 5.7. 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 5.8. 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 5.9. Binding Effect. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective successors and
permitted assigns. The
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<PAGE> 11
Agent, on behalf of Enterprise and the Bank Investors, is an intended
third-party beneficiary of the Seller's obligations hereunder.
SECTION 5.10. 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 5.11. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
[Signatures appear on the following page.]
11
<PAGE> 12
IN WITNESS WHEREOF, the Purchaser, the Seller and the Servicer each
have caused this Receivables Purchase Agreement to be duly executed by their
respective officers as of the day and year first above written.
BELK, INC.,
AS THE SELLER
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
BELK NATIONAL BANK, AS PURCHASER
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
THE BELK CENTER, INC.,
AS SERVICER
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
SIGNATURE PAGE 1
<PAGE> 1
- --------------------------------------------------------------------------------
RECEIVABLES PURCHASE AGREEMENT
among
BELK, INC.,
as Seller
and
BELK ACCOUNTS RECEIVABLE LLC,
as Purchaser
and
THE BELK CENTER, INC.
as Servicer
Dated as of May 3, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT, dated as of May 3, 1999 (as
amended, supplemented or otherwise modified and in effect from time to time,
this "Agreement"), among BELK, INC., a Delaware corporation, as seller (in such
capacity, the "Seller"), BELK ACCOUNTS RECEIVABLE LLC, a North Carolina limited
liability company, as purchaser (in such capacity, the "Purchaser"), and THE
BELK CENTER, INC., a North Carolina corporation, as servicer (the "Servicer" or
"Belk Center").
W I T N E S S E T H :
WHEREAS, the Purchaser desires to purchase certain accounts receivable
existing on the Closing Date generated in the normal course of the business of
Seller or a Designated Seller pursuant to certain revolving consumer credit card
accounts;
WHEREAS, the Seller desires to sell and assign from time to time such
accounts receivable to the Purchaser upon the terms and conditions hereinafter
set forth;
WHEREAS, the Servicer has agreed to service the accounts receivable
sold to the Purchaser by the Seller hereunder;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed by and among
the Purchaser, the Seller and the Servicer as follows:
2
<PAGE> 3
ARTICLE 1
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 Note Purchase Agreement, and shall
include in the singular number the plural and in the plural number the singular:
"Agent" shall mean NationsBank, N.A., as agent on behalf of Enterprise
and the Bank Investors pursuant to the Note Purchase Agreement, and any
successor thereto appointed pursuant to Article IX thereof.
"Bank Investors" shall have the meaning specified in the Note Purchase
Agreement.
"Belk Center" shall mean The Belk Center, Inc.
"Closing Date" shall mean May 3, 1999.
"Designated Seller" shall have the meaning specified in the Note
Purchase Agreement.
"Eligible Receivable" shall have the meaning specified in the Note
Purchase Agreement.
"Enterprise" shall mean Enterprise Funding Corporation, a Delaware
corporation, and its successors and assigns.
"Event of Bankruptcy" shall have the meaning specified in the Note
Purchase Agreement.
"Guaranty Agreement" shall mean the Guaranty and Security Agreement
dated as of May 3, 1999 by and among Belk Accounts Receivable LLC, Belk Center,
as Servicer, Seller, and NationsBank, N.A., as Agent and as a Bank Investor, as
such agreement may be amended, modified or supplemented from time to time.
"Non-Past Due Receivable" shall mean any Receivable other than a Past
Due Receivable.
"Note Purchase Agreement" shall mean the Note Purchase Agreement, dated
as of May 3, 1999, by and among the Seller, Belk Center, as Servicer, Enterprise
Funding Corporation and NationsBank, N.A., as Agent and Bank Investor, as such
agreement may be amended, modified or supplemented from time to time.
"Outstanding Principal Balance" shall have the meaning specified in the
Note Purchase Agreement.
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"Past Due Receivable" means any Receivable that is more than 150 days
past due as of the Closing Date.
"Purchase Price" shall have the meaning set forth in Section 3.1
hereof.
"Purchaser" shall mean Belk Accounts Receivable LLC, and its successors
and assigns hereunder.
"Receivable" shall mean, for purposes of this Agreement, the
indebtedness owed to the Seller or to any Designated Seller by any Obligor under
an Account (whether such Account is in existence as of the Cut-Off Date or
thereafter created), 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, and which in all cases
shall include the right to payment of any Finance Charges and other obligations
of such Obligor with respect thereto.
"Related Security" means with respect to any Receivable, all of the
Seller's rights, title and interest in, to and under:
(1) all of the Seller's interest, if any, in the
merchandise (including returned or repossessed merchandise),
if any, the sale of which gave rise to such Receivable;
(2) 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
Account related to such Receivable or otherwise, together with
all financing statements signed by an Obligor describing any
collateral securing such Receivable;
(3) 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 Account related to such Receivable or
otherwise;
(4) all Records related to such Receivable; and
(5) all Proceeds of any of the foregoing.
"Relevant UCC" shall mean the Uniform Commercial Code as in effect in
the State of New York; provided, however, that if by reason of mandatory
provisions of law, the perfection or non-perfection of a security interest in
any property conveyed hereunder is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New York, "UCC" shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such perfection or non-perfection.
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"Secured Obligations" shall have the meaning set forth in Section
2.1(d) hereof.
"Termination Date" shall have the meaning specified in Section 4.1.
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 2
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 sells, assigns, transfers and conveys to the
Purchaser, and the Purchaser hereby purchases from the Seller, on the terms and
subject to the conditions specifically set forth herein, all of the Seller's
right, title and interest, whether now owned or hereafter acquired, in, to and
under the Past Due Receivables outstanding on the Closing Date, together with
all Related Security and Collections with respect thereto and all proceeds of
the foregoing. The 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 the
Receivables or under any Related Security, Account Agreement or other agreement
and instrument relating to the Receivables. With respect to Receivables sold by
the Seller to Purchaser on the Closing Date, such Receivables shall be deemed to
be all the Past Due Receivables of the Seller that exist as of the close of
business on the Closing Date.
(1) In connection with the foregoing sale, the Seller agrees
to deliver to the Purchaser on or prior to the Closing Date, a
financing statement or statements with respect to the Receivables and
the other property described in Section 2.1(a) sold by the 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 against all creditors of and purchasers from the Seller.
Any expenses of the filing of such financing statements shall be borne
solely by the Seller.
(2) 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 purchased hereunder or to enable the
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<PAGE> 6
Purchaser to exercise or enforce any of its rights hereunder. Without
limiting the foregoing, the Seller will, in order to accurately reflect
this 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 requested by the Purchaser,
and upon the request of the Purchaser, mark its master data processing
records and other documents with a legend describing the purchase by
the Purchaser of the Receivables purchased hereunder, and the
subsequent grant of a security interest therein to the Agent pursuant
to the Guaranty Agreement, and stating "THE RECEIVABLES IN THESE FILES
HAVE BEEN ACQUIRED BY AND CONVEYED TO BELK ACCOUNTS RECEIVABLE LLC, AND
SUCH RECEIVABLES HAVE BEEN PLEDGED BY BELK ACCOUNTS RECEIVABLE LLC TO
NATIONSBANK, N.A., AS AGENT FOR THE BENEFIT OF ENTERPRISE FUNDING
CORPORATION AND THOSE CERTAIN BANK INVESTORS PURSUANT TO THE GUARANTY
AND SECURITY AGREEMENT, DATED AS OF MAY 3, 1999, AS AMENDED FROM TIME
TO TIME, AMONG BELK ACCOUNTS RECEIVABLE LLC, THE BELK CENTER, INC. AND
NATIONSBANK, N.A." The Seller shall, upon 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.
(3) It is the express intent of the Seller and the Purchaser
that the conveyance of the 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 or the Purchaser that such conveyance be deemed a grant of a
security interest in such Receivables by the Seller to the Purchaser to
secure a debt or other obligation of the Seller. However, in the event,
that, notwithstanding the express intent of the parties, such
Receivables 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 the Past Due Receivables outstanding on the Closing
Date and thereafter owned by the Seller, together with all Related
Security and Collections with respect thereto and all proceeds of the
foregoing, to secure the rights of the Purchaser set forth in this
Agreement or as may be determined in connection therewith by applicable
law (collectively, the "Secured Obligations"). 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 such 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.
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SECTION 2.2. Servicing of Receivables. The servicing, administering and
collection of the Receivables sold hereunder shall be conducted by Belk Center,
which hereby agrees to perform, take or cause to be taken all such action as may
be necessary or advisable to collect each such Receivable from time to time, all
in accordance with applicable laws, rules and regulations and with the care and
diligence which Belk Center employs in servicing similar receivables, in
accordance with the Credit Guidelines. The Purchaser hereby appoints Belk Center
as its agent to enforce the Purchaser's rights and interests in, to and under
the Receivables sold hereunder, the Related Security and the Collections with
respect thereto. Belk Center shall hold in trust for the Purchaser, in
accordance with its interests, all Records which evidence or relate to such
Receivables or Related Security, Collections and proceeds with respect thereto.
Notwithstanding anything to the contrary contained herein, from and after the
occurrence of a Termination Event (other than a Termination Event described in
Section 6.1(o) or 6.1(p) of the Guaranty Agreement) or a Servicer Default (each
as defined in the Guaranty Agreement), the Agent or Enterprise shall have the
absolute and unlimited right to terminate Belk Center's servicing activities
described in this Section 2.2. In consideration of the foregoing, the Purchaser
agrees to pay Belk Center a servicing fee of 2.00% per annum on the aggregate
Outstanding Principal Balance of Receivables sold, payable monthly, as well as
an amount equal to all late fees, returned check or NSF charges and similar
charges received from Obligors with respect to Receivables, for its performance
of the duties and obligations described in this Section 2.2.
ARTICLE 3
CONSIDERATION AND PAYMENT
SECTION 3.1. Purchase Price. (a) The Purchase Price for the Receivables
and related property conveyed on the Closing Date to the Purchaser by the Seller
under this Agreement shall be a dollar amount equal to the product of the
aggregate Outstanding Principal Balance of such Receivables.
SECTION 3.2. Payment of Purchase Price. The Purchase Price for the
Receivables sold on the Closing Date shall be paid by payment of cash in
immediately available funds to the Seller.
ARTICLE 4
TERM AND TERMINATION
SECTION 4.1. 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 close
of business on the third Business Day following a conveyance of Receivables by
the Seller to the Purchaser for which the Purchaser does not pay the Purchase
Price in accordance with the
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provisions hereof, (iii) upon the occurrence of an Event of Bankruptcy with
respect to the Seller, (iv) the date on which either the Purchaser or the Seller
defaults on its obligations hereunder, which default continues unremedied for
more than thirty (30) days after written notice, or (v) upon the occurrence of
an Event of Bankruptcy with respect to the Purchaser (any such date described
above, being a "Termination Date") ; provided, however, that the termination of
this Agreement pursuant to this Section 4.1 shall not discharge any Person from
any obligations incurred prior to such termination, including, without
limitation, any obligations to make any payments with respect to the interest of
the Purchaser in any Receivable sold prior to such termination.
SECTION 4.2. Effect of Termination. 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. Without limiting the foregoing, prior to termination, the failure
of the Seller to deliver computer records of Receivables or any reports
regarding the Receivables shall not render such transfer or obligation
executory, nor shall the continued duties of the parties pursuant to Section 5.1
of this Agreement render an executed sale executory.
ARTICLE 5
MISCELLANEOUS PROVISIONS
SECTION 5.1. 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 an amendment to this Agreement.
SECTION 5.2. GOVERNING LAW; Submission to Jurisdiction.
(1) THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
(2) The parties hereto hereby submit to the nonexclusive
jurisdiction of the United States District Court for the Western
District of North Carolina and of any North Carolina state court
sitting in Mecklenburg County 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 5.2 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.
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SECTION 5.3. 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 5.3 and confirmation is received, (ii)
if given by mail three Business Days following such posting, postage prepaid,
U.S. certified or registered, (iii) if given by overnight courier, one 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
5.3.
If to the Seller:
Belk, Inc.
2801 West Tyvola Road
Charlotte, North Carolina 28217
Telephone: (704) 357-1064, ext: 4273
Telecopy: (704) 357-0711
Attn: Terry L. Scott
with a copy to:
NationsBank, N.A.
Bank of America Corporate Center
100 North Tryon Street
NC1-007-10-07
Charlotte, NC 28255
Attention: Michelle M. Heath, Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
If to the Purchaser:
Belk Accounts Receivable LLC
c/o Belk, Inc.
2801 West Tyvola Road
Charlotte, North Carolina 28217
Telephone: (704) 357-1064, ext: 4273
Telecopy: (704) 357-0711
Attn: Terry L. Scott
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with a copy to:
NationsBank, N.A.
Bank of America Corporate Center
100 North Tryon Street
NC-007-10-07
Charlotte, NC 28255
Attention: Michelle M. Heath, Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
If to the Servicer:
The Belk Center, Inc.
2801 West Tyvola Road
Charlotte, North Carolina 28217
Telephone: (704) 357-1064, extension 7000
Telecopy: (704) 357-1861
Attn: Oakley Orser
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 5.4. 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 5.5. Assignment. This Agreement may not be assigned by the
parties hereto, except that the Purchaser may assign its rights hereunder
pursuant to the Guaranty Agreement to the Agent, for the benefit of Enterprise
and the Bank Investors, and Enterprise may assign any or all of its rights to
any Liquidity Provider and may grant a security interest in its rights hereunder
to the Collateral Agent. The Purchaser hereby notifies the Seller that (and the
Seller hereby acknowledges that), pursuant to the Guaranty Agreement, the
Purchaser has assigned its rights hereunder to the Agent, for the benefit of
Enterprise and the Bank Investors.
SECTION 5.6. 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 for filing under the provisions
of the Relevant UCC or other laws of any applicable jurisdiction.
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SECTION 5.7. 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 5.8. 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 5.9. Binding Effect. 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 Enterprise and the Bank Investors, is
an intended third-party beneficiary of the Seller's obligations hereunder.
SECTION 5.10. 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 5.11. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
[Signatures appear on the following page.]
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IN WITNESS WHEREOF, the Purchaser, the Seller and the Servicer each
have caused this Receivables Purchase Agreement to be duly executed by their
respective officers as of the day and year first above written.
BELK, INC.,
AS THE SELLER
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
BELK ACCOUNTS RECEIVABLE
LLC, AS PURCHASER
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
THE BELK CENTER, INC.,
AS SERVICER
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
SIGNATURE PAGE 1
<PAGE> 1
- --------------------------------------------------------------------------------
RECEIVABLES PURCHASE AGREEMENT
among
BELK NATIONAL BANK.,
as Seller
and
BELK ACCOUNTS RECEIVABLE LLC,
as Purchaser
and
BELK, INC.
and
THE BELK CENTER, INC.
as Servicer
Dated as of May 3, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT, dated as of May 3, 1999 (as
amended, supplemented or otherwise modified and in effect from time to time,
this "Agreement"), among BELK NATIONAL BANK, a national banking association, as
seller (in such capacity, the "Seller"), BELK ACCOUNTS RECEIVABLE LLC, a North
Carolina limited liability company, as purchaser (in such capacity, the
"Purchaser"), BELK, INC., a Delaware corporation ("Belk"), and THE BELK CENTER,
INC., a North Carolina corporation, as servicer (the "Servicer" or "Belk
Center").
W I T N E S S E T H :
WHEREAS, the Purchaser desires to purchase certain accounts receivable
existing on the Closing Date or acquired or generated thereafter in the normal
course of the business of Seller, Belk, Inc. or a Designated Seller (as defined
below) pursuant to certain revolving consumer credit card accounts;
WHEREAS, the Seller desires to sell and assign from time to time such
accounts receivable to the Purchaser upon the terms and conditions hereinafter
set forth;
WHEREAS, the Servicer has agreed to service the accounts receivable
sold to the Purchaser by the Seller hereunder;
WHEREAS, Belk owns indirectly 100% of the ownership interests in the
Purchaser and will materially benefit from the Purchaser's acquisition of such
accounts receivable;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed by and among
the Purchaser, the Seller and the Servicer as follows:
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ARTICLE 1
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 Note Purchase Agreement, and shall
include in the singular number the plural and in the plural number the singular:
"Agent" shall mean NationsBank, N.A., as agent on behalf of Enterprise
and the Bank Investors pursuant to the Note Purchase Agreement, and any
successor thereto appointed pursuant to Article IX thereof.
"Bank Investors" shall have the meaning specified in the Note Purchase
Agreement.
"Belk Center" shall mean The Belk Center, Inc.
"Closing Date" shall mean May 3, 1999.
"Designated Seller" shall have the meaning specified in the Note
Purchase Agreement.
"Eligible Receivable" shall have the meaning specified in the Note
Purchase Agreement.
"Enterprise" shall mean Enterprise Funding Corporation, a Delaware
corporation, and its successors and assigns.
"Event of Bankruptcy" shall have the meaning specified in the Note
Purchase Agreement.
"Guaranty Agreement" shall mean the Guaranty and Security Agreement
dated as of May 3, 1999 by and among the Purchaser, Belk Center, Belk and
NationsBank, N.A., as Agent and as a Bank Investor, as such agreement may be
amended, modified or supplemented from time to time.
"Note Purchase Agreement" shall mean the Note Purchase Agreement, dated
as of May 3, 1999, by and among Belk, Belk Center, as Servicer, Enterprise
Funding Corporation and NationsBank, N.A., as Agent and Bank Investor, as such
agreement may be amended, modified or supplemented from time to time.
"Outstanding Principal Balance" shall have the meaning specified in the
Note Purchase Agreement.
"Purchase Price" shall have the meaning set forth in Section 3.1
hereof.
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"Purchaser" shall mean Belk National Bank, a national banking
association, and its successors and assigns hereunder.
"Receivable" shall mean, for purposes of this Agreement, the
indebtedness owed to the Seller, to Belk or to any Designated Seller by any
Obligor under an Account (whether such Account is in existence as of the Cut-Off
Date or thereafter created), 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, and which in
all cases shall include the right to payment of any Finance Charges and other
obligations of such Obligor with respect thereto.
"Related Security" means with respect to any Receivable, all of the
Seller's rights, title and interest in, to and under:
(1) all of the Seller's interest, if any, in the
merchandise (including returned or repossessed merchandise),
if any, the sale of which gave rise to such Receivable;
(2) 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
Account related to such Receivable or otherwise, together with
all financing statements signed by an Obligor describing any
collateral securing such Receivable;
(3) 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 Account related to such Receivable or
otherwise;
(4) all Records related to such Receivable; and
(5) all Proceeds of any of the foregoing.
"Relevant UCC" shall mean the Uniform Commercial Code as in effect in
the State of New York; provided, however, that if by reason of mandatory
provisions of law, the perfection or non-perfection of a security interest in
any property conveyed hereunder is governed by the Uniform Commercial Code as in
effect in a jurisdiction other than the State of New York, "UCC" shall mean the
Uniform Commercial Code as in effect in such other jurisdiction for purposes of
the provisions hereof relating to such perfection or non-perfection.
"Secured Obligations" shall have the meaning set forth in Section
2.1(d) hereof.
"Termination Date" shall have the meaning specified in Section 4.1.
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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 2
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 sells, assigns, transfers and conveys to the
Purchaser, and the Purchaser hereby purchases from the Seller, on the terms and
subject to the conditions specifically set forth herein, all of the Seller's
right, title and interest, whether now owned or hereafter acquired, in, to and
under the Receivables outstanding on the Closing Date and thereafter owned by
the Seller, through any Termination Date applicable to the Seller (but not
thereafter), together with all Related Security and Collections with respect
thereto and all proceeds of the foregoing. The 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 the Receivables or under any Related Security, Account
Agreement or other agreement and instrument relating to the Receivables. With
respect to Receivables sold by the Seller on the Closing Date, such Receivables
shall be deemed to be all the Receivables of the Seller that exist as of the
close of business on the Closing Date. With respect to Receivables sold by the
Seller after the Closing Date, such Receivables shall be deemed to be all the
Receivables created or acquired by the Seller after the close of business on the
Closing Date.
(1) In connection with the foregoing sale, the Seller agrees
to deliver to the Purchaser on or prior to the Closing Date, a
financing statement or statements with respect to the Receivables and
the other property described in Section 2.1(a) sold by the 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 against all creditors of and purchasers from the Seller.
Any expenses of the filing of such financing statements shall be borne
solely by the Seller.
(2) 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 purchased hereunder or to enable the Purchaser to
exercise or enforce any of its rights hereunder. Without limiting the
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<PAGE> 6
foregoing, the Seller will, in order to accurately reflect this
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 requested by the Purchaser,
and upon the request of the Purchaser, mark its master data processing
records and other documents with a legend describing the purchase by
the Purchaser of the Receivables, and the subsequent grant of a
security interest therein to the Agent pursuant to the Guaranty
Agreement, and stating "THE RECEIVABLES IN THESE FILES HAVE BEEN
ACQUIRED BY AND CONVEYED TO BELK ACCOUNTS RECEIVABLE LLC, AND SUCH
RECEIVABLES HAVE BEEN PLEDGED BY BELK ACCOUNTS RECEIVABLE LLC TO
NATIONSBANK, N.A., AS AGENT FOR THE BENEFIT OF ENTERPRISE FUNDING
CORPORATION AND THOSE CERTAIN BANK INVESTORS PURSUANT TO THE GUARANTY
AND SECURITY AGREEMENT, DATED AS OF MAY 3, 1999, AS AMENDED FROM TIME
TO TIME, AMONG BELK ACCOUNTS RECEIVABLE LLC, THE BELK CENTER, INC. AND
NATIONSBANK, N.A." The Seller shall, upon 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.
(3) It is the express intent of the Seller and the Purchaser
that the conveyance of the 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 or the Purchaser that such conveyance be deemed a grant of a
security interest in the Receivables by the Seller to the Purchaser to
secure a debt or other obligation of the Seller. However, in the event,
that, notwithstanding the express intent of the parties, the
Receivables 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 the Receivables outstanding on the Closing Date and
thereafter owned by the Seller, together with all Related Security and
Collections with respect thereto and all proceeds of the foregoing, to
secure the rights of the Purchaser set forth in this Agreement or as
may be determined in connection therewith by applicable law
(collectively, the "Secured Obligations"). 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 the 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.
SECTION 2.2. Servicing of Receivables. The servicing, administering and
collection of the Receivables shall be conducted by Belk Center, which hereby
agrees to perform,
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take or cause to be taken all such action as may be necessary or advisable to
collect each such Receivable from time to time, all in accordance with
applicable laws, rules and regulations and with the care and diligence which
Belk Center employs in servicing similar receivables, in accordance with the
Credit Guidelines. The Purchaser hereby appoints Belk Center as its agent to
enforce the Purchaser's rights and interests in, to and under the Receivables,
the Related Security and the Collections with respect thereto. Belk Center shall
hold in trust for the Purchaser, in accordance with its interests, all Records
which evidence or relate to the Receivables or Related Security, Collections and
proceeds with respect thereto. Notwithstanding anything to the contrary
contained herein, from and after the occurrence of a Termination Event (other
than a Termination Event described in Section 6.1(o) or 6.1(p) of the Guaranty
Agreement) or a Servicer Default (each as defined in the Guaranty Agreement),
the Agent or Enterprise shall have the absolute and unlimited right to terminate
Belk Center's servicing activities described in this Section 2.2. In
consideration of the foregoing, the Purchaser agrees to pay Belk Center a
servicing fee of 2.00% per annum on the aggregate Outstanding Principal Balance
of Receivables sold, payable monthly, as well as an amount equal to all late
fees, returned check or NSF charges and similar charges received from Obligors
with respect to Receivables, for its performance of the duties and obligations
described in this Section 2.2.
ARTICLE 3
CONSIDERATION AND PAYMENT; COLLATERAL;
ASSURANCE OF ADEQUATE CASH; REPURCHASE OF RECEIVABLES BY BELK
FROM SELLER; SALE OF REPURCHASE RECEIVABLES BY BELK TO THE
PURCHASER; SALE OF CERTAIN RECEIVABLES BY PURCHASER TO BELK
SECTION 3.1. Purchase Price. The Purchase Price for the Receivables and
related property conveyed on any date to the Purchaser by the Seller under this
Agreement shall be a dollar amount equal to:
(1) in the case of Receivables acquired by the Seller
from Belk pursuant to the Receivables Purchase Agreement (the
"Belk Receivables Purchase Agreement") dated as of May 3,
1999, between Belk, Inc. and the Seller, the aggregate
Outstanding Principal Balance of such Receivables, and
(2) in the case of any other Receivables, the
product of (A) 98% and (B) the aggregate Outstanding Principal
Balance of such Receivables.
SECTION 3.2. Payment of Purchase Price. The Purchase Price for the
Receivables sold on any date shall be paid by payment of cash in immediately
available funds to the Seller.
SECTION 3.3. Collateral. In order to secure the payment to the Bank of
the Outstanding Principal Balance of any Receivables owned by the Seller, and to
secure payment by the Purchaser of the Purchase Price for any Receivable
purchased hereunder, Belk and the
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<PAGE> 8
Purchaser hereby agree, jointly and severally, to deliver to or maintain on each
day with the Seller, Collateral (defined below) in an aggregate amount at least
equal to the Outstanding Principal Balance of any Receivables owned by the
Seller on such day. For the purpose of this Agreement, "Collateral" shall mean:
(1) with respect to any Receivables acquired by the Seller
from Belk pursuant to the Belk Receivables Purchase Agreement, cash
collateral; and
(2) with respect to any other Receivables, either cash or
obligations of the United States or any of its agencies (the value of
such obligations being measured by their face amount).
The Purchaser and Belk hereby grant to the Seller a security interest
in the Collateral to secure the repayment to the Seller of any Receivables now
or hereafter owned by the Seller and to secure the Purchase Price for any
Receivables sold hereunder. To the extent the amount of Collateral exceeds the
Outstanding Principal Balance of Receivables owned by the Seller as of [the
close of business on] any day, the Seller shall immediately return such excess
Collateral to Belk or the Purchaser (in accordance with Belk's instructions) and
shall (and is hereby deemed to) release its security interest in such excess
Collateral. The agreements and obligations of Belk, the Purchaser and the Seller
pursuant to this Section 3.3 shall survive any termination of this Agreement.
SECTION 3.4. Assurance of Adequate Cash. Belk hereby agrees that it
will at all times cause the Purchaser to have sufficient cash on hand to pay the
daily Purchase Price of Receivables purchased hereunder.
SECTION 3.5. Repurchase of Receivables by Belk from Seller. Belk hereby
agrees that upon receipt of written notice from the Seller, Belk will purchase
from the Seller any Receivables then owned by the Seller that are identified in
such notice, together with all Related Security and Collections with respect to
such Receivables and all proceeds of the foregoing; and Belk shall pay the
Seller a purchase price for such Receivables and related property equal to the
aggregate Outstanding Principal Balance of such Receivables.
The sale of any Receivables and related property by the Seller to Belk
pursuant to this Section 3.5 shall relieve the Purchaser of the obligation to
purchase such Receivables and related property from the Seller pursuant to this
Agreement. The obligations of Belk and the Seller pursuant to this Section 3.5
shall survive any termination of this Agreement.
SECTION 3.6. Sale of Repurchased Receivables by Belk to Purchaser. To
the extent Belk purchases any Receivable (each, a "Repurchased Receivable") on
any day (a "Repurchase Date") from the Seller pursuant Section 3.5, Belk shall
and does hereby sell, assign, transfer and convey to the Purchaser, as of such
Repurchase Date, all of Belk's right, title and interest in, to and under such
Repurchased Receivable, together with all Related Security and Collections with
respect to such Receivable and all proceeds of the foregoing. The Purchaser
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<PAGE> 9
hereby agrees to purchase each Repurchased Receivable and related property from
Belk on the respective Repurchase Date, and to pay Belk on such date a purchase
price therefor in the amount of the Outstanding Principal Balance of such
Receivable.
SECTION 3.7. Sale of Certain Receivables by Purchaser to Belk. Belk
hereby agrees that, on any day, upon written request by the Purchaser, Belk will
purchase from the Purchaser any Receivables then owned by the Purchaser that are
at least 210 days past due, together with all Related Security and Collections
with respect to such Receivables and all proceeds of the foregoing; and Belk
shall pay to the Purchaser a purchase price for such Receivables and related
property equal to the aggregate Outstanding Principal Balance of such
Receivables.
ARTICLE 4
TERM AND TERMINATION
SECTION 4.1. 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 close
of business on the third Business Day following a conveyance of Receivables by
the Seller to the Purchaser for which the Purchaser does not pay the Purchase
Price in accordance with the provisions hereof, (iii) upon the occurrence of an
Event of Bankruptcy with respect to the Seller, (iv) the date on which either
the Purchaser or the Seller defaults on its obligations hereunder, which default
continues unremedied for more than thirty (30) days after written notice, or (v)
upon the occurrence of an Event of Bankruptcy with respect to the Purchaser (any
such date described above, being a "Termination Date") ; provided, however, that
the termination of this Agreement pursuant to this Section 4.1 shall not
discharge any Person from any obligations incurred prior to such termination,
including, without limitation, any obligations to make any payments with respect
to the interest of the Purchaser in any Receivable sold prior to such
termination.
SECTION 4.2. Effect of Termination. Following the termination of this
Agreement pursuant to Section 4.1, the Seller shall not sell, and the Purchaser
shall not purchase, any Receivables from the Seller. 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. Without limiting the foregoing, prior to termination, the failure
of the Seller to deliver computer records of Receivables or any reports
regarding the Receivables shall not render such transfer or obligation
executory, nor shall the continued duties of the parties pursuant to Section 5.1
of this Agreement render an executed sale executory.
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ARTICLE 5
MISCELLANEOUS PROVISIONS
SECTION 5.1. 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 an amendment to this Agreement.
SECTION 5.2. GOVERNING LAW; Submission to Jurisdiction.
(1) THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK.
(2) The parties hereto hereby submit to the nonexclusive
jurisdiction of the United States District Court for the Western
District of North Carolina and of any North Carolina state court
sitting in Mecklenburg County 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 5.2 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 5.3. 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 5.3 and confirmation is received, (ii)
if given by mail three Business Days following such posting, postage prepaid,
U.S. certified or registered, (iii) if given by overnight courier, one 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
5.3.
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If to the Purchaser:
Belk Accounts Receivable LLC
c/o Belk, Inc.
2801 West Tyvola Road
Charlotte, North Carolina 28217
Telephone: (704) 357-1064, ext: 4273
Telecopy: (704) 357-0711
Attn: Terry L. Scott
with a copy to:
NationsBank, N.A.
Bank of America Corporate Center
100 North Tryon Street
NC1-007-10-07
Charlotte, NC 28255
Attention: Michelle M. Heath, Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
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If to the Seller:
Belk National Bank
2801 West Tyvola Road
Charlotte, North Carolina 28217
Telephone: (704) 357-1064, ext: 4273
Telecopy: (704) 357-8052
Attn: James M. Berry
If to Belk:
Belk, Inc.
2801 West Tyvola Road
Charlotte, North Carolina 28217
Telephone: (704) 357-1064, ext: 4273
Telecopy: (704) 357-0711
Attn: Terry L. Scott
with a copy to:
NationsBank, N.A.
Bank of America Corporate Center
100 North Tryon Street
NC1-007-10-07
Charlotte, NC 28255
Attention: Michelle M. Heath, Structured Finance
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
If to the Servicer:
The Belk Center, Inc.
2801 West Tyvola Road
Charlotte, North Carolina 28217
Telephone: (704) 357-1064, extension 7000
Telecopy: (704) 357-1861
Attn: Oakley Orser
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party.
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SECTION 5.4. 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 5.5. Assignment. This Agreement may not be assigned by the
parties hereto, except that the Purchaser may assign its rights hereunder
pursuant to the Guaranty Agreement to the Agent, for the benefit of Enterprise
and the Bank Investors, and that Enterprise may assign any or all of its rights
to any Liquidity Provider and may grant a security interest in its rights
hereunder to the Collateral Agent. The Purchaser hereby notifies the Seller that
(and the Seller hereby acknowledges that), pursuant to the Guaranty Agreement,
the Purchaser has assigned its rights hereunder to the Agent for the benefit of
Enterprise and the Bank Investors.
SECTION 5.6. 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 for filing under the provisions
of the Relevant UCC or other laws of any applicable jurisdiction.
SECTION 5.7. 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 5.8. 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 5.9. Binding Effect. 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 Enterprise and the Bank Investors, is
an intended third-party beneficiary of the Seller's obligations hereunder.
SECTION 5.10. 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.
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This Agreement may not be modified, amended, waived or supplemented except as
provided herein.
SECTION 5.11. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
[Signatures appear on the following page.]
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IN WITNESS WHEREOF, the Purchaser, the Seller and the Servicer each
have caused this Receivables Purchase Agreement to be duly executed by their
respective officers as of the day and year first above written.
BELK NATIONAL BANK,
AS THE SELLER
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
BELK ACCOUNTS RECEIVABLE
LLC, AS PURCHASER
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
BELK, INC.
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
THE BELK CENTER, INC.,
AS SERVICER
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
SIGNATURE PAGE 1
<PAGE> 1
GUARANTY AND SECURITY AGREEMENT
GUARANTY AND SECURITY AGREEMENT, dated as of May 3, 1999 (as the same
may from time to time be amended, supplemented or otherwise modified, this
"AGREEMENT"), between Belk Accounts Receivable LLC, a North Carolina limited
liability company (the "GUARANTOR"), The Belk Center, Inc., a North Carolina
corporation, as servicer (the "SERVICER"), Belk, Inc. (the "Debtor") and
NationsBank, N.A., a national banking association ("NATIONSBANK"), as agent for
Enterprise Funding Corporation (the "COMPANY") and the Bank Investors party to
the Note Purchase Agreement from time to time (in such capacity, the "AGENT")
and as a Bank Investor.
W I T N E S S E T H:
WHEREAS, the Debtor has issued the Note to the Agent, on
behalf of the Company and the Bank Investors, and will be obligated to the
holders of such Note to pay the principal of and interest on such Note in
accordance with the terms thereof;
WHEREAS, the Guarantor, an indirect, wholly-owned Subsidiary
of the Debtor; and
WHEREAS, in consideration for the Debtor's promise to
contribute or lend (directly or indirectly) to the Guarantor certain loan
proceeds received by the Debtor pursuant to the Note Purchase Agreement, the
Guarantor is willing to (i) guarantee the payment and performance by the Debtor
of its obligations under the Note, and (ii) grant a security interest in the
Collateral to the Agent, for the benefit of the Company and the Bank Investors,
to secure the payment and performance by the Guarantor of its obligations under
this Guaranty and Security Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
<PAGE> 2
ARTICLE I
DEFINITIONS
Section 1.1 Defined Terms. As used herein, capitalized terms
defined in the Note Purchase Agreement and not otherwise defined herein are used
herein as so defined.
"AGREEMENT" has the meaning specified in the preamble hereto.
"COLLATERAL" shall have the meaning assigned to it in Section
2.1 hereof.
"DEBTOR COLLATERAL" shall have the meaning assigned to it in
Section 2.1.
"LIEN" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever for the purpose of security,
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing and the filing of any financing statement under the UCC
(other than any such financing statement filed for informational purposes only)
or comparable law of any jurisdiction to evidence any of the foregoing.
"NOTE PURCHASE AGREEMENT" shall mean that certain Note
Purchase Agreement, dated as of May 3, 1999, by and among the Debtor, the
Servicer, the Company, the Agent and NationsBank, as a Bank Investor, as
amended, supplemented or otherwise modified from time to time.
"TERMINATION EVENT" shall mean the events specifically in
Section 6.1(a) hereof.
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ARTICLE II
GRANT OF SECURITY INTERESTS
SECTION 1.2 GRANT OF SECURITY INTEREST. In order to secure the
Guarantor's obligations to Agent, on behalf of the Company and the Bank
Investors, pursuant to this Agreement and the other Transaction Documents, the
Guarantor hereby grants to the Agent, on behalf of the Company and the Bank
Investors, a security interest in and continuing Lien on all of the Guarantor's
right, title and interest in, to and under the following, in each case, whether
now owned or existing or hereafter acquired or arising, and wherever located
(all of which being hereinafter collectively called the "COLLATERAL"): all
accounts, contract rights, general intangibles, chattel paper, instruments,
documents, money, cash, deposit accounts, certificates of deposit, goods,
letters of credit, securities, investment property, financial assets or security
entitlements, which Collateral includes, but is not limited to, all Receivables
existing on the Cut-Off Date and thereafter, together with Related Security,
Collections and Proceeds with respect thereto, now or hereafter existing.
In order to secure the Debtor's obligations to Agent, on
behalf of the Company and the Bank Investors, pursuant to this Agreement, the
Note Purchase Agreement and the other Transaction Documents, the Debtor hereby
grants to the Agent, on behalf of the Company and the Bank Investors, a security
interest in and continuing Lien on all of the Debtor's right, title and interest
in, to and under the following, in each case whether now owned or existing or
hereafter acquired or arising, and wherever located (all of which being
hereinafter called the "Debtor Collateral"): all Receivables existing on the
Cut-Off Date and thereafter, together with Related Security, Collections and
Proceeds with respect thereto, now or hereafter existing.
SECTION 1.3 PROTECTION OF SECURITY INTEREST.
(1) Each of the Guarantor and the Debtor agrees that it will,
and the Debtor agrees that it will cause the Bank 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 Agent's security interest in the Collateral and the
Debtor Collateral 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, each of the Guarantor and the Debtor will, and the Debtor will
cause the Bank to, upon the request of the Agent, the Company or any of the Bank
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<PAGE> 4
Investors, in order to accurately reflect this grant of a security interest,
execute and file such financing or continuation statements or amendments thereto
or assignments thereof as may be requested by the Agent, the Company or any of
the Bank Investors. Each of the Guarantor and the Debtor shall, and the Debtor
shall cause the Bank to, upon 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 Guarantor's or the Debtor's signature; PROVIDED, HOWEVER, that the Agent
shall not file any continuation, amendment or assignment of a financing
statement, which absent the provisions of this Agreement would otherwise require
the Guarantor's or the Debtor's signature, unless the Agent shall have requested
the Guarantor or the Debtor as applicable, to take such action (or cause such
action to be taken) pursuant to this Section 2.2(a) and the Guarantor or the
Debtor as applicable, shall have failed to do so with in a reasonable period of
time after such request. Carbon, photographic or other reproduction of this
Agreement or any financing statement shall be sufficient as a financing
statement.
Each of the Guarantor and the Debtor (with respect to Debtor
Receivables) agrees that it will, and the Debtor agrees that it will cause the
Bank to, at its expense, on or prior to the Closing Date indicate clearly and
unambiguously in its master data processing records and on any storage
containers containing Records that the Receivables created in connection with
the Accounts have been pledged to the Agent, for the benefit of the Company and
the Bank Investors, pursuant to this Agreement by affixing thereon the following
legend: "THE RECEIVABLES IN THESE FILES HAVE BEEN PLEDGED TO NATIONSBANK, N.A.,
AS AGENT, FOR THE BENEFIT OF ENTERPRISE FUNDING CORPORATION AND THOSE CERTAIN
BANK INVESTORS PURSUANT TO THE GUARANTY AND SECURITY AGREEMENT DATED AS OF MAY
3, 1999, AS AMENDED FROM TIME TO TIME, AMONG BELK ACCOUNTS RECEIVABLE LLC, BELK,
INC., THE BELK CENTER, INC., AND NATIONSBANK, N.A." Each of the Guarantor and
the Debtor (with respect to Debtor Receivables) further agrees to deliver or to
cause the Servicer to deliver to the Agent a computer file or microfiche list
containing a true and complete list of all such Receivables, identified by
account number and by Receivable balance as of the Cut-Off Date. Each of the
Guarantor and the Debtor (with respect to Debtor Receivables) agrees to deliver
or to cause the Servicer to deliver to the Agent within five (5) Business Days
of the request therefor by the Agent a computer file or microfiche list showing
a true and complete balance of all Receivables, including all Receivables
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<PAGE> 5
created on or after the Cut-Off Date, in existence as of the last day of the
prior Collection Period, identified by account number and by Receivable balance
as of such day. The Servicer agrees, on behalf of the Guarantor and the Debtor
(with respect to Debtor Receivables), at its own expense, by the end of each
Collection Period to indicate clearly and unambiguously in its master data
processing records and any storage containers containing Records that the
Receivables have been pledged to the Agent, for the benefit of the Company and
the Bank Investors, pursuant to this Agreement.
Neither the Guarantor nor the Debtor shall, nor shall the
Debtor permit the Bank 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, Georgia and North Carolina) nor relocate its respective
chief executive office or any office where Records are kept unless it shall
have: (i) given the Agent at least fifteen (15) days prior notice thereof and
(ii) prepared at Guarantor's or the Debtor's expense and delivered to the Agent
all financing statements, instruments and other documents necessary to preserve
and protect the Agent's security interest in the Collateral and the Debtor
Collateral or reasonably requested by the Agent in connection with such change
or relocation. Any filings under the applicable UCC or otherwise that are
occasioned by such change in name or location shall be made at the expense of
the Guarantor or the Debtor, as applicable.
(2) The Servicer shall direct all Obligors to cause all
Collections to be mailed directly to a Post Office Box or remitted to retail
store locations owned by the Debtor or a Designated Seller. Each Post Office Box
shall be under the exclusive dominion and control of the Agent which is hereby
granted to the Agent by the Servicer. The Servicer shall be permitted to collect
Collections from any Post Office Box for so long as neither a Servicer Default
nor any other Termination Event has occurred hereunder. The Servicer shall not
terminate a Post Office Box or add any new Post Office Box unless the Agent
shall have received thirty (30) days' prior written notice of such termination
or addition and the Agent shall have received a Post Office Box Agreement with
respect to each new Post Office Box, executed by the Servicer and the
appropriate United States Postal Service official.
(3) Unless the Servicer is denied access to such Post Office
Box pursuant to the respective Post Office Box Agreement or otherwise through no
fault of the Servicer, the Servicer shall deposit all Collections received at a
Post Office Box in a Servicer Account promptly, but in any event within two (2)
Business Days of receipt. In the event any Servicer Account shall be proposed to
be closed, the Servicer shall remove all Collections held in such Servicer
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Account to another Servicer Account. Each Servicer Account shall be under the
exclusive ownership and control of the Agent which is hereby granted to the
Agent by the Servicer. The Servicer shall be permitted to give instructions to
any Servicer Account Bank for so long as neither a Servicer Default nor any
other Termination Event has occurred hereunder. The Servicer shall not terminate
any bank as a Servicer Account Bank or add any bank as a Servicer Account Bank
unless the Agent shall have received fifteen (15) days' prior written notice of
such termination or addition and the Agent shall have received a Servicer
Account Agreement executed by each new Servicer Account Bank or an existing
Servicer Account Bank with respect to each new Servicer Account, as applicable.
(4) Unless the Servicer is denied access, either pursuant to
the respective Post Office Box Agreement or otherwise through no fault of the
Servicer, to the Post Office Box where such Collections are held, the Servicer
shall deposit all Collections into the Guarantor Account or, if required by this
Agreement, into the Collection Account within ten (10) days of the initial
receipt of such Collections by the Servicer.
SECTION 1.4 REPORTS. On each Determination Date, the Servicer
shall prepare and forward to the Agent and the Administrative Agent (i) a
Servicer Report as of the end of the last day of the immediately preceding
Collection Period, and (ii) such other information as the Agent or the
Administrative Agent may reasonably request.
SECTION 1.5 COLLECTION ACCOUNT. There shall be established on
the day of the initial Advance under the Note Purchase Agreement and maintained,
for the benefit of the Company and the Bank Investors, 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
Company and the Bank Investors. Upon the occurrence and during the continuance
of (i) a Servicer Default or (ii) a Termination Event (other than one arising
under Section 6.1(o) or (p)), the Servicer shall remit as promptly as possible
and in any event prior to the close of business on the tenth day following
receipt to the Collection Account all Collections received with respect to any
Receivables; if no such event has occurred and is continuing, the Servicer, to
the extent it holds such funds, shall be permitted to retain such funds, or
deliver such funds to the Debtor or the Guarantor, as applicable. Funds on
deposit in the Collection Account (other than investment earnings) shall be
invested by the Agent in Eligible Investments that will mature so that such
funds will be available prior to the Remittance Date following such investment.
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On the date following the Termination Date on which the Net Investment and all
other Aggregate Unpaids have been paid in full, any funds remaining on deposit
in the Collection Account shall be released and paid to the Guarantor.
SECTION 1.6 GUARANTY AND PAYMENT OBLIGATIONS.
(a) In consideration for the Debtor's promise pursuant to the
Note Purchase Agreement to contribute or lend (directly or indirectly) to the
Guarantor certain loan proceeds received by the Debtor pursuant to the Note
Purchase Agreement, the Guarantor unconditionally guarantees to the Agent, for
the benefit of the Company and the Bank Investors, (i) the full and prompt
payment when due of all of the payment obligations of the Debtor, of every kind
and nature now or hereafter existing, or due or to become due, under the Note
Purchase Agreement and the Note, and (ii) the full and prompt payment when due
of all of the payment obligations of the Debtor, of every kind and nature now or
hereafter existing, or due or to become due, under the Fee Letter and all other
Transaction Documents (the "OBLIGATIONS").
(b) The Guarantor shall also pay all reasonable costs and
expenses including, without limitation, all court costs and attorney's fees and
expenses paid or incurred by the Agent in connection with (i) the collection of
all or any part of the Obligations from the Guarantor and (ii) the prosecution
or defense of any action by or against the Agent in connection with the
Obligations whether involving the Debtor, the Guarantor or any other party
including a trustee in bankruptcy, except, in each case, to the extent resulting
from the gross negligence or willful misconduct of the Company, any Bank
Investor or the Agent.
(c) All amounts payable to the Agent by the Guarantor pursuant
to clauses (i) and (ii) above shall be remitted on demand in immediately
available funds to the Agent for the account of the Company and the Bank
Investors.
(d) In the event that payments made by the Guarantor to the
Agent shall be subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to the Guarantor or its
trustee in bankruptcy by the Company, any Bank Investor or any other Person
entitled thereto, the Guarantor hereby agrees to indemnify and hold each such
Person, as applicable, harmless in respect of any such reversed payment.
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(e) The Guarantor agrees that its obligations under this
Agreement shall be unconditional, irrespective of (i) the validity,
enforceability, discharge (other than by payment in full), disaffirmance,
settlement or compromise (by any Person, including a trustee in bankruptcy) of
(A) the Obligations, or (B) the Note Purchase Agreement or the Note, (ii) the
absence of any attempt to collect the Obligations from the Debtor or any
guarantor, (iii) the waiver or consent by the Agent, the Company or any Bank
Investor with respect to any provision of any instrument evidencing the
Obligations, (iv) any change of the time, manner or place of payment or
performance, or any other term of any of the Obligations, (v) any law,
regulation or order of any jurisdiction affecting any term of any of the
Obligations or rights of the Agent, the Company or any Bank Investor with
respect thereto, (vi) the failure by the Agent, on behalf of the Company and the
Bank Investors, to take any steps to perfect and maintain perfected its interest
in the Collateral or the Debtor Collateral or any other security or collateral
related to the Obligations or (vii) any other circumstances which might
otherwise constitute a legal or equitable discharge or defense of a guarantor,
including without limitation any right to require or claim that resort be had to
the Debtor or any other Person or to any collateral in respect of the
Obligations, whether arising under North Carolina General Statutes Section 26-7
and 26-9 or otherwise. The Guarantor agrees that none of the Agent, the Company
or any Bank Investor shall be under any obligation to marshall any assets in
favor of or against or in payment of any or all of the Obligations. The
Guarantor waives all set-offs and counterclaims and all presentments, demands
for performance, notices of dishonor and notices of acceptance of this
Agreement. The Guarantor agrees that its obligations under this Agreement shall
be irrevocable.
SECTION 1.7 LIQUIDATION SETTLEMENT PROCEDURES. Following the
date on which the Net Investment shall be reduced to zero and all other
Aggregate Unpaids have been paid in full, (i) the Servicer shall recompute the
Noteholder's Percentage as zero, (ii) the Agent, on behalf of the Company and
the Bank Investors, shall be considered to have released all of the Company's
and the Bank Investors' right, title and interest in and to the Collateral and
the Debtor Collateral, (iii) the Servicer shall pay to the Debtor or the
Guarantor, as applicable, any remaining Collections set aside and held by the
Servicer and (iv) the Agent, on behalf of the Company and the Bank Investors,
shall execute and deliver to the Debtor, at the Debtor's expense, such documents
or instruments as are necessary to terminate the Company's and the Bank
Investors' respective interests in the Collateral and the Debtor Collateral. Any
such documents shall be prepared by or on behalf of the Debtor or the Guarantor,
as applicable.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 1.8 REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR.
The Guarantor represents and warrants to the Agent, the Company and the Bank
Investors that:
(1) CORPORATE EXISTENCE AND POWER. The Guarantor is a limited
liability company duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization 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. The Guarantor 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 be so qualified or
in good standing would not have a Material Adverse Effect.
(2) CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION.
The execution, delivery and performance by the Guarantor of this Agreement, the
Receivables Purchase Agreements to which the Guarantor is a party and the other
Transaction Documents to which the Guarantor is a party are within the
Guarantor'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 by Section 2.2
hereof), and do not contravene, or constitute a default under, any provision of
applicable law, rule or regulation or of the articles of organization or
operating agreement of the Guarantor or of any agreement, judgment, injunction,
order, writ, decree or other instrument binding upon the Guarantor or result in
the creation or imposition of any Adverse Claim on the assets of the Guarantor
or any of its Subsidiaries (except as contemplated by Section 2.2 hereof or any
other provision of this Agreement or any other Transaction Document).
(3) BINDING EFFECT. Each of this Agreement, the Receivables
Purchase Agreements to which the Guarantor is a party and the other Transaction
Documents to which the Guarantor is a party constitutes the legal, valid and
binding obligation of the Guarantor, enforceable against it in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium or other
similar laws affecting the rights of creditors generally.
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(4) PERFECTION. The Guarantor shall be the owner of all of the
Receivables (other than Debtor Receivables), free and clear of all Adverse
Claims (except as permitted by this Agreement or the other Transaction
Documents). All financing statements and other documents required to be recorded
or filed in order to perfect and protect the Agent's security interest in the
Collateral against all creditors of and purchasers from the Debtor, any
Designated Seller, the Guarantor and the Bank have been, or will, within ten
(10) days of the date hereof be, duly filed in each filing office necessary for
such purpose and all filing fees and taxes, if any, payable in connection with
such filings have been, or will, within ten (10) days of the date hereof be,
paid in full.
(5) ACCURACY OF INFORMATION. All information heretofore
furnished by the Guarantor to the Company, any Bank Investors, the Agent or the
Administrative Agent for purposes of or in connection with this Agreement, the
Note Purchase Agreement or any transaction contemplated hereby or thereby is,
and all such information hereafter furnished by the Guarantor to the Company,
any Bank Investors, the Agent or the Administrative Agent will be, true and
accurate in every material respect, on the date such information is stated or
certified.
(6) TAX STATUS. The Guarantor 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, assessments and other governmental
charges.
(7) ACTION, SUITS.
(x) Except as set forth in Exhibit A hereof (as such
exhibit may be amended from time to time), there are no actions, suits
or proceedings pending, or to the knowledge of the Guarantor
threatened, against or affecting the Guarantor or its properties, in or
before any court, arbitrator or other body, (i) asserting the
invalidity of any Transaction Document, (ii) seeking to prevent the
consummation of any of the transactions contemplated by any Transaction
Document, (iii) seeking any determination or ruling that, in the
judgment of the Guarantor, would materially and adversely affect the
performance of its obligations under any Transaction Document to which
it is a party or materially and adversely affect the collectibility of
the Receivables as a whole, or (iv) seeking any determination or ruling
that would materially and adversely affect the validity or
enforceability of any Transaction Document.
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(y) Except as set forth in Exhibit A hereof (as such
exhibit may be amended from time to time), there are no actions, suits
or proceedings pending, or to the knowledge of the Guarantor
threatened, against or affecting the Bank or the Bank's respective
properties, in or before any court, arbitrator or other body, (i)
asserting the invalidity of any Transaction Document, (ii) seeking to
prevent the consummation of any of the transactions contemplated by any
Transaction Document, (iii) seeking any determination or ruling that,
in the judgment of the Guarantor, would materially and adversely affect
the performance of the Bank's obligations under any Transaction
Document to which it is a party or materially and adversely affect the
collectibility of the Receivables as a whole, or (iv) seeking any
determination or ruling that would materially and adversely affect the
validity or enforceability of any Transaction Document.
(z) Except as set forth in Exhibit A hereof (as such
exhibit may be amended from time to time), there are no outstanding
judgments in any court against the Guarantor or the Bank (for which any
such party is solely responsible or is responsible jointly with other
Persons) in excess of $1,000,000 individually.
(8) USE OF PROCEEDS. No proceeds of any Advance will be used
by the Guarantor to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(9) PLACE OF BUSINESS. The principal place of business and
chief executive office of the Guarantor are located at the address of the
Guarantor indicated in Section 7.1 hereof and the offices where the Guarantor
keeps all its Records, are located at the address(es) described on Exhibit B or
such other locations notified to the Agent in accordance with Section 2.2 hereof
in jurisdictions where all action required by Section 2.2 hereof has been taken
and completed.
(10) GOOD TITLE. Upon the filing of the appropriate financing
statements as required by this Agreement and/or the Note Purchase Agreement, the
Agent on behalf of the Company and the Bank Investors shall have or acquire a
first priority perfected security interest in the Receivables existing on the
date of the Closing Date and thereafter and in the Related Security and
Collections with respect thereto free and clear of any Adverse Claim.
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(11) TRADENAMES, ETC. As of the date hereof: (i) the Guarantor
has no subsidiaries or divisions; and (ii) the Guarantor has, within the last
five (5) years, not operated under any tradename, and, within the last five (5)
years, has not changed its name, merged with or into or consolidated with any
other corporation or been the subject of any proceeding under Title 11, United
States Code (Bankruptcy).
(12) NATURE OF RECEIVABLES. Each Receivable (x) represented by
the Guarantor or the Servicer to be an Eligible Receivable (including in any
Servicer Report or other report delivered pursuant to Section 2.3 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 is an
"eligible asset" as defined in Rule 3a-7 under the Investment Company Act, of
1940, as amended.
(13) COVERAGE REQUIREMENT; AMOUNT OF RECEIVABLES. The
Guarantor's Percentage is not less than the Minimum Guarantor's Percentage. As
of the Cut-Off Date, the aggregate Outstanding Principal Balance of the
Receivables in existence was $299,867,436.32, the aggregate balance of Finance
Charges was $13,773,645.67, and the Net Receivable Balance was $299,867,436.32.
(14) RATIOS. The Default Ratio and the Delinquency Ratio have
not exceeded 8% and 7.5%, respectively, for the 3 months prior to the Cut-Off
Date.
(15) NO TERMINATION EVENT. No event has occurred and is
continuing and no condition exists which constitutes a Termination Event or a
Potential Termination Event.
(16) NOT AN INVESTMENT COMPANY. The Guarantor 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.
(17) ERISA. Each of the Guarantor and its ERISA Affiliates is
in compliance in all material respects with ERISA and no lien exists in favor of
the Pension Benefit Guaranty Corporation on any of the Receivables.
(18) SERVICER ACCOUNTS. The names and addresses of all the
Servicer Account Banks, together with the account numbers of the Servicer
Accounts at such Servicer Account Banks, are specified in Exhibit C hereto (or
at such other Servicer Account Banks and/or with such other Servicer Accounts as
have been notified to the Agent and for which Servicer Account Agreements have
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been executed in accordance with Section 2.2(c) hereof and delivered to the
Agent). Only Collections are deposited into the Servicer Accounts.
(19) BULK SALES. No transaction contemplated by any
Receivables Purchase Agreement requires compliance with any bulk sales act or
similar law.
(20) TRANSFERS UNDER RECEIVABLES PURCHASE AGREEMENT. Each
Receivable which has been transferred to the Guarantor by the Bank has been
purchased by the Guarantor from the Bank pursuant to, and in accordance with,
the terms of the applicable Receivables Purchase Agreement.
SECTION 1.9 REPRESENTATIONS AND WARRANTIES OF THE SERVICER.
The Servicer represents and warrants to the Agent, the Company and the Bank
Investors that:
(1) CORPORATE EXISTENCE AND POWER. The Servicer is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of 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. 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 be so qualified or
in good standing would not have a Material Adverse Effect.
(2) CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION.
The execution, delivery and performance by the Servicer of this Agreement and
the other Transaction Documents to which it is a party 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 governmental body,
agency or official (except as contemplated by Section 2.2), and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the charter or Bylaws of the Servicer or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Servicer or result in the creation or imposition of any lien on assets of the
Servicer or any of its Subsidiaries (except as contemplated by Section 2.2 or
any other provision of this Agreement or any other Transaction Document).
(3) BINDING EFFECT. This Agreement and each other Transaction
Document to which the Servicer is a party constitutes the legal, valid and
binding obligation of the Servicer enforceable in accordance with its terms,
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subject to applicable bankruptcy, insolvency, moratorium or other similar laws
affecting the rights of creditors generally.
(4) ACCURACY OF INFORMATION. All information heretofore
furnished by the Servicer in writing to the Guarantor, the Debtor, the Company,
any Bank Investor, the Agent or the Administrative Agent for purposes of or in
connection with this Agreement or the Note Purchase Agreement or any transaction
contemplated hereby or thereby is, and all such information hereafter furnished
by the Servicer to the Guarantor, the Debtor, the Company, any Bank Investor,
the Agent or the Administrative Agent will be, true and accurate in every
material respect, on the date such information is stated or certified.
(5) TAX STATUS. The Servicer 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, assessments and other governmental
charges.
(6) ACTION, SUITS.
(x) Except as set forth in Exhibit A hereof (as such
exhibit may be amended from time to time), there are no actions, suits
or proceedings pending, or to the knowledge of the Servicer threatened,
against or affecting the Servicer or its properties, in or before any
court, arbitrator or other body, (i) asserting the invalidity of any
Transaction Document, (ii) seeking to prevent the consummation of any
of the transactions contemplated by any Transaction Document, (iii)
seeking any determination or ruling that, in the judgment of the
Servicer, would materially and adversely affect the performance of the
Servicer's obligations under any Transaction Document to which it is a
party or materially and adversely affect the collectibility of the
Receivables as a whole, or (iv) seeking any determination or ruling
that would materially and adversely affect the validity or
enforceability of any Transaction Document.
(y) Except as set forth in Exhibit A hereof (as such
exhibit may be amended from time to time), there are no outstanding
judgments in any court against the Servicer (for which either the
Servicer is solely responsible or the Servicer is responsible jointly
with other Persons) in excess of $1,000,000 individually.
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(7) COLLECTIONS AND SERVICING. Since August 22, 1997, there
has been no material adverse change in the ability of the Servicer to service
and collect the Receivables and no material adverse change has occurred in the
overall rate of collections of Receivables.
(8) NOT AN INVESTMENT COMPANY. The Servicer is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, or is exempt from all provisions of such Act.
(9) ERISA. The Servicer is in compliance in all material
respects with ERISA.
(10) SERVICER ACCOUNTS. The names and addresses of all the
Servicer Account Banks, together with the account numbers of the Servicer
Accounts at such Servicer Account Banks, are specified in Exhibit C (or at such
other Servicer Account Banks and/or with such other Servicer Accounts as have
been notified to the Guarantor and the Agent and for which Servicer Account
Agreements have been executed in accordance with Section 2.2(c) hereof and
delivered to the Agent). Only Collections are deposited into the Servicer
Accounts.
(11) POST OFFICE BOXES. The names and addresses of all the
Post Office Boxes are specified in Exhibit D (or at such other Post Office Boxes
as have been notified to the Guarantor and the Agent and for which Post Office
Box Agreements have been executed in accordance with Section 2.2(b) hereof and
delivered to the Agent). All Obligors have been directed to make payment to a
Post Office Box or to retail store locations owned by the Debtor or a Designated
Seller.
(12) CREDIT GUIDELINES. Since November 21, 1997, there have
been no material changes in the Credit Guidelines other than as permitted
hereunder. Since such date, no material adverse change has occurred in the
overall rate of collection of the Receivables.
SECTION 1.10 REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES
BY THE GUARANTOR AND SERVICER. On each day that an Advance is made under the
Note Purchase Agreement, the Guarantor and the Servicer shall be deemed to have
certified that all of their respective representations and warranties described
in Sections 3.1 and 3.2 hereof are correct on and as of such day as though made
on and as of such day, provided that the representations set forth in Section
3.1(g) and 3.2(f)(x) hereof shall be deemed made only on and as of the Closing
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Date and on each January 1, April 1, July 1 and October 1 of each calendar year
(whether or not any such date is an Advance Date).
ARTICLE IV
COVENANTS
SECTION 1.11 AFFIRMATIVE COVENANTS OF THE GUARANTOR. At all
times from the date hereof to the later to occur of (i) the Termination Date or
(ii) the date on which the Net Investment and all other Aggregate Unpaids have
been paid in full, in cash, unless the Agent shall otherwise consent in writing:
(1) FINANCIAL REPORTING. The Guarantor will maintain a system
of accounting established and administered substantially in accordance with
GAAP, and furnish to the Agent:
(1) NOTICE OF TERMINATION EVENTS OR POTENTIAL
TERMINATION EVENTS. As soon as possible and in any event within two (2)
Business Days after the Guarantor has actual knowledge of the
occurrence of each Termination Event or each Potential Termination
Event, a statement of the Chief Financial Officer of the Guarantor
setting forth details of such Termination Event or Potential
Termination Event, and within five (5) Business Days after such notice,
an additional notice detailing the action which the Guarantor or the
Debtor proposes to take with respect thereto.
(2) CHANGE IN CREDIT GUIDELINES. Within ten (10) days
after the date any material change in or amendment to the Credit
Guidelines is made, a copy of the Credit Guidelines then in effect
indicating such change or amendment.
(3) CREDIT GUIDELINES. Promptly upon the request of
the Agent, a complete copy of the Credit Guidelines then in effect.
(4) ERISA. Promptly after the filing or receiving
thereof, copies of all reports and notices with respect to any
Reportable Event (as defined in Article IV of ERISA) which the
Guarantor or any ERISA Affiliate of the Guarantor files under ERISA
with the Internal Revenue Service, the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or which the Guarantor or
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any ERISA Affiliate of the Guarantor receives from the Internal Revenue
Service, the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor.
(5) 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 Guarantor or any Subsidiary of the Guarantor.
(2) CONDUCT OF BUSINESS. The Guarantor will carry on and
conduct its business in substantially the same manner and in substantially the
same fields of enterprise as it is intended to be conducted as of the Closing
Date and do all things necessary to remain duly incorporated or organized,
validly existing and in good standing as a limited liability company in its
jurisdiction of organization and maintain all requisite authority to conduct its
business in each jurisdiction in which its business is conducted.
(3) COMPLIANCE WITH LAWS. The Guarantor 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 comply would not have a Material Adverse Effect.
(4) FURNISHING OF INFORMATION AND INSPECTION OF RECORDS. The
Guarantor will furnish to the Agent from time to time such information with
respect to the Receivables as the Agent may reasonably request. The Guarantor
will, at any time and from time to time during regular business hours permit 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 Guarantor for the purpose of examining such Records, and to discuss matters
relating to Receivables or the Guarantor's performance hereunder and under the
other Transaction Documents to which Guarantor is a party with any of the
officers, directors, employees or independent public accountants of the
Guarantor having knowledge of such matters.
(5) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Guarantor
will 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 identification as of each Cycle Date of each new
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Receivable and all Collections of and adjustments to each existing Receivable).
The Guarantor will give the Agent notice of any material change in the
administrative and operating procedures of the Guarantor referred to in the
previous sentence.
(6) PERFORMANCE AND COMPLIANCE WITH ACCOUNTS. The Guarantor,
at its expense, will timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by the
Guarantor under the Accounts related to the Receivables.
(7) CREDIT GUIDELINES. The Guarantor will comply in all
material respects with the Credit Guidelines in regard to each Receivable and
the related Account.
(8) COLLECTIONS. The Guarantor shall, or shall cause the
Servicer to, direct all Obligors to cause all Collections to be mailed directly
to a Post Office Box or delivered to retail store locations owned by the Debtor
or a Designated Seller.
(9) COLLECTIONS RECEIVED. The Guarantor shall hold in trust,
and remit, immediately, but in any event not later than three (3) Business Days
of its receipt thereof, to the Servicer all Collections received from time to
time by the Guarantor.
(10) INVENTORY FINANCINGS. The Guarantor shall specifically
exclude from the property subject to any Adverse Claim granted on inventory any
and all accounts receivable generated by sales of such inventory and the
proceeds thereof, and shall provide evidence, in each case satisfactory to the
Agent, that any and all accounts receivable generated by sales of such inventory
and the proceeds thereof shall have been excluded from any such Adverse Claims.
(11) YEAR 2000. The Guarantor has taken all action deemed
reasonably necessary by the Guarantor to assure that the Guarantor's computer
based systems are able to operate and effectively process data, including dates,
on and after January 1, 2000. At the request of the Agent, the Guarantor will
provide the Agent with assurances reasonably acceptable to the Agent of the
Guarantor's year 2000 compatibility.
SECTION 1.12 NEGATIVE COVENANTS OF THE GUARANTOR. During the
term of this Agreement, unless the Agent shall otherwise consent in writing:
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(1) NO SALES, LIENS, ETC. Except as otherwise provided herein
or in the other Transaction Documents, the Guarantor 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 Collateral, (y) any goods, the sale of which may give
rise to a Receivable or any Receivable or related Account, or (z) any account
which concentrates in a Servicer Account Bank to which any Collections of any
Receivables are sent (other than such Servicer Account Bank's rights of set-off
with respect to fees, expenses and NSF charges related to such account), or
assign any right to receive income in respect thereof. Except as otherwise
provided herein or in the other Transaction Documents, the Guarantor will not
sell, assign (by operation of law or otherwise) or otherwise dispose of or
create any Adverse Claim upon (or the filing of any financing statement) or with
respect to any account which contains proceeds of Receivables, or assign any
right to receive income in respect thereof.
(2) NO EXTENSION OR AMENDMENT OF RECEIVABLES. Except as
otherwise permitted in this Article IV or in Section 5.2 hereof, the Guarantor
will not extend, amend or otherwise modify the terms of any Receivable, or
amend, modify or waive any term or condition of any Account related thereto. The
Guarantor will not take any action to permit the reduction of the amount due
under any Receivable as a result of any discount, credit, rebate, dispute,
repossessed or returned goods, chargeback allowance or billing adjustment except
with the prior written consent of the Agent or except in accordance with the
Credit Guidelines.
(3) PERFORMANCE OF ACCOUNT AGREEMENTS. The Guarantor shall not
fail to comply with and perform its obligations under the applicable Account
Agreements relating to the Accounts and the Credit Guidelines except insofar as
any such failure to comply or perform would not materially and adversely affect
the rights of the Company, the Agent, or any Bank Investor in the Receivables or
the collectibility of the Receivables. The Guarantor shall not change the terms
and provisions of the Account Agreements or the Credit Guidelines in any respect
(including, without limitation, the calculation of the amount, and the timing,
of uncollectible Receivables) except to the extent (i) such change is made
applicable to the comparable segment of the consumer revolving credit accounts
owned by the Guarantor, the Debtor or the Bank that have characteristics the
same as, or substantially similar to, the Accounts that are the subject of such
change or (ii) if the Guarantor, the Debtor or the Bank does not own such a
comparable segment, the Guarantor will not make any such change with the intent
to materially benefit itself over the Company, the Agent, or any Bank Investor,
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and such change does not materially and adversely affect the rights of the
Company, the Agent or any Bank Investor in the Receivables or the collectibility
of the Receivables. References to the Receivables in this paragraph shall be
deemed to refer to the Receivables in the aggregate.
(4) NO CHANGE IN BUSINESS OR CREDIT GUIDELINES. The Guarantor
will not make any change in the character of its business or in the Credit
Guidelines, which change would, in either case, impair the collectibility of any
Receivable or otherwise result in a Material Adverse Effect.
(5) NO MERGERS, ETC. The Guarantor 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, except in accordance with
the Transaction Documents and except for distributions to members; PROVIDED,
HOWEVER, that the Guarantor may merge with another Person if (w) such Person is
the Debtor or a Subsidiary of the Debtor, (x) the Guarantor is the Person
surviving such merger or the Person surviving such merger agrees to be bound by
the obligations of the Guarantor under this Agreement and the other Transaction
Documents, and (y) immediately following such merger, no Termination Event or
Potential Termination Event shall have occurred and be continuing.
(6) CHANGE IN PAYMENT DIRECTIONS TO OBLIGORS. The Guarantor
will not make any change in its directions to Obligors regarding payments to be
made to a Post Office Box, unless (i) such directions are to deposit such
payments to another Post Office Box or to retail store locations owned by the
Debtor or any Designated Seller, and (ii) the Agent shall have received written
notice of such change at least thirty (30) days prior thereto and the Agent
shall have received a Post Office Box Agreement with respect to the new Post
Office Box.
(7) DEPOSITS TO SERVICER ACCOUNTS. The Guarantor will not
deposit or otherwise credit, or cause or permit to be so deposited or credited,
to any Servicer Account cash or cash proceeds other than Collections of
Receivables.
(8) CHANGE OF NAME, ETC. The Guarantor will not change its
name, identity or structure or the location of its chief executive office,
unless at least 10 days prior to the effective date of any such change the
Guarantor delivers to the Agent such documents, instruments or agreements,
executed by the Guarantor, as are necessary to reflect such change and to
continue the perfection of the Agent's security interests in the Collateral.
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(9) AMENDMENT TO RECEIVABLES PURCHASE AGREEMENTS. The
Guarantor will not amend, waive, modify, or supplement any Receivables Purchase
Agreement to which the Guarantor is a party, except with the prior written
consent of the Agent and the Administrative Agent; nor shall the Guarantor take
any other action under any such Receivables Purchase Agreement that shall have a
material adverse affect on the Agent, the Company or any Bank Investor or which
violates the terms of this Agreement.
(10) ERISA MATTERS. The Guarantor will not (i) engage or
permit any of its respective ERISA Affiliates to engage in any prohibited
transaction (as defined in Section 4975 of the Code and Section 406 of ERISA)
for which an exemption is not available or has not previously been obtained from
the U.S. Department of Labor; (ii) permit to exist any accumulated funding
deficiency (as defined in Section 302(a) of ERISA and Section 412(a) of the
Code) or funding deficiency with respect to any Benefit Plan other than a
Multiemployer Plan; (iii) fail to make any payments to any Multiemployer Plan
that the Guarantor, or any ERISA Affiliate of the Guarantor is required to make
under the agreement relating to such Multiemployer Plan or any law pertaining
thereto; (iv) terminate any Benefit Plan so as to result in any liability; or
(v) permit to exist any occurrence of any reportable event described in Title IV
of ERISA which represents a material risk of a liability to the Guarantor, or
any ERISA Affiliate of the Guarantor under ERISA or the Code.
(11) AMENDMENTS TO ARTICLES OF ORGANIZATION. Without the prior
written consent of the Agent, the Guarantor shall not amend Section 4.1, 4.2,
6.3, 10.1 or 11.9 of its Articles of Organization.
SECTION 1.13 COVENANTS OF THE SERVICER. At all times from the
date hereof to the later to occur of (i) the Termination Date or (ii) the date
on which the Net Investment and all other Aggregate Unpaids have been paid in
full, in cash, the Servicer covenants that, unless the Agent shall otherwise
consent in writing:
(1) COMPLIANCE WITH REQUIREMENTS OF LAW. The Servicer shall
duly satisfy its obligations in all material respects on its part to be
fulfilled under or in connection with each Receivable and the related Account,
will maintain in effect all material qualifications required under Requirements
of Law in order to service properly each Receivable and the related Account and
will comply in all material respects with all other Requirements of Law in
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connection with servicing each Receivable and the related Account the failure to
comply with which would have a Material Adverse Effect.
(2) NO RESCISSION OR CANCELLATION. The Servicer shall not
permit any rescission or cancellation of a Receivable except as ordered by a
court of competent jurisdiction or other Governmental Authority or in the
ordinary course of its business and in accordance with the Credit Guidelines.
(3) PROTECTION OF COMPANY'S RIGHTS. Except as otherwise
permitted by this Article IV or Section 5.2, the Servicer shall take no action,
nor omit to take any action, which would impair the rights of the Agent in any
Receivable.
(4) ALL CONSENTS REQUIRED. All approvals, authorizations,
consents, orders or other actions of any Person or of any governmental body or
official required in connection with the execution and delivery by the Servicer
of this Agreement and the Note Purchase Agreement, the performance by the
Servicer of the transactions contemplated by this Agreement and the Note
Purchase Agreement and the fulfillment by the Servicer of the terms hereof and
thereof, have been obtained.
(5) CUSTODIAN. The Servicer will, at its own cost and expense,
(i) maintain the books and records with respect to the Accounts and the
Receivables and copies of all documents relating to each Account as custodian
for the Agent and (ii) clearly and unambiguously mark such books and records
that indicate the Receivables have been pledged to the Agent, for benefit of the
Company and the Bank Investors, pursuant to this Agreement.
(6) NO EXTENSION OR AMENDMENT OF RECEIVABLES. Except as
otherwise permitted in this Article IV or Section 5.2, the Servicer will not
extend, amend or otherwise modify the terms of any Receivable, or amend, modify
or waive any term or condition of any Account related thereto except as ordered
by a court of competent jurisdiction or other Governmental Authority or in the
ordinary course of its business and in accordance with the Credit Guidelines.
(7) NO CHANGE IN BUSINESS. The Servicer will not make any
change in the character of its business which would impair the collectibility of
the Receivables taken as a whole or otherwise result in a Material Adverse
Effect. The Servicer shall not reduce the amount due under any Receivable as a
result of any discount, credit, rebate, dispute, repossessed or returned goods,
chargeback allowance or billing adjustment except in accordance with the Credit
Guidelines.
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(8) NO MERGERS, ETC. The Servicer 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; PROVIDED that the Servicer
may consolidate with or merge into Belk Store Services, Inc, the Debtor or a
Subsidiary of the Debtor.
(9) CHANGE IN PAYMENT DIRECTIONS TO OBLIGORS. The Servicer
will not make any change in the directions to Obligors regarding payments to be
made to a Post Office Box or to retail store locations owned by the Debtor or
any Designated Seller unless (i) such directions are to deposit such payments to
another Post Office Box or to retail store locations owned by the Debtor or any
Designated Seller, and (ii) the Agent shall have received written notice of such
change at least thirty (30) days prior thereto and the Agent shall have received
a Post Office Box Agreement with respect to the new Post Office Box.
(10) DEPOSITS TO SERVICER ACCOUNT, DEBTOR ACCOUNT AND
COLLECTION ACCOUNT. The Servicer will not deposit or otherwise credit, or cause
or permit to be so deposited or credited, to any Servicer Account cash or cash
proceeds other than Collections of Receivables. The Servicer shall require the
Bank, the Debtor, the Guarantor and each Designated Seller to remit to the
Servicer all Collections received by the Bank, the Debtor, the Guarantor or such
Designated Seller promptly, but in any event within three (3) Business Days or,
alternatively, the Servicer may in the ordinary course of its servicing
activities as of each Cycle Date net any such amounts due from the Guarantor,
the Bank, the Debtor or any Designated Seller against amounts due from the
Servicer to the Guarantor, the Bank, the Debtor or such Designated Seller, and
any such amounts so netted shall be included as Collections on any reports or
certificates delivered hereunder by the Servicer. Any Collections received by
the Servicer from the Guarantor, the Bank, the Debtor or any Designated Seller
shall be deposited promptly, but in any event within two (2) Business Days of
receipt, in a Servicer Account. The Servicer shall deposit all Collections into
the Guarantor Account or, if required by this Agreement, into the Collection
Account, within ten (10) days of the initial receipt of such Collections by the
Servicer, the Guarantor, the Bank, the Debtor or any Designated Seller. The
Servicer will not change its name, identity or structure or the location of its
chief executive office, unless at least 10 days prior to the effective date of
any such change the Servicer delivers to the Agent new or revised Servicer
Account Agreements executed by the Servicer Account Banks and new revised Post
Office Box Agreements with respect to the Post Office Boxes which reflect such
change and enable the Agent to continue to exercise its rights contained in
Section 2.2 hereof.
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(11) YEAR 2000. The Servicer has taken all action deemed
reasonably necessary by the Servicer to assure that the Servicer's and its
Subsidiaries' computer based systems are able to operate and effectively process
data, including dates, on and after January 1, 2000. At the request of the
Agent, the Servicer will provide the Agent with assurances reasonably acceptable
to the Agent of the Servicer's year 2000 compatibility.
SECTION 1.14 AFFIRMATIVE COVENANTS OF THE DEBTOR. At all times
from the date hereof to the later to occur of (i) the Termination Date or (ii)
the date on which the Net Investment and all other Aggregate Unpaids have been
paid in full, in cash, unless the Agent shall otherwise consent in writing:
(1) FINANCIAL REPORTING. The Debtor will cause the Bank to
maintain a system of accounting established and administered substantially in
accordance with GAAP, and will further cause the Bank to furnish to the Agent:
(1) NOTICE OF TERMINATION EVENTS OR POTENTIAL
TERMINATION EVENTS. As soon as possible and in any event within two (2)
Business Days after the Bank has actual knowledge of the occurrence of
each Termination Event or each Potential Termination Event, a statement
of the Chief Financial Officer of the Bank setting forth details of
such Termination Event or Potential Termination Event, and within five
(5) Business Days after such notice, an additional notice detailing the
action which the Bank, the Guarantor or the Debtor proposes to take
with respect thereto.
(2) CHANGE IN CREDIT GUIDELINES. Within ten (10) days
after the date any material change in or amendment to the Credit
Guidelines is made, a copy of the Credit Guidelines then in effect
indicating such change or amendment.
(3) CREDIT GUIDELINES. Promptly upon the request of
the Agent, a complete copy of the Credit Guidelines then in effect.
(4) ERISA. Promptly after the filing or receiving
thereof, copies of all reports and notices with respect to any
Reportable Event (as defined in Article IV of ERISA) which the Bank or
any ERISA Affiliate of the Bank files under ERISA with the Internal
Revenue Service, the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor or which the Bank or any ERISA Affiliate of the
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Bank receives from the Internal Revenue Service, the Pension Benefit
Guaranty Corporation or the U.S. Department of Labor.
(5) 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 Bank or any Subsidiary of the Bank.
(2) CONDUCT OF BUSINESS. The Debtor will cause the Bank to
carry on and conduct its business in substantially the same manner and in
substantially the same fields of enterprise as it is intended to be conducted as
of the Closing Date and do all things necessary to remain duly incorporated or
organized, validly existing and in good standing as a national banking
association in its jurisdiction of organization and maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted.
(3) COMPLIANCE WITH LAWS. The Debtor will cause the Bank 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 comply would not have a Material Adverse Effect.
(4) FURNISHING OF INFORMATION AND INSPECTION OF RECORDS. The
Debtor will, and will cause the Bank to, furnish to the Agent from time to time
such information with respect to the Receivables as the Agent may reasonably
request. The Debtor will, at any time and from time to time during regular
business hours permit 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 Debtor or the Bank for the purpose of
examining such Records, and to discuss matters relating to Receivables or the
Debtor's or the Bank's performance hereunder and under the other Transaction
Documents to which Debtor or the Bank is a party with any of the officers,
directors, employees or independent public accountants of the Debtor or the
Bank, as applicable, having knowledge of such matters.
(5) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. The Debtor will,
and will cause the Bank 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
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identification as of each Cycle Date of each new Receivable and all Collections
of and adjustments to each existing Receivable). The Debtor will, and will
cause the Bank to, give the Agent notice of any material change in the
administrative and operating procedures of the Debtor or the Bank referred to in
the previous sentence.
(6) PERFORMANCE AND COMPLIANCE WITH ACCOUNTS. The Debtor, at
its expense, will, or will cause the Bank to, timely and fully perform and
comply with all material provisions, covenants and other promises required to be
observed by the Debtor or the Bank under the Accounts related to the
Receivables.
(7) CREDIT GUIDELINES. The Debtor will, and will cause the
Bank to, comply in all material respects with the Credit Guidelines in regard to
each Receivable and the related Account.
(8) COLLECTIONS. The Debtor shall, or shall cause the Servicer
to, direct all Obligors to cause all Collections to be mailed directly to a Post
Office Box or delivered to retail store locations owned by the Debtor or a
Designated Seller.
(9) COLLECTIONS RECEIVED. The Debtor shall, and shall cause
the Bank to, hold in trust, and remit, immediately, but in any event not later
than three (3) Business Days of its receipt thereof, to the Servicer all
Collections received from time to time by the Debtor or the Bank, as applicable.
(10) INVENTORY FINANCINGS. The Debtor shall, and will cause
the Bank to, specifically exclude from the property subject to any Adverse Claim
granted on inventory any and all accounts receivable generated by sales of such
inventory and the proceeds thereof, and shall provide evidence, in each case
satisfactory to the Agent, that any and all accounts receivable generated by
sales of such inventory and the proceeds thereof shall have been excluded from
any such Adverse Claims.
(11) YEAR 2000. The Debtor has taken, and has caused the Bank
to take, all action deemed reasonably necessary by the Debtor to assure that the
Debtor's and the Bank's and their Subsidiaries' computer based systems are able
to operate and effectively process data, including dates, on and after January
1, 2000. At the request of the Agent, the Debtor will provide the Agent with
assurances reasonably acceptable to the Agent of the Debtor's or the Bank's, as
applicable, year 2000 compatibility.
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SECTION 1.15 NEGATIVE COVENANTS OF THE DEBTOR. During the term
of this Agreement, unless the Agent shall otherwise consent in writing:
(1) NO SALES, LIENS, ETC. Except as otherwise provided herein
or in the other Transaction Documents, the Debtor will not, nor will it permit
the Bank 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 Collateral or
Debtor Collateral, (y) any goods, the sale of which may give rise to a
Receivable or any Receivable or related Account, or (z) any account which
concentrates in a Servicer Account Bank to which any Collections of any
Receivables are sent (other than such Servicer Account Bank's rights of set-off
with respect to fees, expenses and NSF charges related to such account), or
assign any right to receive income in respect thereof. Except as otherwise
provided herein or in the other Transaction Documents, the Debtor will not, nor
will it permit the Bank to, sell, assign (by operation of law or otherwise) or
otherwise dispose of or create any Adverse Claim upon (or the filing of any
financing statement) or with respect to any account which contains proceeds of
Receivables, or assign any right to receive income in respect thereof.
(2) NO EXTENSION OR AMENDMENT OF RECEIVABLES. Except as
otherwise permitted in this Article IV or in Section 5.2 hereof, the Debtor will
not, nor will it permit the Bank to, extend, amend or otherwise modify the terms
of any Receivable, or amend, modify or waive any term or condition of any
Account related thereto. The Debtor will not, nor will it permit the Bank to,
take any action to permit the reduction of the amount due under any Receivable
as a result of any discount, credit, rebate, dispute, repossessed or returned
goods, chargeback allowance or billing adjustment except with the prior written
consent of the Agent or except in accordance with the Credit Guidelines.
(3) PERFORMANCE OF ACCOUNT AGREEMENTS. The Debtor shall not,
nor shall it permit the Bank to fail to comply with and perform its obligations
under the applicable Account Agreements relating to the Accounts and the Credit
Guidelines except insofar as any such failure to comply or perform would not
materially and adversely affect the rights of the Company, the Agent, or any
Bank Investor in the Receivables or the collectibility of the Receivables. The
Debtor shall not, nor shall it permit the Bank to, change the terms and
provisions of the Account Agreements or the Credit Guidelines in any respect
(including, without limitation, the calculation of the amount, and the timing,
of uncollectible Receivables) except to the extent (i) such change is made
applicable to the comparable segment of the consumer revolving credit accounts
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owned by the Guarantor, the Debtor or the Bank that have characteristics the
same as, or substantially similar to, the Accounts that are the subject of such
change or (ii) if the Guarantor, the Debtor or the Bank does not own such a
comparable segment, the Debtor will not, nor will it permit the Bank to, make
any such change with the intent to materially benefit itself over the Company,
the Agent, or any Bank Investor, and such change does not materially and
adversely affect the rights of the Company, the Agent or any Bank Investor in
the Receivables or the collectibility of the Receivables. References to the
Receivables in this paragraph shall be deemed to refer to the Receivables in the
aggregate.
(4) NO CHANGE IN BUSINESS OR CREDIT GUIDELINES. The Debtor
will not, nor will it permit the Bank to, make any change in the character of
its business or in the Credit Guidelines, which change would, in either case,
impair the collectibility of any Receivable or otherwise result in a Material
Adverse Effect.
(5) NO MERGERS, ETC. The Debtor will not permit the Bank to
(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, except in
accordance with the Transaction Documents.
(6) CHANGE IN PAYMENT DIRECTIONS TO OBLIGORS. The Debtor will
not, nor will it permit the Bank to, make any change in its directions to
Obligors regarding payments to be made to a Post Office Box, unless (i) such
directions are to deposit such payments to another Post Office Box or to retail
store locations owned by the Debtor or any Designated Seller, and (ii) the Agent
shall have received written notice of such change at least thirty (30) days
prior thereto and the Agent shall have received a Post Office Box Agreement with
respect to the new Post Office Box.
(7) DEPOSITS TO SERVICER ACCOUNTS. The Debtor will not, nor
will it permit the Bank to, deposit or otherwise credit, or cause or permit to
be so deposited or credited, to any Servicer Account cash or cash proceeds other
than Collections of Receivables.
(8) CHANGE OF NAME, ETC. The Debtor will not, nor will it
permit the Bank to, change its name, identity or structure or the location of
its chief executive office, unless at least 10 days prior to the effective date
of any such change the Debtor or the Bank, as applicable, delivers to the Agent
such documents, instruments or agreements, executed by the Debtor or the Bank,
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as applicable, as are necessary to reflect such change and to continue the
perfection of the Agent's security interests in the Collateral and the Debtor
Collateral.
(9) AMENDMENT TO RECEIVABLES PURCHASE AGREEMENTS. The Debtor
will not, nor will it permit the Bank to, amend, waive, modify, or supplement
any Receivables Purchase Agreement to which the Debtor or the Bank is a party,
except with the prior written consent of the Agent and the Administrative Agent;
nor shall the Debtor take, or permit the Bank to take, any other action under
any such Receivables Purchase Agreement that shall have a material adverse
affect on the Agent, the Company or any Bank Investor or which violates the
terms of this Agreement.
(10) ERISA MATTERS. The Debtor will not permit the Bank to (i)
engage or permit any of its respective ERISA Affiliates to engage in any
prohibited transaction (as defined in Section 4975 of the Code and Section 406
of ERISA) for which an exemption is not available or has not previously been
obtained from the U.S. Department of Labor; (ii) permit to exist any accumulated
funding deficiency (as defined in Section 302(a) of ERISA and Section 412(a) of
the Code) or funding deficiency with respect to any Benefit Plan other than a
Multiemployer Plan; (iii) fail to make any payments to any Multiemployer Plan
that the Bank or any ERISA Affiliate of the Bank is required to make under the
agreement relating to such Multiemployer Plan or any law pertaining thereto;
(iv) terminate any Benefit Plan so as to result in any liability; or (v) permit
to exist any occurrence of any reportable event described in Title IV of ERISA
which represents a material risk of a liability to the Bank or any ERISA
Affiliate of the Bank under ERISA or the Code.
ARTICLE V
ADMINISTRATION AND COLLECTIONS
SECTION 1.16 APPOINTMENT OF SERVICER. The servicing,
administering and collection of the Receivables shall be conducted by such
Person so designated from time to time in accordance with this Section 5.1 (the
"SERVICER"). Until the Agent gives notice to Belk Center of the designation of a
new Servicer, Belk Center is hereby designated as, and hereby agrees to perform
the duties and obligations of, the Servicer pursuant to the terms hereof and of
the Note Purchase Agreement. 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, and provided that the Servicer shall
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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 an event described
in either Section 6.1(o) or 6.1(p)) designate as Servicer any Person (including
itself) to succeed Belk Center 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. The Agent may
notify any Obligor of its interest in the Receivables.
SECTION 1.17 DUTIES OF SERVICER.
(1) The Servicer shall take or cause to be taken all such
action as may be necessary or 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 Credit Guidelines.
Each of the Debtor, the Guarantor and the Agent, on behalf of the Company and
the Bank Investors, hereby appoints as its agent the Servicer, from time to time
designated pursuant to Section 5.1 hereof, to enforce the Accounts and the
Receivables with respect to collections and to service the Accounts and the
Receivables pursuant to the Credit Guidelines. To the extent permitted by
applicable law, each of the Debtor and the Guarantor (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 Debtor's
and/or the Guarantor's name and on behalf of the Debtor or the Guarantor
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 Debtor's and/or the Guarantor's name on checks and
other instruments representing Collections and enforcing such Receivables and
the related Accounts. The Guarantor shall deliver to the Servicer and the
Servicer shall hold in trust for the Guarantor, the Debtor, the Company, the
Agent and the Bank Investors, in accordance with their respective interests, all
Records which evidence or relate to Receivables or Related Security.
Notwithstanding anything to the contrary contained herein, upon and during the
continuance of a Servicer Default or Termination Event, the Agent shall have the
absolute and unlimited right to direct the Servicer (whether the Servicer is
Belk Center 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.
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(2) The Servicer shall, as soon as practicable following
receipt thereof, turn over to the Guarantor any collections received by the
Servicer of any indebtedness of any Person which is not on account of a
Receivable. If the Servicer is not the Debtor or an Affiliate of the Debtor, the
Servicer, by giving three 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 Noteholder's Percentage 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 Guarantor and shall not be included in
the amounts described in Section 2.4(a)(ii) of the Note Purchase Agreement. The
Servicer, if other than the Debtor or an Affiliate of the Debtor, shall as soon
as practicable upon demand, deliver to the Debtor or the Guarantor, as
applicable, all Records in its possession which evidence or relate to
indebtedness of an Obligor which is not a Receivable.
(3) By May 31, 1999 and on or before 45 days after the end of
each fiscal year of the Servicer beginning with the fiscal year ending January
29, 2000, the Servicer shall cause a firm of independent public accountants (who
may also render other services to the Servicer, the Debtor, the Guarantor, the
Bank or any Affiliates of any of the foregoing) or another qualified party
designated by the Agent to furnish a report to the Agent to the effect that they
have compared the information contained in the Servicer Reports delivered during
such fiscal year then ended with the information contained in the Accounts and
the Servicer's records and computer systems for such period, and that, on the
basis of such comparison, nothing came to the attention of such firm that caused
them to believe the Servicer failed to accurately record the information
contained in the Servicer Reports from the Accounts and the Servicer's records
and computer systems.
(4) Notwithstanding anything to the contrary contained in this
Article V, the Servicer, if not the Debtor or any Affiliate of the Debtor, shall
have no obligation to collect, enforce or take any other action described in
this Article V with respect to any indebtedness that does not relate to the
Collateral other than to deliver to the Debtor the collections and documents
with respect to any such indebtedness as described in Section 5.2(b) hereof.
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(5) In consideration of acting as Servicer hereunder, the
Servicer shall be entitled to retain from Collections received by it on any day
all late fees, NSF or returned check charges and all other similar charges and
fees received by it. To the extent that they constitute part of Collections, the
Servicer shall account for such amounts received and retained by it in respect
of a Collection Period on each related Servicer Report delivered by it
hereunder.
SECTION 1.18 RIGHTS AFTER DESIGNATION OF NEW SERVICER. At any
time following the designation of a new Servicer (other than the Debtor or any
Affiliate of the Debtor) pursuant to Section 5.1 hereof:
(1) The Guarantor and the Servicer 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 (in each case known to the Guarantor or the Servicer to
represent payment on Receivables and not other indebtedness) received
by it from time to time to the extent constituting Collections of
Receivables in a manner acceptable to the Agent and shall, promptly
upon receipt, remit all such cash (including the cash proceeds of
collected checks representing payments in respect of Receivables if
such checks represented payments on Receivables and other
indebtedness), checks and instruments (in each case known to the
Guarantor or the Servicer to represent payment on Receivables and not
other indebtedness), duly endorsed or with duly executed instruments of
transfer, to the Agent or its designee.
(2) The Guarantor and the Servicer hereby authorize
the Agent to take any and all steps in the Guarantor's or the
Servicer's name and on behalf of the Guarantor or the Servicer,
respectively, necessary or desirable, in the determination of the
Agent, to collect all amounts due under any and all Receivables,
including, without limitation, endorsing the Guarantor's or the
Servicer's name on checks and other instruments representing
Collections and enforcing such Receivables and the related Accounts.
SECTION 1.19 SERVICER DEFAULT. The occurrence of any one or
more of the following events shall constitute a Servicer Default:
(1) the Servicer or, to the extent that the Debtor or any
Affiliate of the Debtor is then acting as Servicer, the Debtor or such
Affiliate, as applicable, shall fail (i) to observe or perform any term,
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<PAGE> 33
covenant or agreement hereunder or under the Note Purchase Agreement (other than
as referred to in clauses (ii) or (iii) of this Section 5.4(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
from the date the Debtor, the Guarantor, the Servicer or any Affiliate of either
had actual knowledge of such failure or (ii) to make any payment or deposit
required to be made by it hereunder or under the Note Purchase Agreement or the
other Transaction Documents when due, provided, however, that if such failure is
not the result of factors under the payor's control, then such failure should
have continued unremedied for one (1) Business Day, or (iii) to observe or
perform any term, covenant or agreement under Sections 4.3(b), 4.3(f) or 4.4(g);
or
(2) any representation, warranty, certification or statement
made by the Servicer, the Debtor or any Affiliate of the Debtor (in the event
that the Debtor or such Affiliate is then acting as the Servicer) in this
Agreement or the Note Purchase Agreement 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
(3) failure of the Servicer or any of its Subsidiaries to pay
when due any amounts due under any agreement under which any Indebtedness
greater than $1,000,000 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 $1,000,000
was created or is governed, if such default permits the creditor to accelerate
such Indebtedness; or any Indebtedness of the Servicer or any of its
Subsidiaries greater than $1,000,000 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
(4) any Event of Bankruptcy shall occur with respect to the
Servicer or any of its Subsidiaries; or
(5) there shall have occurred any material adverse change in
the operations of the Servicer since the end of the last fiscal year ending
prior to the date of its appointment as Servicer hereunder or any other event
shall have occurred which, in the commercially reasonable judgment of the Agent,
materially and adversely affects the Servicer's ability to either collect the
Receivables or to perform under this Agreement.
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SECTION 1.20 RESPONSIBILITIES OF THE GUARANTOR. Anything
herein to the contrary notwithstanding, the Guarantor shall, and/or the Debtor
shall cause the Bank to, (i) perform all of the Guarantor's or the Bank's
obligations under the Accounts related to the Receivables to the same extent as
if interests in such Receivables had not been sold pursuant to the applicable
Receivables Purchase Agreement and had not been pledged hereunder and the
exercise by the Agent, the Company and the Bank Investors of their rights
hereunder and under the applicable Receivables Purchase Agreement shall not
relieve the Guarantor or the Bank 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 Accounts, nor shall it be obligated to
perform any of the obligations of the Guarantor or the Bank thereunder.
ARTICLE VI
TERMINATION EVENTS
SECTION 1.21 TERMINATION EVENTS. The occurrence of any one or
more of the following events shall constitute a Termination Event:
(1) the Debtor, the Guarantor, the Bank or the Servicer shall
fail to make any payment or deposit to be made by it hereunder or under the Note
Purchase Agreement, the Note or any Receivables Purchase Agreement when due
hereunder or thereunder, PROVIDED, however, that if such failure is not the
result of factors within such Person's control, such failure shall have
continued unremedied for one (1) Business Day, PROVIDED FURTHER, that in the
case of any fees payable pursuant to Section 2.6 of the Note Purchase Agreement,
such fee shall not be paid within one (1) Business Day of the date when due; or
(2) any representation, warranty, certification or statement
made by the Debtor, the Servicer or the Guarantor in this Agreement, the Note
Purchase Agreement or 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, PROVIDED,
HOWEVER, that in the case of any breach of the representation set forth in
Section 3.1(l) hereof which does not have a material adverse effect on the
Agent's security interest in the Collateral taken as a whole, such breach shall
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<PAGE> 35
not constitute a Termination Event if the Debtor shall have made any payment
required as a result thereof pursuant to Section 2.7(b) of the Note Purchase
Agreement; or
(3) the Debtor or the Guarantor shall default in the
performance of any covenant or undertaking (other than those covered by clause
(a) above) (i) to be performed or observed under Sections 5.1(a)(iii),
5.1(a)(iv), 5.1(c), 5.2(a) or 5.2(b) of the Note Purchase Agreement or Sections
4.1(a)(i), 4.1(a)(ii), 4.1(c), 4.1(f), 4.1(g), 4.2(a)(x), 4.2(c), 4.2(d) or
4.2(e) of this Agreement 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 twenty (20) days after the earlier of the date the Agent gave notice of such
default to the Debtor, the Guarantor or the Servicer, as applicable, and the
date on which the Debtor, the Guarantor or the Servicer had knowledge of such
default; or
(4) any material adverse change in the operations of the
Servicer or any other event which materially affects the Servicer's ability to
either collect the Receivables or perform its obligations under this Agreement
or the Note Purchase Agreement; or
(5) any Event of Bankruptcy shall occur with respect to the
Debtor, the Guarantor, the Bank, any Designated Seller or the Servicer; or
(6) the Agent, on behalf of the Company and/or the Bank
Investors, shall, for any reason, fail or cease to have a valid and perfected
first priority security interest in the Collateral or the Debtor Collateral free
and clear of any Adverse Claims; or
(7) a Servicer Default shall have occurred; or
(8) any Receivables Purchase Agreement shall have terminated
without the prior written consent of the Agent (not to be unreasonably
withheld); or
(9) subject to Sections 5.2(b) of the Note Purchase Agreement
and 4.2(e) and 4.3(h) of this Agreement, the Debtor, the Guarantor or the
Servicer shall enter into any transaction or merger whereby it is not the
surviving entity; or
(10) (i) the Debtor's Percentage is less than the Minimum
Debtor's Percentage as of the last day of any two consecutive Collection
Periods, (ii) the Noteholder's Percentage equals or exceeds 100% at any time; or
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<PAGE> 36
(iii) the Net Investment plus the aggregate Interest Component of all
outstanding Related Commercial Paper shall exceed the Facility Limit for more
than two (2) consecutive Business Days after the Guarantor or the Debtor had
knowledge of such occurrence; or
(11) the Payment Rate averaged for any three consecutive
Collection Periods is less than 16.00%; or
(12) the Net Portfolio Yield averaged for any three
consecutive Collection Periods is less than 1.00%; or
(13) the Delinquency Ratio averaged for any three consecutive
Collection Periods is greater than 7.50%; or
(14) the Default Ratio averaged for any three consecutive
Collection periods is greater than 8.00%; or
(15) 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
(16) the Commercial Paper issued by the Company shall not be
rated at least "A2" by Standard & Poor's and at least "P2" by Moody's.
SECTION 1.22 TERMINATION.
(1) If a Termination Event shall have occurred and be
continuing, the Agent may, or at the direction of the Majority Investors shall,
by notice to the Guarantor, the Debtor and the Servicer declare the Termination
Date to have occurred; PROVIDED, HOWEVER, that in the case of any event
described in Section 6.1(e), 6.1(f), 6.1(j)(ii) or 6.1(j)(iii) above, 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 may, and shall at the direction of the Majority Investors, declare all the
Note and all amounts due under this Agreement and the Note Purchase Agreement to
then be due and payable.
(2) At all times after the declaration or automatic occurrence
of the Termination Date pursuant to Section 6.2(a) other than as a result of the
occurrence of a Termination Event described in 6.1(o) or 6.1(p), the Carrying
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<PAGE> 37
Costs may (at the option of the Agent) thereafter be calculated on the basis of
the Adjusted LIBOR Rate giving effect to a margin of 2.80% (as described in the
definition of Adjusted LIBOR Rate) for all existing and future funding periods.
(3) If the Note is declared due and payable in accordance with
this Section, the Agent may, and shall at the direction of the Majority
Investors, do any one or more of the following:
(1) take all necessary action to foreclose upon the
Collateral and the Debtor Collateral;
(2) retain in satisfaction of any amounts owing from
the Debtor or the Guarantor all amounts otherwise payable to the Debtor
or the Guarantor pursuant to this Agreement to the extent necessary to
pay in full all amounts (including principal and interest) due and
payable under the Note, this Agreement and the Note Purchase Agreement;
(3) pursue any available remedy by proceeding at law
or in equity including complete or partial foreclosure of the Lien upon
the Collateral and the Debtor Collateral and sale of the Collateral or
the Debtor Collateral or any portion thereof or rights or interest
therein as may appear necessary or desirable (i) to collect amounts
owed pursuant to the Note and any other payments then due and
thereafter to become due under the Note, this Agreement or the Note
Purchase Agreement, or (ii) to enforce the performance and observance
of any obligation, covenant, agreement or provision contained in this
Agreement or the Note Purchase Agreement to be observed or performed by
the Debtor or the Guarantor; or
(4) exercise all other rights and remedies of a
secured party provided under the UCC of the applicable jurisdiction and
other applicable laws, all of which rights shall be cumulative.
SECTION 1.23 PROCEEDS. The proceeds from the sale, disposition
or liquidation of the Collateral and/or the Debtor Collateral pursuant to
Section 6.2 above shall be applied to cover all reasonable expenses of the Agent
in connection with the Collateral and the Debtor Collateral (including
reasonable attorneys' fees and expenses) and then to the satisfaction of all
obligations of the Debtor and the Guarantor under the Note, this Agreement and
the Note Purchase Agreement, and any remaining proceeds shall be remitted to the
Guarantor. Section 1.1
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ARTICLE VII
MISCELLANEOUS
Section 1.24 NOTICES, ETC. 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 7.1 and confirmation is
received, (ii) if given by mail, three (3) Business Days following such posting,
postage prepaid, 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 7.1.
If to the Company:
Enterprise Funding Corporation
c/o Global Securitization Services, LLC
25 West 43rd St., Suite 704
New York, New York 10036
Attention: Kevin Burns
Telephone: (212) 302-8331
Telecopy: (212) 302-8767
(with a copy to the Administrative Agent)
If to the Guarantor:
Belk Accounts Receivable LLC
c/o Belk, Inc.
2801 West Tyvola Road
Charlotte, North Carolina 28217
Attention: Terry L. Scott
Telephone: (704) 357-1064, Ext. 4273
Telecopy: (704) 357-0711
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If to Belk Center
The Belk Center, Inc.
2801 West Tyvola Road
Charlotte, North Carolina 28217
Telephone: (704) 357-1064, extension 7000
Telecopy: (704) 357-1861
Attn: Oakley Orser
If to the Agent:
NationsBank N.A.
Bank of America Corporate
Center - 10th Floor
100 North Tryon Street
NC1-007-10-01
Charlotte, North Carolina 28255-0001
Attention: Michelle M. Heath
Global Asset Backed
Securitization
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
Payment Information:
NationsBank, N.A.
ABA 053-000-196
For the Account of: Global Investment Bank
Operations
Account No. 1093601650000
Attn.: Camille Zerbinos
SECTION 1.25 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.
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Any provision of this Agreement may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by the
Guarantor, the Servicer, the Company the Debtor and the Majority Investors. 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 Collateral Agent shall have obtained
sufficient consent hereunder.
SECTION 1.26 SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon the Debtor, the Agent, the Company, the Guarantor, the Bank
Investors, the Servicer and their respective successors and permitted assigns
and shall inure to the benefit of the Debtor, the Servicer, the Agent, the
Company, the Guarantor, the Bank Investors and their respective successors and
permitted assigns including the Liquidity Support Provider; PROVIDED that
neither the Servicer nor the Guarantor shall assign any of its rights or
obligations hereunder without the prior written consent of the Agent acting upon
written instruction of each of the Company and the Bank Investors. The Guarantor
and the Servicer hereby acknowledge that the Company has granted a security
interest in all of its rights hereunder to the Collateral Agent. In addition,
the Guarantor and the Servicer hereby acknowledge that the Company may at any
time and from time to time assign all or a portion of its rights hereunder to
the Liquidity Provider pursuant to the Liquidity Agreement. Except as expressly
permitted hereunder or in the agreements establishing the Company's commercial
paper program, the Company shall not assign any of its rights or obligations
hereunder without the prior written consent of the Guarantor. No Bank Investor
may assign, participate, grant a security interest in or otherwise transfer any
of its rights and/or obligations hereunder without the prior written consent of
the Guarantor, such consent not to be unreasonably withheld.
SECTION 1.27 SEVERABILITY CLAUSE. Any provisions of this
Agreement which are prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
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SECTION 1.28 GOVERNING LAW; SUBMISSION TO JURISDICTION;
INTEGRATION.
(1) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE DEBTOR HEREBY SUBMITS TO
THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF NORTH CAROLINA AND OF ANY NORTH CAROLINA STATE COURT SITTING
IN MECKLENBURG COUNTY, NORTH CAROLINA FOR PURPOSES OF ALL LEGAL PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY. The Guarantor 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 7.5 shall affect the right of the
Company to bring any action or proceeding against the Debtor or its property in
the courts of other jurisdictions.
(2) 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.
(3) The Guarantor, the Debtor and the Servicer each hereby
appoints Luther T. Moore 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 Western District of North Carolina and of any North Carolina State court
sitting in Mecklenburg County, North Carolina by the Company, the Agent, any
Bank Investor, the Collateral Agent or any assignee of any of them.
SECTION 1.29 NO BANKRUPTCY PETITION AGAINST THE COMPANY. The
Guarantor and each of the other parties hereto covenant and agree that, and each
such Person agrees that it shall cause any successor Servicer appointed pursuant
to Section 5.1 of this Agreement to covenant and agree that, prior to the date
which is one year and one day after the payment in full of the later of (i) all
amounts due under the Note or (ii) all Commercial Paper issued by the Company
(or, if the Net Investment (or any portion thereof) has been assigned to a
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<PAGE> 42
Conduit Assignee, one year and one day after the payment in full of all
Commercial Paper issued by such Conduit Assignee); it will not institute
against, or join any other Person in instituting against the Company or any
Conduit Assignee any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings, or other proceedings under any federal or state
bankruptcy or similar law.
SECTION 1.30 SETOFF. The Servicer hereby irrevocably and
unconditionally waives all right of setoff that it may have under contract
(including this Agreement), applicable law or otherwise with respect to any
funds or monies of the Guarantor at any time held by or in the possession of the
Servicer.
Section 1.31 NO RECOURSE AGAINST THE COMPANY. Notwithstanding
anything to the contrary contained in this Agreement, the obligations of the
Company under this Agreement and all other Transaction Documents are solely the
corporate obligations of the Company and shall be payable solely from the assets
of the Company in excess of funds necessary to pay matured and maturing
Commercial Paper.
SECTION 1.32 FURTHER ASSURANCES. Each of the Servicer and the
Guarantor agrees to do such further acts and things and to execute and deliver
to the Company, the Bank Investors, the Administrative Agent, or the Agent such
additional assignments, agreements, powers and instruments as are required by
the Agent to carry into effect the purposes of this Agreement or to better
assure and confirm unto the Agent, the Company or the Bank Investors its rights,
powers and remedies hereunder.
SECTION 1.33 COUNTERPARTS. This Agreement may be executed
(which execution may be by facsimile) in any number of copies, and by the
different parties hereto on the same or separate counterparts, each of which
shall be deemed to be an original instrument.
SECTION 1.34 HEADINGS. Section headings used in this Agreement
are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
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<PAGE> 43
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Guaranty and Security Agreement as of the date first written
above.
BELK ACCOUNTS RECEIVABLE LLC,
as Guarantor
By:
--------------------------------------
Name:
Title:
THE BELK CENTER, INC.,
as Servicer
By:
--------------------------------------
Name:
Title:
BELK, INC.,
as Debtor
By:
--------------------------------------
Name:
Title:
NATIONSBANK, N.A., as Agent
and a Bank Investor
By:
--------------------------------------
Name:
Title:
<PAGE> 1
------------------------------------------------------------------
NOTE PURCHASE AGREEMENT
between
ENTERPRISE FUNDING CORPORATION,
as Company
and
BELK, INC.
as Debtor
and
THE BELK CENTER, INC.
as Servicer
and
NATIONSBANK, N.A.
as Agent and Bank Investor
Dated as of May 3, 1999
------------------------------------------------------------------
<PAGE> 2
NOTE PURCHASE AGREEMENT
Note Purchase Agreement (this "Agreement"), dated as of May 3, 1999, by
and among BELK, INC., a Delaware corporation, as debtor (in such capacity, the
"Debtor"), THE BELK CENTER, INC., a North Carolina corporation, as servicer (the
"Servicer" or "Belk Center"), ENTERPRISE FUNDING CORPORATION, a Delaware
corporation (the "Company") and NATIONSBANK, N.A., a national banking
association ("NationsBank"), as agent for the Company and the Bank Investors (in
such capacity, the "Agent") and as a Bank Investor.
PRELIMINARY STATEMENTS
WHEREAS, the Debtor has issued the Note to the Agent and will be
obligated to the holder of such Note to pay the principal of and interest on
such Note in accordance with the terms thereof;
WHEREAS, the Guarantor is guaranteeing the payment and performance by
the Debtor of its obligations under the Note;
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Account" means each credit account established pursuant to an Account
Agreement with an Obligor as of the Cut-Off Date and on any day thereafter.
"Account Agreements" means the agreements and Federal Truth in Lending
Statement for Accounts, in substantially the form attached as Exhibit A to this
Agreement, as such agreements or statement may be amended, modified or otherwise
changed from time to time.
<PAGE> 3
"Accrued Interest Component" means, for any Collection Period, that
portion of the Interest Component of all Related Commercial Paper outstanding at
any time during such Collection Period which has accrued from the first day
through the last day of such Collection Period whether or not such Related
Commercial Paper matures during such Collection Period, based on the actual
number of days in such Collection Period that such Related Commercial Paper was
outstanding.
"Additional Advance Certificate" means a certificate of the Servicer in
substantially the form of Exhibit B hereto, appropriately completed.
"Adjusted LIBOR Rate" means, with respect to any period during which
the return to any Bank Investor or the Liquidity Provider is to be calculated by
reference to the London interbank offered rate, a rate which is 0.80% (2.80%
upon the occurrence and during the continuance of a Termination Event other than
a Termination Event described in Section 6.1(o) or 6.1(p)) in excess of a rate
per annum equal to the sum (rounded upwards, if necessary, to the next higher
1/100 of 1%) of (A) 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 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 period during which any such percentage shall be applicable)
plus (B) the then daily net annual assessment rate (rounded upwards, if
necessary, to the nearest 1/100 of 1%) as estimated by the Agent for determining
the current annual assessment payable by the Agent to the Federal Deposit
Insurance Corporation in respect of eurocurrency or eurodollar funding, lending
or liabilities.
"Administrative Agent" means NationsBank, N.A., as administrative
agent.
"Administrative Fee" means the fee payable by the Debtor to the Company
pursuant to Section 2.6 hereof, the terms of which are set forth in the Fee
Letter.
2
<PAGE> 4
"Advance" means a funding which is made pursuant to Section 2.1(a)
hereof.
"Advance Amount" means with respect to any Advance, the amount paid to
the Debtor by the Company or the Bank Investors.
"Advance Date" means, with respect to each Advance, the Business Day on
which such Advance is made.
"Adverse Claim" means a lien, security interest, charge or encumbrance,
or other right or claim in, 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).
"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, N.A., in its capacity as agent for the
Company and the Bank Investors, and any successor thereto appointed pursuant to
Article VII.
"Aggregate Interest Component" means aggregate sum of the Interest
Components of all issued and outstanding Related Commercial Paper.
"Agreement" has the meaning specified in the preamble hereto.
"Aggregate Unpaids" means, at any time, an amount equal to the sum of
(i) the aggregate accrued and unpaid Carrying Costs at such time, (ii) yield on
Related Commercial Paper, interest related to any outstanding LIBOR-based
funding periods arising from advances by any Liquidity Provider or Bank
Investor, (iii) without duplication, Facility Fees, Program Fees, and
Administrative Fees which may have accrued and be unpaid at such time, (iv) the
Net Investment at such time, and (v) all other
3
<PAGE> 5
amounts owed (whether due or accrued) hereunder by the Debtor to the Company,
the Agent or any Bank Investor at such time.
"Arrangement Fee" means the fee payable by the Debtor to the
Administrative Agent pursuant to Section 2.6 hereof, 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 unused Commitment,
and (iii) such Bank Investor's Pro Rata Share of the Outstanding Principal
Balance of Eligible Receivables (excluding Defaulted Receivables) at such time.
"Assignment and Assumption Agreement" means an Assignment and
Assumption Agreement substantially in the form of Exhibit C attached hereto.
"Bank" means Belk National Bank, a national banking association.
"Bank Investors" means NationsBank, N.A. and each other financial
institution that becomes a Bank Investor pursuant to an Assignment and
Assumption Agreement in accordance with the Agreement and the respective
successors and permitted assigns of any of the foregoing.
"Base Rate" 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 if more than one Liquidity Provider, by
NationsBank)) 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
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<PAGE> 6
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.
"Belk Center" means The Belk Center, Inc.
"Belk Simpson" means Belk-Simpson Company, Greenville, South Carolina.
"Belk Virginia" means Belk Stores of Virginia LLC.
"Benefit Plan" means any employee benefit plan as defined in Section
3(3) of ERISA in respect of which the Debtor, any Designated Seller or any ERISA
Affiliate of the Debtor or a Designated Seller is, or at any time during the
immediately preceding six years was, an "employer" as defined in Section 3(5) of
ERISA.
"Business Day" means any day excluding Saturday, Sunday and any day on
which banks in New York, New York or Charlotte, North Carolina are authorized or
required by law to close, and, when used with respect to the determination of
any LIBOR 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.
"Carrying Costs" means for a Collection Period the sum of (i) the sum
of the dollar amount of the Company's obligations for such Collection Period
determined on an accrual basis in accordance with GAAP consistently applied (a)
to pay (or pass through) interest with respect to Purchased Interests pursuant
to the provisions of the Liquidity Provider Agreement (such interest to be
calculated based on the Adjusted LIBOR Rate) outstanding at any time during such
Collection Period accrued from the first day through the last day of such
Collection Period whether or not such interest is payable during such Collection
Period and to pay interest with respect to amounts disbursed by a Credit Support
Provider pursuant to the Credit Support Agreement outstanding at any time during
such Collection Period accrued from the first day through the last day of such
Collection Period whether or not such interest is payable during such Collection
Period, (b) to pay the Accrued Interest Compo-
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<PAGE> 7
nent of Related Commercial Paper with respect to any Collection Period (and, for
purposes of this clause (b), Related Commercial Paper shall include Commercial
Paper issued to fund the Net Investment even if such Commercial Paper is issued
in an amount in excess of the Net Investment), (c) to pay the Dealer Fee with
respect to Related Commercial Paper issued during such Collection Period, (d) to
pay any past due interest not paid in clauses (a) and (b) with respect to prior
Collection Periods, and (e) to pay the costs of the Company with respect to the
operation of Sections 6.1, 6.2, 6.3 and 6.4, (ii) the Program Fee, the
Administrative Fee and the Facility Fee accrued from the first day through the
last day of such Collection Period whether or not such amount is payable during
such Collection Period, and all interest amounts due the Bank Investors in
accordance with Section 2.2(c), (d) and (e) and (iii) to pay the Servicing Fee
due to any successor Servicer.
"Closing Date" means May 3, 1999.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" has the meaning specified in the Guaranty and Security
Agreement.
"Collateral Agent" means NationsBank, N.A. in its capacity as
collateral agent under the Security Agreement, dated as of September 5, 1991, as
amended, between Enterprise and NationsBank, N.A., as consented and agreed to by
the Liquidity Provider and the letter of credit bank (as defined therein).
"Collection Account" means the account, established by the Agent, for
the benefit of the Company and the Bank Investors, pursuant to Section 2.4 of
the Guaranty and Security Agreement.
"Collection Period" means each monthly period ending on the 28th day of
a calendar month; provided, that the first Collection Period shall begin on the
Cut-Off Date and shall end on the 28th day of the calendar following the month
containing the Cut-Off Date. For purposes of calculation under this definition
relating to Receivables performance involving "Collection Periods" prior to the
date hereof, the parties hereto agree that
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<PAGE> 8
such prior periods shall refer to "Collection Periods" under that certain Note
Purchase and Security Agreement, dated as of June 12, 1998, by and between the
Company, Belk, Inc., Belk Center and NationsBank, N.A., as amended, restated or
supplemented and in effect from time to time.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all Recoveries and Finance Charges, if any, and cash proceeds of
Related Security with respect to such Receivable. For the purposes hereof,
"cash" shall include payments received with respect to the Receivables in the
form of cash, checks or money orders.
"Commercial Paper" means the promissory notes of the Company 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 advances to the Debtor or
to acquire interests in the Net Investment from 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
direct or indirect assignee of a Bank Investor party hereto taking pursuant to
an Assignment and Assumption Agreement, the commitment of such assignee to make
advances to the Debtor or to acquire interests in the Net Investment from the
Company not to exceed the amount set forth in such Assignment and Assumption
Agreement plus the dollar amount of any increase to such assignee's Commitment
consented to by such assignee prior to the time of determination minus the
dollar amount of any Commitment or portion thereof assigned pursuant to an
Assignment and Assumption Agreement prior to such time of determination.
"Commitment Termination Date" means May 2, 2000, or such later date to
which the Commitment Termina-
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<PAGE> 9
tion Date may be extended by Debtor, the Agent and the Bank Investors not later
than 30 days prior to the then current Commitment Termination Date.
"Company" means Enterprise Funding Corporation, and its successors and
permitted assigns.
"Company Termination Date" means the second Business Day after the
delivery by the Company to the Debtor of written notice that the Company elects
to commence the amortization of its interest in the Net Investment pursuant to
Section 2.5 or otherwise liquidate the Net Investment.
"Conduit Assignee" shall mean any commercial paper conduit for which
the administrative agent is either NationsBank or Bank of America National Trust
and Savings Association and which is designated by NationsBank from time to time
to accept an assignment from the Company of all or a portion of the Net
Investment.
"Credit Guidelines" means Belk Center's credit and collection policy or
policies and practices, relating to Accounts and Receivables existing on the
Cut-Off Date and referred to in Exhibit D attached hereto, as modified and as
supplemented from time to time in compliance with Section 4.2(d) of the Guaranty
and Security Agreement.
"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.
"Cut-Off Date" means May 1, 1999.
"Cycle Date" means the 1st, 4th, 7th, 10th, 13th, 16th, 19th, 22nd,
25th and 28th calendar day of each calendar month.
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<PAGE> 10
"Date of Processing" means, with respect to any transaction giving rise
to a Receivable, the date on which such transaction is first recorded on the
Servicer's computer master file of Accounts (without regard to the effective
date of such recordation).
"Dealer Fee" shall have the meaning assigned in the Fee Letter.
"Debtor" has the meaning specified in the preamble hereto.
"Debtor Receivable" means any Receivable which has been transferred
from the Bank or the Guarantor to the Debtor pursuant to a Receivables Purchase
Agreement.
"Deemed Collections" means any Collections on any Receivable deemed to
have been received pursuant to Section 2.7(a) or (b) hereof.
"Default Ratio" means, with respect to any Collection Period, the ratio
(expressed as a percentage) computed (on the following Determination Date) as of
the last day of each Collection Period by dividing (i) the product of (x) 12 and
(y) the aggregate amount of Receivables which became Defaulted Receivables
during such Collection Period by (ii) the aggregate amount of all Receivables
(other than Defaulted Receivables) as of the last day of the prior Collection
Period.
"Default Ratio Multiplier" means, at any time, the highest three-month
rolling arithmetic average Default Ratio for the twelve most recent Collection
Periods. The three-month rolling arithmetic average Default Ratio shall be
computed on each Determination Date by dividing the sum of the Default Ratios
for the three immediately preceding Collection Periods by three.
"Defaulted Receivable" means a Receivable in an Account with respect to
which, in accordance with the Credit Guidelines or Belk Center's customary and
usual servicing procedures, the Servicer has charged off such Receivable as
uncollectible; a Receivable shall become a Defaulted Receivable on the day on
which it is recorded as charged off as uncollectible on the Servicer's computer
master file of consumer credit card revolving accounts.
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<PAGE> 11
"Delinquency Ratio" means, the ratio (expressed as a percentage)
computed as of the last day of each Collection Period by dividing (i) the
aggregate amount of all Delinquent Receivables as of such date by (ii) the
aggregate amount of all Receivables (other than Defaulted Receivables) as of
such date.
"Delinquent Receivable" means a Receivable: (i) as to which any
payment, or part thereof, remains unpaid for more than 30 days from the original
due date for such Receivable and (ii) which is not a Defaulted Receivable.
"Designated Sellers" means, collectively, Belk Simpson and Belk
Virginia.
"Determination Date" means with respect to any Collection Period, the
tenth day of the succeeding calendar month or, if such tenth day is not a
Business Day, the Business Day next succeeding such tenth day.
"Dilution Ratio" means, for each Collection Period, the ratio
(expressed as a percentage) computed (on the following Determination Date) as of
the last day of each Collection Period by dividing (i) the aggregate amount by
which Receivables (other than the finance charge component of any such
Receivable) are reduced or cancelled as a result of any defective, rejected or
returned merchandise or services and all credits, rebates, discounts, disputes,
warranty claims, repossessed or returned goods, chargebacks, allowances, or any
other downward adjustments to the balance of such Receivable without receiving
Collections therefor and prior to such Receivable becoming a Defaulted
Receivable (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 Debtor, a Designated Seller or
the Servicer, provided to Obligors in respect of Receivables during such month
by (ii) the aggregate Outstanding Principal Balance of all Receivables as of the
last day of the preceding Collection Period.
"Dilution Ratio Multiplier" means (i) at any time during a Collection
Period ending in November, December, or January, the highest Dilution Ratio for
the immediately preceding Collection Periods ending in Novem-
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<PAGE> 12
ber, December or January, and (ii) at any other time, the highest Dilution Ratio
during the immediately preceding twelve Collection Periods (excluding for
purposes of this determination, the Collection Periods ending in November,
December or January).
"Discount Percentage" means the percentage designated by the Debtor
pursuant to Section 2.4(d).
"Discount Receivables" shall have the meaning specified in Section
2.4(d).
"Discount Receivable Collections" means, for any day, the product of
(a) the Discount Percentage and (b) Collections, other than those of the type
described in clauses (i) and (ii) of the definition of "Finance Charge
Collections," on such day.
"Early Collection Fee" means, for any funding period during which the
portion of the Net Investment that was allocated to such funding period is
reduced for any reason whatsoever, the excess, if any, of (i) the additional
interest that would have accrued during such funding period if such reductions
had not occurred, minus (ii) the income, if any, received by the recipient of
such reductions from investing the proceeds of such reductions.
"Eligible Account" means, as of the Closing Date (or, with respect to
Accounts arising after the Closing Date, as of the date of creation), each
Account in existence and owned by the Bank:
(1) which is payable in United States Dollars;
(2) the credit card or cards related thereto have not been
reported lost or stolen or designated fraudulent;
(3) which is not an Account as to which any of the Receivables
existing thereunder are Defaulted Receivables;
(4) the Receivables in which have not been charged-off (unless
such Account is subsequently reinstated);
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<PAGE> 13
(5) which is serviced by the Servicer and has been created by
the Bank (or acquired by the Bank on the Closing Date) and is maintained by the
Bank in the ordinary course of its business in accordance with the Credit
Guidelines; and
(6) with respect to which the Bank has, and, with respect to
which to the Receivables thereunder, the Guarantor (or, in the case of Debtor
Receivables, the Debtor) has, good title thereto, free and clear of all Adverse
Claims.
"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 of America; (ii) time deposits in, or bankers acceptances issued by, any
depositary institution or trust company incorporated under the laws of the
United States of America 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 Moody's and S&P of at least "P-1" and "A-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 Moody's and
by S&P; (iii) certificates of deposit having, at the time of investment or
contractual commitment to invest therein, a rating from Moody's and S&P of at
least "P-1" and "A-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
Moody's and S&P of at least "P-1" and "A-1", respectively; (d) Eurodollar time
deposits having
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<PAGE> 14
a credit rating from Moody's and S&P of at least "P-1" and "A-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
Moody's and S&P of at least "P-1" and "A-1", respectively.
"Eligible Receivable" means, at any time, any Receivable:
(7) with respect to which, the related Account is an Eligible
Account;
(8) which has been originated by the Bank (or, in the case of
certain Receivables existing on the Closing Date, has been sold by the Debtor or
a Designated Seller to the Bank or the Guarantor) in the ordinary course of its
business and has been sold to the Guarantor (or, in the case of Debtor
Receivables, to the Debtor) pursuant to (and in accordance with) the applicable
Receivables Purchase Agreement, and to which the Guarantor (or, in the case of
Debtor Receivables, the Debtor) has good title thereto, free and clear of all
Adverse Claims;
(9) which (together with the Collections and Related Security
related thereto) has been the subject of the grant of a first priority perfected
security interest therein (and in the Collections and Related Security related
thereto) to the Agent, on behalf of the Company and the Bank Investors,
effective until the termination of this Agreement;
(10) which arises pursuant to an Account with respect to which
the Debtor, the Bank or any Affiliate of the Debtor or the Bank has performed
all material obligations required to be performed by it thereunder, including
without limitation shipment of the merchandise and/or the performance of the
services purchased thereunder, at the time an interest in such Receivable is
initially pledged to the Agent, on behalf of the Company and the Bank Investors;
(11) the Obligor of which has been directed to make all
payments to a Post Office Box with respect to which there shall be a Post Office
Box Agree-
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<PAGE> 15
ment in effect or at retail store locations owned by the Debtor or any
Designated Seller;
(12) 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;
(13) which is an "account" or a "general intangible" or
"chattel paper" within the meaning of Article 9 of the UCC of all applicable
jurisdictions;
(14) which arises under an Account 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, right of
rescission, dispute, offset, counterclaim or other defense (it being understood
that a potential reduction because of returned merchandise would not in itself
cause a Receivable to not be considered an "Eligible Receivable");
(15) which was created in compliance, in all material
respects, with all 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 pursuant to an Account Agreement which
complies, in all material respects, with all such laws, rules and regulations;
(16) which (A) satisfies all applicable requirements of the
Credit Guidelines, (B) has not been waived or modified except in accordance with
the Credit Guidelines, (C) is assignable without the consent of, or notice to,
the Obligor thereunder and (D) is not, at the time of the initial creation of
interest hereunder, a Defaulted Receivable;
(17) is serviced in all respects by the Servicer;
(18) with respect to which all material consents, licenses,
approvals or authorizations
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<PAGE> 16
of, or registrations or declarations with, any Governmental Authority required
to be obtained, effected or given by the Bank (or, in the case of certain
Receivables existing on the Closing Date, by the Debtor, an Affiliate thereof or
the related Designated Seller) in connection with the creation of such
Receivable or the execution, delivery, creation and performance by the Bank (or,
in the case of certain Receivables existing on the Closing Date, by the Debtor,
an Affiliate thereof or the related Designated Seller), of the Account Agreement
pursuant to which such Receivable was created, have been duly obtained, effected
or given and are in full force and effect; and
(19) the assignment of which under the applicable Receivables
Purchase Agreements by the Bank or the Debtor to the Guarantor, and the grant of
a security interest therein under the Guaranty and Security Agreement does not
violate, conflict or contravene any applicable laws, rules, regulations, orders
or writs or any contractual or other restriction, limitation or encumbrance.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA Affiliate" means, with respect to any Person, (i) any
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code (as in effect from time to
time, the "Code")) as such Person; (ii) a trade or business (whether or not
incorporated) under common control (within the meaning of Section 414(c) of the
Code) with such Person; or (iii) a member of the same affiliated service group
(within the meaning of Section 414(n) of the Code) as such Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above.
"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
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<PAGE> 17
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 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).
"Excluded Taxes" shall have the meaning specified in Section 6.3
hereof.
"Facility Fee" means the fee payable by the Debtor to the Agent for
distribution to the Bank Investors pursuant to Section 2.6(a) hereof, the terms
of which are set forth in the Fee Letter.
"Facility Limit" means $300,000,000; provided that such amount may not
at any time exceed the aggregate Commitments at any time in effect; provided,
further, that from and after the Termination Date the Facility Limit shall at
all times equal the Net Investment plus the Aggregate Interest Component.
"Fee Letter" means the letter agreement dated the date hereof between
the Debtor, the Company and the Agent on behalf of the Bank Investors, with
respect to the fees to be paid by the Debtor hereunder, as amended, modified or
supplemented from time to time.
"Finance Charge Collections" means (i) that portion of the Collections
with respect to the Receivables which are estimated by the Servicer to be
designated as billed Finance Charges,(ii) any Recoveries (net of liquidation
expenses, if any) in respect of Defaulted Receivables and Related Security with
respect thereto and (iii) all Discount Receivable Collections.
"Finance Charges" means, with respect to an Account, any periodic
finance charges, and, to the extent rights with respect thereto are held by the
Guarantor or the Debtor, late fees, returned check or NSF charges or
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<PAGE> 18
similar charges owing by an Obligor pursuant to such Account.
"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, which are in effect as of the date of this Agreement.
"Governmental Authority" means the United States of America, any state
or other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantor" means Belk Accounts Receivable LLC, a North Carolina
limited liability company, and its successors and permitted assigns.
"Guarantor Account" means the demand deposit account of the Guarantor
maintained at NationsBank, N.A. for the purpose of receiving deposits of
Collections.
"Guarantor's Percentage" means at any time 1 minus the Noteholder's
Percentage.
"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.
"Guaranty and Security Agreement" means that certain Guaranty and
Security Agreement, dated as of May 3, 1999, between the Guarantor, the
Servicer, the Debtor
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<PAGE> 19
and NationsBank, as Agent and as a Bank Investor, as amended, modified or
supplemented from time to time.
"Indebtedness" means, with respect to any Person, without duplication,
such Person's (i) obligations for borrowed money evidenced by a promissory note,
bond or similar written obligation, including, without limitation, conditional
sales or similar title retention agreements, (ii) obligations representing the
deferred purchase price of property, (iii) obligations, whether or not assumed,
secured by liens or payable out of the proceeds or production from property now
or hereafter owned or acquired by such Person, (iv) obligations which are
evidenced by notes, acceptances, or other instruments, and all liabilities of
such Person by way of endorsements (other than for collection or deposit in the
ordinary course of business), (v) Capitalized Lease obligations, and (vi)
obligations for which such Person is obligated pursuant to a Guaranty; provided
that the term "Indebtedness" shall not include any accounts payable arising in
the ordinary course of such Person's business on terms customary in the trade.
"Indemnified Amounts" has the meaning specified in Section 6.1 hereof.
"Indemnified Parties" has the meaning specified in Section 6.1 hereof.
"Interest Component" means, (i) with respect to any Commercial Paper
issued on an interest-bearing basis, the interest payable on such Commercial
Paper at its maturity 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 to the extent included as part of such discount).
"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 one-month, two-month or
three-month funding period, the rate per annum (rounded upwards, if necessary,
to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any
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<PAGE> 20
successor page) as the London interbank offered rate for deposits in U.S.
dollars at approximately 11:00 a.m. (London time) two London Business Days prior
to the first day of such funding period for a term of one month, two months or
three months, as applicable. If for any reason such rate is not available, the
term "LIBOR Rate" shall mean, for any funding period, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1%) appearing on Reuters
Screen LIBOR Page as the London interbank offered rate for deposits in dollars
at approximately 11:00 a.m. (London time) two London Business Days prior to the
first day of such funding period for a term of one month, two months or three
months, as applicable; provided, however, if more than one rate is specified on
the Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean
of all such rates.
"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.
"London Business Day" shall mean, with respect to the determination of
the LIBOR Rate, any Business Day other than a Business Day on which banking
institutions in London, England trading in dollar deposits in the London
interbank market are authorized or obligated by law or executive order to be
closed.
"Majority Investors" means, at any time, the Agent and those Bank
Investors which hold Commitments aggregating in excess of 51% of the Facility
Limit (less the Commitment of any Bank Investor who is to be disregarded
pursuant to Section 8.2(b)) 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 Debtor, the
Bank or the Guarantor, (iii) the ability of the Debtor, the Bank or the
Guarantor, to
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perform its respective obligations under the Transaction Documents to which it
is a party and (iv) the interests of the Agent, the Company or the Bank
Investors under the Transaction Documents, or any event or condition which would
directly or immediately result in or cause the bankruptcy or insolvency of the
Debtor, the Bank or the Guarantor.
"Minimum Guarantor's Percentage" means at any time the greater of (i)
2.5 times the sum of the Default Ratio Multiplier plus the Dilution Ratio
Multiplier and (ii) 15%, subject to a minimum equivalent to, when expressed as
the product of the Minimum Guarantor's Percentage and the Net Receivables
Balance, 3% of the Facility Limit.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA which is or was at any time during the current year or the
immediately preceding five years contributed to by the Debtor, any Designated
Seller or any ERISA Affiliate of the Debtor or any Designated Seller on behalf
of its employees.
"NationsBank" has the meaning specified in the preamble hereto.
"Net Investment" means the sum of the initial Advance Amount plus,
without duplication, the sum of the cash amounts paid to the Debtor for each
Advance less the aggregate amount of payments made by or on behalf of the Debtor
received and applied by the Agent to reduce such Net Investment pursuant to
Section 2.4, 2.5 or 2.7 hereof; provided that the Net Investment shall be
restored and reinstated in the amount of any payment made by or on behalf of the
Debtor so received and applied if at any time such payment 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 7.9(d) as
described therein.
"Net Portfolio Yield" means, with respect to any Collection Period, the
annualized percentage equivalent of a fraction the numerator of which is the
estimated daily average Noteholder's Percentage of Finance
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Charge Collections over such a period less the Carrying Costs for such
Collection Period less the estimated daily average Noteholder's Percentage of
the aggregate outstanding balance of all Receivables which became Defaulted
Receivables during such Collection Period less the Servicing Fee with respect to
such Collection Period (to the extent not duplicative of Carrying Costs) and the
denominator of which is the daily average aggregate Net Investment during such
Collection Period.
"Net Receivables Balance" at any time means the aggregate Outstanding
Principal Balance of all Eligible Receivables, excluding the aggregate balance
of any Discount Receivables at such time, minus the amount by which (i) the
aggregate Outstanding Principal Balance of Receivables with respect to which the
related obligor has not provided, as its most recent billing address, an address
located in the United States or its territories or possessions, or which is a
United States military address exceeds (ii) 1.00% of the aggregate Outstanding
Principal Balance of Receivables.
"Note" shall have the meaning specified in Section 2.1(a).
"Noteholder's Percentage" means the percentage computed in accordance
with Section 2.1(b) as follows:
NI/NRB
Where:
NI = the Net Investment at the time of such computation.
NRB = the Net Receivables Balance at the time of such computation.
Notwithstanding the foregoing computation, (i) the Noteholder's
Percentage shall not exceed 100%, and (ii) the Noteholder's Percentage with
respect to Principal Collections at any time on and after the Termination Date
shall be the percentage equivalent of a fraction the numerator of which is the
Net Investment as of the Termination Date and the denominator of which is the
greater of (x) the Net Receivables Balance on the first Remittance Date
following the Termination Date or (y) the Net
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Receivables Balance on the Remittance Date of the Collection Period in which the
Termination Date occurs.
"Obligor" means any Person obligated to make payments under an Account,
including any guarantor thereunder.
"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.
"Original Receivables Purchase Agreements" means, collectively, (a) the
Receivables Purchase Agreement, dated as of June 12, 1998, by and between Belk,
Inc., as purchaser, Belk Simpson, as seller, and Belk Center, as servicer, and
(b) the Receivables Purchase Agreement, dated as of January 30, 1999, by and
between Belk, Inc., as purchaser, Belk Virginia, as seller, and Belk Center, as
servicer.
"Other Transferor" means any Person that has entered into a note
purchase agreement or a receivables purchase agreement or transfer and
administration agreement with the Company.
"Outstanding Principal Balance" means, with respect to any Receivable
at any time, the then outstanding principal amount thereof excluding any accrued
and outstanding Finance Charges related thereto and giving effect to the amount
of any credit balances and other adjustments existing with respect to such
Receivable on such day. The outstanding principal amount of any Defaulted
Receivables shall be considered to be zero for the purposes of any determination
hereunder of the aggregate Outstanding Principal Balance of the Receivables or
the aggregate Outstanding Principal Balance of Eligible Receivables.
"Payment Rate" means, for any Collection Period, the percentage
equivalent of a fraction, the numerator of which is equal to the amount of all
cash and check Principal Collections received during such Collection Period and
the denominator of which is equal to the aggregate Outstanding Principal Balance
of all Receiv-
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ables (excluding Discount Receivables) as of the last day of the prior
Collection Period.
"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.
"Post Office Box" means any box at a United States Post Office with
respect to which a Post Office Box Agreement is in effect.
"Post Office Box Agreement" means an agreement between the Servicer and
an official of the United States Postal Service in substantially the form of
Exhibit E hereto.
"Potential Termination Event" means an event which with the passage of
time or the giving of notice, or both, would constitute a Termination Event.
"Principal Collections" means with respect to any Collection Period,
all Collections received during such period other than Finance Charge
Collections.
"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.
"Program Fee" means the fee payable by the Debtor to the Company
pursuant to Section 2.6 hereof, the terms of which are set forth in the Fee
Letter.
"Purchased Interest" means the interest in the Note acquired by a
Liquidity Provider through purchase pursuant to the terms of the Liquidity
Provider Agreement.
"Receivable" means the indebtedness owed by any Obligor under an
Account, whether to a Designated Seller, the Debtor, the Bank or the Guarantor,
in each case whether constituting an account, chattel paper, instrument,
investment property or general intangible, arising in connection with the sale
or lease of merchandise or
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the rendering of services, and includes the right to payment of any Finance
Charges and other obligations of such Obligor with respect thereto. A Receivable
shall be deemed to have been created or the amount thereof increased as of the
end of the day on the Date of Processing of such Receivable or such increase to
the amount thereof.
"Receivables Purchase Agreements" means, collectively, (i) the
Receivables Purchase Agreement, dated as of May 3, 1999, by and among the
Guarantor, as purchaser, the Bank, as seller, the Debtor and Belk Center, as
servicer, (ii) the Receivables Purchase Agreement, dated as of May 3, 1999, by
and among the Bank, as purchaser, the Debtor, as seller, and Belk Center, as
servicer, (iii) the Receivables Purchase Agreement, dated as of May 3, 1999, by
and among the Guarantor, as purchaser, the Debtor, as seller, and Belk Center,
as servicer, (iv) the Assignment of Accounts Receivable, dated as of May 3,
1999, by and among Belk Simpson, the Guarantor and the Bank, (v) the Assignment
of Accounts Receivable, dated as of May 3, 1999, by and among Belk Virginia, the
Guarantor and the Bank, and (vi) the Original Receivables Purchase Agreements.
"Records" means all Account Agreements 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.
"Recoveries" means all amounts received or collected by the Servicer
with respect to Defaulted Receivables.
"Related Commercial Paper" means Commercial Paper issued by the Company
the proceeds of which were used to acquire, or refinance the acquisition of, an
interest in the Net Investment with respect to the Debtor.
"Related Security" means with respect to any Receivable, all of the
Guarantor's (or, in the case of a Debtor Receivable, the Debtor's) rights, title
and interest in, to and under:
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(1) all of the Debtor's, a Designated Seller's or the Bank's
interest, if any, in the merchandise (including returned or repossessed
merchandise), if any, the sale of which gave rise to such Receivable;
(2) 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 Account related to such Receivable
or otherwise, together with all financing statements signed by an
Obligor describing any collateral securing such Receivable;
(3) 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 Account related to
such Receivable or otherwise;
(4) all Records related to such Receivable;
(5) all rights and remedies of the Guarantor (or, in the case
of a Debtor Receivable, the Debtor's) under the applicable Receivables
Purchase Agreement together with all financing statements filed by the
Guarantor (or, in the case of a Debtor Receivable, the Debtor's) in
connection therewith;
(6) all rights and remedies of the Guarantor or the Debtor, as
applicable, under the Servicing Agreement; and
(7) all Proceeds of any of the foregoing.
"Remittance Advance" shall have the meaning specified in Section
2.4(d).
"Remittance Date" means the fifteenth day of each month beginning May
15, 1999, or, if such day is not
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a Business Day, the Business Day next succeeding such fifteenth day.
"Requirements of Law" for any Person means the certificate of
incorporation or articles of association and by-laws or other organizational or
governing documents of such Person, and any law, treaty, rule or regulation, or
determination of an arbitrator or Governmental Authority, in each case
applicable to or binding upon such Person or to which such Person is subject,
whether Federal, state or local (including, without limitation, usury laws, the
Federal Truth in Lending Act and Regulation Z and Regulation B of the Board of
Governors of the Federal Reserve System).
"Section 6.2 Costs" has the meaning specified in Section 6.2(d) hereof.
"Servicer" means at any time the Person then authorized pursuant to
Section 5.1 of the Guaranty and Security Agreement to service, administer and
collect Receivables.
"Servicer Account" means an account maintained by the Servicer at a
Servicer Account Bank for the purpose of depositing Collections from
Receivables.
"Servicer Account Agreement" means an agreement between the Agent and a
Servicer Account Bank in substantially the form of Exhibit F hereto.
"Servicer Account Bank" means each of the banks set forth in Exhibit G
hereto and such banks as may be added thereto or deleted therefrom pursuant to
Section 2.2 of the Guaranty and Security Agreement.
"Servicer Default" has the meaning specified in Section 5.4.
"Servicer Report" means a report, in substantially the form attached
hereto as Exhibit H or in such other form as is mutually agreed to by the
Servicer, the Debtor and the Agent, furnished by the Servicer pursuant to
Section 2.3 of the Guaranty and Security Agreement.
"Servicing Agreement" means, collectively, (i) the Membership
Agreement, dated as of June 10, 1998, by
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and among Belk Center, the Debtor, and various other members party thereto, and
(ii) the Accounts Receivable Administration and Servicing Agreement, dated as of
May 3, 1999, by and among the Debtor, the Bank and Belk Center.
"Servicing Fee" means an amount equal to 2.0% per annum (calculated on
the basis of actual days elapsed divided by a year consisting of 360 days) on
the average daily amount of the Net Investment. Such fee shall accrue from the
date of the initial Advance to the date on which the Noteholder's Percentage is
reduced to zero.
"Standard & Poor's" or "S&P" means Standard & Poor's Ratings Services,
a division of 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 6.3 hereof.
"Telerate Page 3750 Screen" shall mean the display designated as "Page
3750" on the Telerate Service (or such other page as may replace Page 3750 on
that service or such other service as may be nominated by the British Bankers'
Association as the information vendor for the purposes of displaying British
Bankers' Association Interest Settlement Rates for U.S. Dollar deposits).
"Termination Date" means the earliest of (i) the Business Day
designated by the Debtor 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,
(iii) the date of termination of the commitment of the Credit Support Provider
under the Credit Support Agreement, (iv) the day upon which a Termination Date
is declared or automatically occurs pursuant to Section 6.2(a) of the Guaranty
and Security Agreement(v) two Business Days prior to the Commitment Termination
Date, or on (vi) the day on which
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a Company Termination Date shall occur unless the interest in the Net Investment
shall have been assigned (or is concurrently so assigned) to the Bank Investors
pursuant to Section 7.9 hereof.
"Termination Event" means an event described in Section 6.1 of the
Guaranty and Security Agreement.
"Transaction Costs" has the meaning specified in Section 6.4(a) hereof.
"Transaction Documents" means, collectively, this Agreement, the
Guaranty and Security Agreement, the Receivables Purchase Agreements, any
Servicer Account Agreement, any Post Office Box Agreement, the Fee Letter, the
Note and all of the other instruments, documents and other agreements executed
and delivered by the Debtor, the Guarantor, the Bank or the Servicer 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.
"UCC" means, with respect to any state, the Uniform Commercial Code as
from time to time in effect in such state.
"U.S." or "United States" means the United States of America.
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. All capitalized terms used herein and
not otherwise defined shall have the meanings ascribed to such terms in the
Guaranty and Security Agreement.
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 excluding", and the word "within" means
"from and excluding a specified date and to and including a later specified
date".
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ARTICLE II
ADVANCES; SETTLEMENTS
Section 1.4 Advances; the Note; Eligible Receivables Advances. Upon the
terms and subject to the conditions herein set forth, at any time and from time
to time prior to the occurrence of the Termination Date the Company may, at its
option, or the Bank Investors shall, if so requested by the Debtor, make an
advance (any such advance, an "Advance"); provided that after giving effect to
the issuance of Related Commercial Paper to fund the amount of any Advance (an
"Advance Amount") and the payment to the Debtor of such Advance Amount the sum
of the Net Investment plus the Interest Component of all outstanding Related
Commercial Paper would not exceed the Facility Limit; and, provided further,
that, after giving effect to such Advance, the Guarantor's Percentage shall not
be less than the Minimum Guarantor's Percentage (the calculation thereof to be
set forth in the Additional Advance Certificate delivered in connection with
such Advance) and provided further however, that, subject to Section 3.2, the
representations and warranties set forth in Section 3.1 shall be true and
correct both immediately before and immediately after giving effect to any such
Advance and the payment to the Debtor of the Advance Amount related thereto and
an Additional Advance Certificate shall have been delivered with respect to such
Advance as required by Section 3.2 hereof.
The Debtor shall, by notice to the Agent given by telephone (and
promptly followed by telecopy confirmation), request an Advance at least three
(3) Business Days prior to the proposed date of any Advance. Each such notice
shall specify (w) whether such request is made to the Company or the Bank
Investors (it being understood and agreed that the Debtor shall not request
funding from the Bank Investors unless the Company shall have not accepted an
Advance and that once the Bank Investors acquire any interest in the Net
Investment hereunder, the Bank Investors shall be required to accept the
assignment of all interests in the Net Investment held by the Company in
accordance with Section 7.9 and thereafter the Company shall no longer make any
additional Advances hereunder), (x) the desired Advance Amount (which shall be
at least $1,000,000 or integral
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multiples of $100,000 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 equal to such available portion of the Facility Limit), and (y)
the desired date of such Advance. In the event that proceeds from the issuance
of Related Commercial Paper exceed the Advance Amount paid to the Debtor, the
Debtor may elect to receive such excess proceeds and increase the Net
Investment, subject to the terms and conditions applicable to Advances as set
forth in this Agreement. The Agent will promptly notify the Company or each of
the Bank Investors, as the case may be, of the Agent's receipt of any request
for an Advance to be made by such Person. To the extent that any such Advance is
requested of the Company, the Company shall accept or reject such request by
notice given to the Debtor and the Agent by telephone or telecopy by no later
than 5:00 p.m. (New York time) on the Business Day following its receipt of any
such request. Each Additional Advance Certificate shall be irrevocable and
binding on the Debtor and the Debtor shall indemnify the Company and each Bank
Investor against any loss or expense incurred by 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
Debtor to accept any such Advance on the date indicated in the applicable
Additional Advance Certificate, including, without limitation, any actual loss
or expense incurred by the 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 Advance.
On or prior to the Closing Date, the Debtor shall issue a single note
to the Agent, on behalf of the Company and the Bank Investors (the "Note"),
which shall (1) be dated the Closing Date; (2) be in the stated principal amount
equal to the Facility Limit (as reflected from time to time on the grid attached
thereto); (3) bear interest as provided therein; (4) be payable to the order of
the Agent for the account of the Company or the Bank Investors and mature on the
date which is twelve
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(12) months after the Termination Date; and (5) be substantially in the form of
Exhibit I to this Agreement, with blanks appropriately completed in conformity
herewith. The Agent shall indicate the amount of the initial Advance together
with the date thereof on the grid attached to the Note. The Agent shall indicate
the amount of each subsequent Advance together with the date thereof as well as
any increase in the Net Investment on the grid attached to the Note.
Although the Note shall be dated the Closing Date, interest in respect
thereof shall be payable only for the periods during which amounts are
outstanding thereunder. In addition, although the stated principal amount of the
Note shall be equal to the Facility Limit, the Note shall be enforceable with
respect to the Debtor's obligation to pay the principal thereof only to the
extent of the unpaid principal amount of the Advances outstanding thereunder at
the time such enforcement shall be sought.
By no later than 11:00 a.m. (New York time) on any Advance Date, the
Company or each Bank Investor, as the case may be, shall remit its share (which,
in the case of an Advance by the Bank Investors, shall be equal to such Bank
Investor's Pro Rata Share) of the aggregate Advance Amount for such Advance 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 Advance Amount 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 Advance and the Agent's receipt of funds
from the Company or the Bank Investors as aforesaid, the Agent shall use its
reasonable efforts to remit the Advance Amount to the Debtor's account at the
location indicated in Section 8.1 hereof, in immediately available funds, by
1:30 p.m. (New York time) on the Advance Date. 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 Advance Amount relating to any Advance
available on the applicable Advance 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 Advance Amount available to the Debtor in anticipa-
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tion 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 Advance
Date, the Company or such Bank Investor, on the one hand, and the Debtor, 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 Debtor, 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
otherwise have sufficient funds to pay the face amount of its Commercial Paper
in full). The Agent shall immediately notify the Debtor if the Agent has made
such an advance on behalf of the Company or any Bank Investor and the Debtor
shall repay such advance at any time without penalty or any Early Collection
Fee. 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 have an interest
in the Net Investment hereunder. Upon the payment of such amount to the Agent
(x) by the Debtor, 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 Advance Amount
for such Advance.
(1) Noteholder's Percentage. The Noteholder's Percentage shall
be initially computed as of the opening of business of the Servicer on the date
of the Cut-Off Date. Thereafter until the Termination Date the Noteholder's
Percentage shall be automatically and promptly recomputed as of the close of
business of each Cycle Date (other than a Cycle Date after the Termination
Date). The Noteholder's Percentage 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.
Section 1.5 Fundings.
(1) Prior to the Termination Date; Net Investment Funded by
Company. At all times hereafter, but prior to the Termination Date and not with
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respect to any portion of the Net Investment held by the Bank Investors (or any
of them), the Debtor may, subject to the Company's approval and the limitations
described below, request that the Net Investment be allocated among one or more
funding periods, so that the aggregate amounts so allocated at all times shall
equal the Net Investment held by the Company. The Debtor shall give the Company
irrevocable notice by telephone of the new requested funding period(s) at least
three (3) Business Days prior to the expiration of any then existing funding
period; provided, however, that the Company may select, in its sole discretion,
any such new funding period if (i) the Debtor fails to provide such notice on a
timely basis or (ii) the Company determines, in its sole discretion, that the
funding period requested by the Debtor is unavailable or for any reason
commercially undesirable. The Company confirms that it is its intention to fund
all or substantially all of the Net Investment held by it by issuing Related
Commercial Paper; provided,that the Company may determine, from time to time, in
its sole discretion, that funding such Net Investment by means of Related
Commercial Paper 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 Note 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 funding period applicable
to any such Purchased Interest shall be a period of not greater than three (3)
Business Days and shall accrue Carrying Costs on the basis of the Base Rate.
Thereafter, provided that the Termination Date shall not have occurred, Carrying
Costs shall accrue on the basis of either the Base Rate or the Adjusted LIBOR
Rate, as determined by the Debtor. The Debtor shall give the Agent irrevocable
notice by telephone of the new requested funding period at least three (3)
Business Days prior to the expiration of any then existing funding period. In
the case of any funding period outstanding upon the Termination Date, such
funding period shall end on such date.
(2) After the Termination Date; Net Investment Funded by
Company. At all times on and after the Termination Date (provided that no
Termination Event (other than an event described in either Section 6.1(o) or
6.1(p) of the Guaranty and Security Agreement) shall
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have occurred), with respect to any portion of the Net Investment which shall
not have been transferred to the Bank Investors (or any of them), the Debtor
shall select all funding periods and rates applicable thereto. The Debtor shall
give the Agent irrevocable notice by telephone of the new requested funding
period at least three (3) Business Days prior to the expiration of any then
existing funding period. After the occurrence of a Termination Event (other than
an event described in either Section 6.1(o) or 6.1(p) of the Guaranty and
Security Agreement), Carrying Costs shall accrue at either the Base Rate or the
Adjusted LIBOR Rate, at the Agent's option.
(3) Prior to the Termination Date; Net Investment Funded by
Bank Investor. At all times with respect to any portion of the Net Investment
transferred to the Bank Investors (or any of them) pursuant to Section 7.9, but
prior to the Termination Date, the initial funding period applicable to such
portion of the Net Investment allocable thereto shall be a period of not greater
than three (3) Business Days and shall accrue Carrying Costs on the basis of the
Base Rate. Thereafter, with respect to such portion, and with respect to any
other portion of the Net Investment held by the Bank Investors (or any of them),
provided that the Termination Date shall not have occurred, Carrying Costs shall
accrue with respect thereto at either the Base Rate or the Adjusted LIBOR Rate,
at the Debtor's option. The Debtor shall give the Agent irrevocable notice by
telephone of the new requested funding period at least three (3) Business Days
prior to the expiration of any then existing funding period. In the case of any
funding period outstanding upon the occurrence of the Termination Date, such
funding period shall end on the date of such occurrence.
(4) After the Termination Date; Net Investment Funded by Bank
Investor. At all times on and after the Termination Date (provided that no
Termination Event (other than an event described in either Section 6.1(o) or
6.1(p) of the Guaranty and Security Agreement) shall have occurred), with
respect to any portion of the Net Investment which shall have been owned or
transferred to the Bank Investors (or any of them), the Debtor shall select all
funding periods applicable thereto. After the occurrence of a Termination Event
(other than an event
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described in either Section 6.1(o) or 6.1(p) of the Guaranty and Security
Agreement), the Agent shall select all funding periods and rates applicable to
the Net Investment.
(5) Eurodollar Rate Protection; Illegality. (i) If the Agent
or NationsBank is unable to obtain on a timely basis the information necessary
to determine the LIBOR Rate for any proposed funding period, then
(A) the Agent shall forthwith notify the Company or Bank
Investors, as applicable and the Debtor that the Adjusted LIBOR Rate
cannot be determined for such funding period, and
(B) while such circumstances exist, neither the Company, any
Liquidity Provider, the Bank Investors or the Agent shall allocate the
Net Investment related to any Advances made during such period or
reallocate the Net Investment allocated to any then existing funding
period ending during such period, to a funding period which accrues
Carrying Costs on the basis of the Adjusted LIBOR Rate.
(ii) If, with respect to any outstanding funding period which
accrues Carrying Costs on the basis of the Adjusted LIBOR Rate, the Company, any
Liquidity Provider or any of the Bank Investors funding any portion of the Net
Investment allocated thereto notifies the Agent that it is unable to obtain
matching deposits in the London interbank market to fund its purchase or
maintenance of such Net Investment or that the Adjusted LIBOR Rate applicable to
such Net Investment will not adequately reflect the cost to the Person of
funding or maintaining such Net Investment for such funding period then the
Agent shall forthwith so notify the Debtor, whereupon neither the Agent nor the
Company, any Liquidity Provider or the Bank Investors, as applicable, shall,
while such circumstances exist, allocate any Net Investment related to any
Advances made during such period or reallocate the Net Investment allocated to
any funding period ending during such period, to a funding period which accrues
Carrying Costs on the basis of the Adjusted LIBOR Rate.
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(iii) Notwithstanding any other provision of this Agreement,
if the Company, any Liquidity Provider 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 Liquidity Provider, as applicable, to
fund the Net Investment or any portion thereof at the Adjusted LIBOR Rate, then
(x) as of the effective date of such notice from such Person to the Agent, the
obligation or ability of the Company, any Liquidity Provider or such Bank
Investor, as applicable, to fund its purchase or maintenance of Net Investments
at the Adjusted LIBOR Rate shall be suspended until such Person notifies the
Agent that the circumstances causing such suspension no longer exist and (y) the
Net Investment allocated to each funding period which accrues Carrying Costs on
the basis of the Adjusted LIBOR Rate in which such Person owns an interest shall
either (1) if such Person may lawfully continue to maintain such Net Investment
at the Adjusted LIBOR Rate until the last day of the applicable funding period,
be reallocated on the last day of such funding period to another funding period
in respect of which the Net Investment allocated thereto accrues Carrying Costs
on a basis other than the Adjusted LIBOR Rate or (2) if such Person shall
determine that it may not lawfully continue to maintain such Net Investment at
the Adjusted LIBOR Rate until the end of the applicable funding period, such
Person's share of the Net Investment allocated to such funding period shall be
deemed to accrue Carrying Costs on the basis of the Base Rate from the effective
date of such notice until the end of such funding period.
Section 1.6 Carrying Costs, Fees and Other Costs and Expenses. The
Debtor shall pay, as and when due in accordance with this Agreement, all fees
hereunder, including any Early Collection Fee, Carrying Costs and all amounts
payable pursuant to Article VI hereof, if any. On each Remittance Date, the
Debtor shall pay to the Agent, on behalf of the Company or the Bank Investors,
as applicable, an amount equal to the accrued and unpaid Carrying Costs for the
related Collection Period. The Debtor shall pay to the Agent, on behalf of the
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Company, on each day on which Related Commercial Paper is issued by the Company,
the Dealer Fee with respect to such Related Commercial Paper. Nothing in this
Agreement shall limit in any way the obligations of the Debtor to pay the
amounts set forth in this Section 2.3.
Section 1.7 Allocations of Collections; Non-Liquidation Settlement
Procedures. (a) Within six (6) days of each Cycle Date, the Servicer shall
allocate all Collections received on or prior to such Cycle Date and after the
preceding Cycle Date as Finance Charge Collections or Principal Collections and
shall deposit such Collections into the Guarantor Account or the Collection
Account, as applicable. Calculations with respect to Principal Collections shall
be performed by the Servicer as described in subsection (b) below. On each
Remittance Date, the product of (A) the estimated daily average of the
Noteholder's Percentage over the preceding Collection Period (as determined as
of each Cycle Date occurring during such Collection Period) and (B) the
aggregate Finance Charge Collections for such preceding Collection Period (other
than Collections comprised of late fees, NSF or returned check charges or
similar fees and charges which shall be retained by the Servicer as provided in
Section 6.2(e)), which product shall be net of any Remittance Advances made by
the Debtor for costs accrued with respect to such Collection Period (but not
less than zero), shall be calculated by the Servicer (such amount, the "Monthly
Finance Charge Amount"). Upon each Remittance Date:
(1) first, the Debtor shall pay to the Agent any accrued and
unpaid Carrying Costs for such Collection Period;
(2) second, the Servicer shall calculate an amount equal to
any Servicing Fee due and owing (such amount which, when added together
with the amount paid pursuant to clause (i), is not to exceed the
Monthly Finance Charge Amount); and
(3) third, to the extent the sum of the amounts paid pursuant
to or described in clauses (i) and (ii) above do not exceed the Monthly
Finance Charge Amount, if such Remittance Date is on or after the
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Termination Date, the Debtor shall pay to the Agent an amount equal to
any such deficit, which payment shall be applied as a reduction of the
Net Investment (such amount which, when added together with the sum of
the amounts paid pursuant to or described in clauses (i) and (ii), is
not to exceed the Monthly Finance Charge Amount).
(b) Within six (6) days after each Cycle Date on or after the
Termination Date, (i) the Servicer shall calculate an amount equal to the
Noteholder's Percentage of all Principal Collections received on or prior to
such Cycle Date (such amount, the "Monthly Principal Amount")and after the
preceding Cycle Date and on the related Remittance Date the Debtor shall pay an
amount equal to such amount (net of any Remittance Advances made by the Debtor
for costs accrued with respect to the preceding Collection Period in excess of
the amount of Remittance Advances netted against the Noteholder's Percentage of
Finance Charge Collections for such Collection Period, the Guarantor's
Percentage of Finance Charge Collections for such Collection Period and the
portion of Principal Collections not allocated to the Net Investment) to the
Agent in reduction of the Net Investment, and (ii) the Servicer shall calculate
an amount equal to the portion of such Principal Collections not allocated to
the Net Investment (net of any Remittance Advances made by the Debtor for costs
accrued with respect to the preceding Collection Period in excess of the amount
of Remittance Advances netted against the Noteholder's Percentage of Finance
Charge Collections for such Collection Period and the Guarantor's Percentage of
Finance Charge Collections for such Collection Period), and if a Termination
Event (other than an event described in either Section 6.1(o) or 6.1(p) of the
Guaranty and Security Agreement) shall have occurred, on the related Remittance
Date the Debtor shall pay an amount equal to such amount to the Agent in
reduction of the Net Investment.
(c) In the event that, on any date, the Company does not have
sufficient funds to pay the Interest Component of matured or maturing Related
Commercial Paper or any Dealer Fee due and payable on such day, the Debtor,
acting upon written notice from the Agent, shall pay an amount equal to such
costs and any Dealer Fee due and
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payable on such day (a "Remittance Advance") to the Agent, for the account of
the Company.
(2) The Debtor shall have the option to designate a fixed
percentage (the "Discount Percentage") of all Receivables other than Finance
Charges and Receivables in Defaulted Accounts to be treated as finance charge
receivables ("Discount Receivables") in accordance with the provisions of this
Section 2.4(d), which percentage shall remain fixed and in effect until such
time as the Debtor has provided a subsequent designation, upon 20 days prior
written notice, to the Agent. The initial Discount Percentage shall be 0%. The
Debtor shall have the option to increase, decrease or eliminate the Discount
Percentage, provided, that (i) no such designation shall become effective if it
would reasonably be expected to cause a Termination Event to occur, (ii) no such
designation shall become effective upon or after a Termination Event without the
Agent's prior written approval, and (iii) if, at the date of designation, the
projected Net Portfolio Yield for any Monthly Period during the six months
following such date, after giving effect to such designation, is less than 3%,
no such designation shall become effective without the Agent's prior written
consent.
Section 1.8 Liquidation Settlement Procedures. If, on the Termination
Date the Guarantor's Percentage is less than the Minimum Guarantor's Percentage,
then the Debtor shall immediately pay to the Agent, for the benefit of the
Company or the Bank Investors, as applicable, an amount equal to the amount
that, when applied in reduction of the Net Investment, will result in a
Guarantor's Percentage equal to or greater than the Minimum Guarantor's
Percentage. Such amount shall be applied by the Agent to the reduction of the
Net Investment.
Section 1.9 Fees. The Debtor shall pay the following non-refundable
fees:
(1) On each Remittance Date, to the Company solely for its own
account, the Program Fee and the Administrative Fee, and to the Agent for
distribution to the Bank Investors, the Facility Fee.
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(2) On the date of execution hereof, to the Administrative
Agent solely for its own account, the Arrangement Fee.
Section 1.10 Deemed Collections; Application of Payments. (a) If on any
day the Outstanding Principal Balance of a Receivable is either (x) reduced as a
result of any defective, rejected or returned merchandise or services, any
discount, credit, rebate, dispute, warranty claim, repossessed or returned
goods, chargeback, allowance or any billing adjustment, or (y) reduced or
canceled as a result of a setoff or offset in respect of any claim by any Person
(whether such claim arises out of the same or a related transaction or an
unrelated transaction) or (z) any other downward adjustments to the balance of
such Receivable without receiving Collections therefor and prior to such
Receivable becoming a Defaulted Receivable, the amount of such cancellation,
reduction or adjustment shall thereafter be deducted from the aggregate
Outstanding Principal Balance of the Receivables and the Net Receivables
Balance. If such reduction would result in a Guarantor's Percentage less than
the Minimum Guarantor's Percentage, the Debtor shall pay to the Agent an amount
equal to the amount that, when applied in reduction of the Net Investment, will
result in a Guarantor's Percentage equal to or greater than the Minimum
Guarantor's Percentage. Such amount shall be applied by the Agent to the
reduction of the Net Investment.
(1) If on any day the Servicer or the Debtor has actual
knowledge that any of the representations or warranties in Section 3.1(l) of the
Guaranty and Security Agreement was or has become untrue with respect to a
Receivable (whether on or after the date of any transfer of an interest therein
to the Agent, the Company or the Bank Investors as contemplated hereunder), such
Receivable shall thereafter not be included in any calculation of the Net
Receivables Balance. If such reduction would result in a Guarantor's Percentage
less than the Minimum Guarantor's Percentage, the Debtor shall pay to the Agent
an amount equal to the amount that, when applied in reduction of the Net
Investment, will result in a Guarantor's Percentage equal to or greater than the
Minimum Guarantor's Percentage. Such amount shall be applied by the Agent to the
reduction of the Net Investment.
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Section 1.11 Payments and Computations, Etc. All amounts to be paid or
deposited by the Debtor or the Servicer hereunder or under the Guaranty and
Security Agreement shall be paid or deposited in accordance with the terms
hereof no later than 11:00 a.m. (New York City time) on the day when due in
immediately available funds; if such amounts are payable to the Company or any
Bank Investor they shall be paid or deposited in the account indicated in
Section 8.1 hereof, until otherwise notified by the Agent. The Debtor 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 the Adjusted LIBOR Rate that
would apply during the continuance of a Termination Event. All computations of
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
Debtor hereunder shall be binding upon the Debtor absent manifest error.
Section 1.12 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 any interest in the Net Investment it may
have (other than pursuant to Section 2.5, or Article VI and other than as a
result of the differences in the timing of the applications of payments pursuant
to Section 2.3 or 2.4) in excess of its ratable share of payments on account of
Net Investment held 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 Net
Investment held 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 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
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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 1.13 Right of Setoff. Without in any way limiting the
provisions of Section 2.9, each of 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 or during the continuance of a Potential
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 Company or such Bank Investor
to, or for the account of, the Debtor against the amount of the Aggregate
Unpaids owing by the Debtor to such Person (even if contingent or unmatured).
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 1.14 Representations and Warranties of the Debtor. The Debtor
represents and warrants to the Agent, the Company and the Bank Investors that:
(1) Corporate Existence and Power. The Debtor is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of 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. The
Debtor 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 be so qualified or in good standing would
not have a Material Adverse Effect.
(2) Corporate and Governmental Authorization; Contravention.
The execution, delivery and performance by the Debtor of this Agreement, the
Receivables Purchase Agreements to which the Debtor is a party, the Fee Letter,
the Note and the other Transaction Documents to which the Debtor is a party are
within the Debtor'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 by Section 2.2 of the
Guaranty and Security Agreement), and do not contravene, or constitute a default
under, any provision of applicable law, rule or regulation or of the Certificate
of Incorporation or Bylaws of the Debtor or of any agreement, judgment,
injunction, order, writ, decree or other instrument binding upon the Debtor or
result in the creation or imposition of any Adverse Claim on the assets of the
Debtor or any of its Subsidiaries (except as contemplated by Section 2.2 of the
Guaranty and Security Agreement or any other provision of this Agreement or any
other Transaction Document).
(3) Binding Effect. Each of this Agreement, the Receivables
Purchase Agreements to which the Debtor is a party, the Fee Letter, the Note and
the
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other Transaction Documents to which the Debtor is a party constitutes the
legal, valid and binding obligation of the Debtor, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of creditors generally.
(4) Accuracy of Information. All information heretofore
furnished by the Debtor (including without limitation, the financial statements
delivered pursuant to Section 5.1) 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 Debtor to the Company, any Bank Investors, the Agent or the
Administrative Agent will be, true and accurate in every material respect, on
the date such information is stated or certified.
(5) Tax Status. The Debtor 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, assessments and other governmental charges.
(6) Action, Suits. Except as set forth in Exhibit J hereof (as
such exhibit may be amended from time to time), there are no actions, suits or
proceedings pending, or to the knowledge of the Debtor threatened, against or
affecting the Debtor or its properties, in or before any court, arbitrator or
other body, (i) asserting the invalidity of any Transaction Document, (ii)
seeking to prevent the consummation of any of the transactions contemplated by
any Transaction Document, (iii) seeking any determination or ruling that, in the
judgment of the Debtor, would materially and adversely affect the performance of
its obligations under any Transaction Document to which it is a party or
materially and adversely affect the collectibility of the Receivables as a
whole, or (iv) seeking any determination or ruling that would materially and
adversely affect the validity or enforceability of any Transaction Document.
Except as set forth in Exhibit J hereof (as such exhibit may be amended from
time to time), there are no outstanding judgments in any court against the
Debtor (for which the Debtor is solely responsible or is
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responsible jointly with other Persons) in excess of $1,000,000 individually.
(7) Use of Proceeds. The proceeds of all Advances shall be
used by the Debtor exclusively for the following purposes: (i) to make capital
contributions or loans, directly or indirectly, to the Guarantor (it being
understood that, with respect to any such indirect capital contribution or
indirect loan, all of such proceeds at any intermediary will be contributed or
loaned, as applicable, to the Guarantor), and (ii) to purchase Receivables from
the Bank or the Guarantor in accordance with and pursuant to the applicable
Receivables Purchase Agreement; provided, that to the extent the Debtor uses the
proceeds of Advance for any purpose set forth in clause (i) or (ii), and such
funds are repaid or retransferred to the Debtor pursuant to the Transaction
Documents or otherwise, then the foregoing restrictions shall no longer apply to
such proceeds so repaid or retransferred to the Debtor. No proceeds of any
Advance will be used by the Debtor to acquire any security in any transaction
which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as
amended. The Guarantor shall be a third-party beneficiary of this paragraph (g)
of this Section 3.1.
(8) Tradenames, Etc. As of the date hereof: (i) the Debtor has
only the subsidiaries and divisions listed on Exhibit K hereto; and (ii) the
Debtor has, within the last five (5) years, operated only under the tradenames
identified in Exhibit K hereto, and, within the last five (5) years, has not
changed its name, merged with or into or consolidated with any other corporation
or been the subject of any proceeding under Title 11, United States Code
(Bankruptcy), except as disclosed in Exhibit K hereto.
(9) No Termination Event. No event has occurred and is
continuing and no condition exists which constitutes a Termination Event or a
Potential Termination Event.
(10) Not an Investment Company. The Debtor 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.
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(11) ERISA. Each of the Debtor and its ERISA Affiliates is in
compliance in all material respects with ERISA and no lien exists in favor of
the Pension Benefit Guaranty Corporation on any of the Receivables.
(12) Bulk Sales. No transactions contemplated hereby or by any
Receivables Purchase Agreement requires compliance with any bulk sales act or
similar law.
(13) Transfers Under the Original Receivables Purchase
Agreements. Each Receivable which has been transferred to the Debtor by a
Designated Seller has been purchased by the Debtor from such Designated Seller
pursuant to, and in accordance with, the terms of the applicable Original
Receivables Purchase Agreement.
Section 1.15 Reaffirmation of Representations and Warranties by the
Debtor. On each day that an Advance is made hereunder, the Debtor, by accepting
the proceeds of such Advance, shall be deemed to have certified that all of its
respective representations and warranties described in Sections 3.1 hereof are
correct on and as of such day as though made on and as of such day, provided
that the representations set forth in Section 3.1(f) hereof shall be deemed made
only on and as of the Closing Date and on each January 1, April 1, July 1 and
October 1 of each calendar year (whether or not any such date is an Advance
Date). Each Advance shall be subject to the further condition precedent that
prior to the date of such Advance, the Servicer shall have delivered to the
Agent and the Administrative Agent, in the form and substance satisfactory to
the Agent and the Administrative Agent, a completed Additional Advance
Certificate as of a Cycle Date that is not earlier than the fifth Business Day
prior to the date of such Advance, together with such additional information as
may be reasonably requested by the Administrative Agent or the Agent; and the
Debtor shall be deemed to have represented and warranted that such conditions
precedent have been satisfied.
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ARTICLE IV
CONDITIONS PRECEDENT
Section 1.16 Conditions to Closing. On or prior to the date of
execution hereof, the Debtor 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:
(1) A copy of the resolutions of the Board of Directors of the
Debtor, certified by its Secretary or Assistant Secretary, approving the
execution, delivery and performance by the Debtor of this Agreement and the
other Transaction Documents to be delivered by the Debtor hereunder or
thereunder.
(2) A copy of the resolutions of the Board of Directors of the
Servicer, the Bank and the Guarantor certified by its Secretary or Assistant
Secretary approving the execution, delivery and performance by such Person of
each Transaction Document to be delivered by such Person hereunder or
thereunder.
(3) The Articles or Certificate of Incorporation of the Debtor
certified by the Secretary of State or other similar official of the Debtor's
jurisdiction of incorporation dated a date reasonably prior to the Closing Date.
(4) The Articles or Certificate of Incorporation, Articles of
Association or Articles of Organization, as applicable, of the Servicer, the
Bank and the Guarantor certified by the Secretary of State or other similar
official of such Person's jurisdiction of incorporation dated a date reasonably
prior to the Closing Date.
(5) A Good Standing Certificate for the Debtor issued by the
Secretary of State or a similar official of the Debtor's jurisdiction of
incorporation and certificates of qualification as a foreign corporation 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.
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(6) A Good Standing Certificate for the Servicer, the Bank and
the Guarantor issued by the Secretary of State or a similar official of the
Servicer's jurisdiction of incorporation 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 other Transaction Documents,
in each case, dated a date reasonably prior to the Closing Date.
(7) A Certificate of the Secretary or Assistant Secretary of
the Debtor, the Servicer, the Bank and the Guarantor substantially in the form
of Exhibit L attached hereto.
(8) Copies of proper financing statements (Form UCC-1), dated
a date reasonably near to the date of the initial Advance naming Belk Simpson as
the debtor in favor of the Debtor, as 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 Debtor's first priority perfected security interest in all
Receivables sold thereto by Belk Simpson and the Related Security and
Collections relating thereto.
(9) Copies of proper financing statements (Form UCC-1), dated
a date reasonably near to the date of the initial Advance naming Belk Virginia
as the debtor in favor of the Debtor, as 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 Debtor's first priority perfected security interest in all
Receivables sold thereto by Belk Virginia and the Related Security and
Collections relating thereto.
(10) Copies of proper financing statements (Form UCC-1), dated
a date reasonably near to the date of the initial Advance naming the Debtor as
the debtor in favor of the Bank, as secured party or other similar instruments
or documents as may be necessary or in the reasonable opinion of the Agent
desirable under
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the UCC of all appropriate jurisdictions or any comparable law to perfect the
Bank's first priority perfected security interest in all Receivables sold
thereto by the Debtor and the Related Security and Collections relating thereto.
(11) Copies of proper financing statements (Form UCC-1), dated
a date reasonably near to the date of the initial Advance naming the Debtor as
the debtor in favor of the Guarantor, as 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 Guarantor's first priority perfected security interest in all
Receivables sold thereto by the Debtor and the Related Security and Collections
relating thereto.
(12) Copies of proper financing statements (Form UCC-1), dated
a date reasonably near to the date of the initial Advance naming the Debtor as
the debtor in favor of the Agent, as 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 Agent's first priority perfected security interest in all Debtor
Receivables pledged thereto by the Debtor and the Related Security and
Collections relating thereto.
(13) Copies of proper financing statements (Form UCC-1), dated
a date reasonably near to the date of the initial Advance naming the Bank as the
debtor in favor of the Guarantor, as 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 Guarantor's first priority perfected security interest in all
Receivables sold thereto by the Bank and the Related Security and Collections
relating thereto.
(14) Copies of proper financing statements (Form UCC-1), dated
a date reasonably near to the date of the initial Advance naming the Guarantor
as the debtor in favor of the Agent, as secured party or other similar
instruments or documents as may be
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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 first
priority perfected security interest in all Receivables pledged thereto by the
Guarantor and the Related Security and Collections relating thereto.
(15) Copies of proper financing statements (Form UCC-3), if
any, necessary to terminate all security interests and other rights of any
person in Receivables granted by the Debtor, any Designated Seller, the Bank or
the Guarantor.
(16) Executed copies of the Servicer Account Agreements
relating to each of the Servicer Account Banks and the Servicer Accounts.
(17) Opinions of Smith Helms Mulliss & Moore, L.L.P., special
counsel to the Debtor, the Bank, the Guarantor and the Servicer and Luther T.
Moore, Senior Vice President and Assistant General Counsel of Belk Stores
Services, Inc., as counsel to the Debtor, the Bank, the Guarantor and the
Servicer, together covering the matters set forth in Exhibit M hereto, in form
and substance satisfactory to the Agent and Agent's counsel.
(18) A computer tape setting forth as of the Cut-Off Date all
Receivables and the Outstanding Principal Balances thereon and such other
information as the Agent may reasonably request.
(19) An executed copy of this Agreement, the Guaranty and
Security Agreement, the Receivables Purchase Agreements, the Fee Letter and each
of the other Transaction Documents to be executed by the Servicer, the
Designated Sellers the Bank, the Guarantor or the Debtor.
(20) The Note, duly executed by the Debtor.
(21) The Arrangement Fee in accordance with Section 2.6(b).
(22) A Servicer Report for May 1, 1999.
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(23) An executed copy of the Post Office Box Agreements.
(24) Such other documents, instruments, certificates and
opinions as the Agent or the Administrative Agent shall reasonably request.
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ARTICLE V
COVENANTS
Section 1.17 Affirmative Covenants of Debtor. At all times from the
date hereof to the later to occur of (i) the Termination Date or (ii) the date
on which the Net Investment and all other Aggregate Unpaids have been paid in
full, in cash, unless the Agent shall otherwise consent in writing:
(1) Financial Reporting. The Debtor will maintain, for itself
and each of its respective Subsidiaries, a system of accounting established and
administered substantially in accordance with GAAP, and furnish to the Agent:
(1) Annual Reporting. (A) Within 150 days after the close of
the Debtor's and Belk Center's fiscal years, (beginning with the fiscal
year ending in 1999) company prepared financial statements, (x)
prepared substantially in accordance with GAAP for the Debtor, and (y)
prepared on a consolidated basis, substantially as currently prepared,
for Belk Center and its Subsidiaries, in each case, including balance
sheets as of the end of such period, related statements of operations,
stockholder's equity and cash flows, or (B) within ten (10) days of the
delivery of the Debtor's Form 10-K Annual Report to the Securities and
Exchange Commission, a copy of such report, in either case certified by
an officer of the Debtor as accurate accompanied by a certificate of
the Chief Financial Officer of the Debtor stating that the Debtor is in
compliance with Section 5.3 of this Agreement and stating that no
Termination Event or Potential Termination Event exists, or if any
Termination Event or Potential Termination Event exists, stating the
nature and status thereof; provided, that if such annual report does
not include the financial statements of Belk Center, the Debtor shall
furnish to the Agent the information specified in Section
5.1(a)(i)(A)(y).
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(2) Quarterly Reporting. (A) Within forty-five (45) days after
the close of the first three quarterly periods of the Debtor's year,
consolidated unaudited balance sheets of the Debtor and its
Subsidiaries as at the close of each such period and consolidated
related statements of operations, stockholder's equity and cash flows
for the period from the beginning of such fiscal year to the end of
such quarter, or (B) within ten (10) days of the delivery of the
Debtor's Form 10-Q Quarterly Report to the Securities and Exchange
Commission, a copy of such report, in either case certified by the
Debtor's chief financial officer, and (B) Within forty-five days (45)
days after the close of each quarterly period of each of the
Guarantor's fiscal years, a certification from the chief financial
officer of the Guarantor specifying the Indebtedness the Guarantor has
outstanding other than that contemplated by this Agreement and the
other Transaction Documents.
(3) Consolidated Reports. Within ten days (10) days after the
delivery thereof to the Comptroller of the Currency, the publicly
available portions of the Bank's consolidated reports of condition and
income.
(4) Notice of Termination Events or Potential Termination
Events. As soon as possible and in any event within two (2) Business
Days after the Debtor has actual knowledge of the occurrence of each
Termination Event or each Potential Termination Event, a statement of
the Chief Financial Officer of the Debtor setting forth details of such
Termination Event or Potential Termination Event, and within five (5)
Business Days after such notice, an additional notice detailing the
action which the Debtor proposes to take with respect thereto.
(5) Change in Debt Ratings. Within five (5) Business Days
after
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the date of any change in the Debtor's public or private debt ratings
from Moody's, S&P, Fitch IBCA, Inc. or Duff & Phelps Credit Rating Co.,
if any, a written certification of the Debtor's public and private debt
ratings after giving effect to any such change.
(6) ERISA. Promptly after the filing or receiving thereof,
copies of all reports and notices with respect to any Reportable Event
(as defined in Article IV of ERISA) which the Debtor or any ERISA
Affiliate of the Debtor files under ERISA with the Internal Revenue
Service, the Pension Benefit Guaranty Corporation or the U.S.
Department of Labor or which the Debtor or any ERISA Affiliate of the
Debtor receives from the Internal Revenue Service, the Pension Benefit
Guaranty Corporation or the U.S. Department of Labor.
(7) 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 Debtor or any
Subsidiary of either of them.
(2) Conduct of Business. The Debtor will 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 incorporated or organized, 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.
(3) Compliance with Laws. The Debtor 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 comply would not have a Material Adverse Effect.
(4) Furnishing of Information and Inspection of Records. The
Debtor will, at any time and from time to time during regular business hours
permit
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the Agent, or its agents or representatives, to discuss matters relating
to the Debtor's performance hereunder and under the other Transaction Documents
to which the Debtor is a party with any of the officers, directors, employees or
independent public accountants of the Debtor having knowledge of such matters.
(5) Collections Received. The Debtor shall hold in trust, and
remit, immediately, but in any event not later than three (3) Business Days of
its receipt thereof, to the Servicer all Collections that may be received from
time to time by the Debtor.
(6) Year 2000. The Debtor has taken all action deemed
reasonably necessary by the Debtor to assure that the Debtor's and its
Subsidiaries' computer based systems are able to operate and effectively process
data, including dates, on and after January 1, 2000. At the request of the
Agent, the Debtor will provide the Agent with assurances reasonably acceptable
to the Agent of the Debtor's year 2000 compatibility.
Section 1.18 Negative Covenants of the Debtor. During the term of this
Agreement, unless the Agent shall otherwise consent in writing:
(1) No Change in Business. The Debtor will not make any change
in the character of its business which change would, in either case, impair the
collectibility of any Receivable or otherwise result in a Material Adverse
Effect.
(2) No Mergers, Etc. The Debtor 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; provided, however, that the
Debtor may merge with another person if (w) such Person is a Subsidiary of the
Debtor, (x) the Debtor is the corporation surviving such merger, and (y)
immediately after and giving effect to such merger, no Termination Event or
Potential Termination Event shall have occurred and be continuing.
(3) ERISA Matters. The Debtor will not (i) engage or permit
any of its respective ERISA Affiliates to engage in any prohibited transaction
(as defined in Section 4975 of the Code and Section 406 of
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ERISA) for which an exemption is not available or has not previously been
obtained from the U.S. Department of Labor; (ii) permit to exist any accumulated
funding deficiency (as defined in Section 302(a) of ERISA and Section 412(a) of
the Code) or funding deficiency with respect to any Benefit Plan other than a
Multiemployer Plan; (iii) fail to make any payments to any Multiemployer Plan
that the Debtor or any ERISA Affiliate of the Debtor is required to make under
the agreement relating to such Multiemployer Plan or any law pertaining thereto;
(iv) terminate any Benefit Plan so as to result in any liability; or (v) permit
to exist any occurrence of any reportable event described in Title IV of ERISA
which represents a material risk of a liability to the Debtor or any ERISA
Affiliate of the Debtor or such Designated Seller under ERISA or the Code.
Section 1.19 Financial Covenants of Debtor.
(1) The Debtor shall not permit the Fixed Charge Coverage
Ratio for the consecutive three-quarter period of the Debtor ending on January
30, 1999, or for any consecutive four-quarter period of the Debtor ending on a
date after January 30, 1999, to be less than 1.5 to 1.0.
(2) The Debtor shall not permit, the Leverage Ratio for: (i)
the consecutive three-quarter period of the Debtor ending on January 30, 1999,
to be equal to or greater than 3.00 to 1.00, (ii) any consecutive four-quarter
period of the Debtor including and ending with the first fiscal quarter of any
fiscal year to be greater than 3.25 to 1.00, (iii) any consecutive four-quarter
period of the Debtor including and ending with the second fiscal quarter of any
fiscal year to be greater than 3.25 to 1.00, (iv) any consecutive four-quarter
period of the Debtor including and ending with the third fiscal quarter of any
fiscal year to be greater than 3.70 to 1.00, or (v) any consecutive four-quarter
period of the Debtor including and ending with the fourth fiscal quarter of any
fiscal year to be greater than 3.00 to 1.00.
(3) Capitalized terms used herein and not otherwise defined
are used as defined in Exhibit N hereto.
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ARTICLE VI
INDEMNIFICATION; EXPENSES; RELATED MATTERS
Section 1.20 Indemnities by the Debtor. Without limiting any other
rights which the Agent, the Company or the Bank Investors may have hereunder or
under applicable law, the Debtor 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 and employees
(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
Debtor, any Designated Seller, the Bank, the Guarantor or the Servicer and any
of the Indemnified Parties or between any of the Indemnified Parties and any
third party arising out of or as a result of this Agreement, the Guaranty and
Security Agreement, the other Transaction Documents, the maintenance, either
directly or indirectly, by the Agent, the Company or any Bank Investor of the
Net Investment, the security interest in the Collateral or any of the other
transactions contemplated hereby or thereby, or otherwise arising out of or as a
result of this Agreement, the Guaranty and Security Agreement, the other
Transaction Documents, the maintenance, either directly or indirectly, by the
Agent, the Company or any Bank Investor of the Net Investment, the security
interest in the Collateral 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. Without limiting the generality of the foregoing,
subject to the qualifications contained in clauses (i) and (ii) above, the
Debtor shall indemnify each Indemnified Party for Indemnified Amounts relating
to or resulting from:
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(1) any representation or warranty made by the Debtor, the
Guarantor or any Designated Seller or the Servicer or any officers of
the Debtor, the Guarantor, any Designated Seller or the Servicer under
or in connection with this Agreement, the Guaranty and Security
Agreement, any Receivables Purchase Agreement, any of the other
Transaction Documents, any Servicer Report or any other information or
report delivered by the Debtor, which shall have been false or
incorrect in any material respect when made or deemed made;
(2) the failure by the Debtor, the Guarantor, the Bank or the
Servicer to comply with any applicable law, rule or regulation with
respect to any Receivable or the related Account, or the nonconformity
of any Receivable or the related Account with any such applicable law,
rule or regulation;
(3) the failure to create or maintain a valid and perfected
first priority security interest in favor of the Agent, for the benefit
of the Company and/or the Bank Investors, in the Guarantor's interest
in the Collateral, free and clear of any Adverse Claim;
(4) 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 Account 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;
(5) any failure of the Servicer to perform its duties or
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obligations in accordance with the provisions hereof or of the Guaranty
and Security Agreement; or
(6) 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;
(7) the failure by the Debtor, the Bank, the Guarantor, any
Designated Seller, the Bank, the Guarantor, or the Servicer to comply
with any term, provision or covenant contained in this Agreement, the
Guaranty and Security Agreement or any of the other Transaction
Documents to which it is a party or to perform any of its respective
duties under the Accounts;
(8) the Guarantor's Percentage is less than the Minimum
Guarantor's Percentage at any time;
(9) the failure of the Debtor, the Bank, the Guarantor any
Designated Seller or the Servicer to pay when due any taxes, including
without limitation, sales, excise or personal property taxes payable in
connection with any of the Receivables;
(10) 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;
(11) the commingling by the Debtor, the Bank, the Guarantor,
any Designated Seller or the Servicer of Collections of Receivables at
any time with other funds;
(12) any investigation, litigation or proceeding related
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to this Agreement, the Guaranty and Security Agreement any of the other
Transaction Documents, the use of proceeds of Advances by the Debtor or
any Designated Seller, the holding of Net Investment, or an interest in
any Receivable, Related Security or Account;
(13) the failure of any Servicer Account Bank to remit any
amounts held in the Servicer Accounts pursuant to the instructions of
the Servicer, the Guarantor, or the Agent (to the extent such Person is
entitled to give such instructions in accordance with the terms hereof
and of any applicable Servicer Account Agreement) whether by reason of
the exercise of set-off rights or otherwise;
(14) 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 Debtor, the Bank, the
Guarantor, any Designated Seller or the Servicer to qualify to do
business or file any notice of business activity report or any similar
report;
(15) any action taken by the Debtor, the Bank, the Guarantor,
any Designated Seller or the Servicer in the enforcement or collection
of any Receivable;
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 Debtor and each Other
Transferor; and provided, further, that if such Indemnified Amounts are
attributable to the Debtor, the Bank, the Guarantor, any Designated Seller or
the Servicer and not attributable to any Other Transferor, the Debtor shall be
solely liable for such Indemnified Amounts or if such Indemnified Amounts are
attributable to Other Transferors and not attributable to the Debtor, the Bank,
the Guarantor, any Designated Seller or the Servicer, such Other
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Transferors shall be solely liable for such Indemnified Amounts.
Section 1.21 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 interpretation 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):
(1) shall subject any Indemnified Party to any tax, duty or
other charge (other than Excluded Taxes) with respect to this
Agreement, the Guaranty and Security Agreement, the other Transaction
Documents, the maintenance of the Net Investment, 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 Guaranty and Security Agreement, the other Transaction
Documents, or the maintenance of the Net Investment, 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 Guaranty and Security Agreement, the other Transaction
Documents, or the maintenance of the Net Investment (except for changes
in the rate of general corporate, franchise, net income or other income
tax or gross receipts tax);
(2) 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
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United States market for certificates of deposit or the London
interbank market any other condition affecting this Agreement, the
Guaranty and Security Agreement, the other Transaction Documents, the
maintenance of the Net Investment 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 Guaranty and
Security Agreement, the other Transaction Documents, or the maintenance
or financing of the Net Investment; or
(3) imposes upon any Indemnified Party any other expense
(including, without limitation, 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 maintenance of the Net Investment 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 Guaranty and Security Agreement, the other
Transaction Documents, or the maintenance of the Net Investment,
and the result of any of the foregoing is to increase the cost to such
Indemnified Party with respect to this Agreement, the Guaranty and Security
Agreement, the other Transaction Documents, the maintenance of the Net
Investment, the obligations hereunder, the funding of any advances hereunder,
the Liquidity Provider Agreement or the Credit Support Agreement, by an amount
deemed by such Indemnified Party to be material, then (to the extent such
increased cost is not otherwise reflected in an increase in interest rates or
other Carrying Costs), within ten (10) days after demand by such Indemnified
Party through the Agent, the Debtor shall pay to the Agent, for the benefit of
such Indemnified Party, or such additional amount or amounts as will compensate
such Indemnified Party for such increased cost.
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(2) 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 thereof by any Official Body, or any 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
(to the extent such reduction is not otherwise reflected in an increase in
interest rates or other Carrying Costs), within ten (10) days after demand by
such Indemnified Party through the Agent, the Debtor 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.
(3) The Agent will promptly notify the Debtor 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 6.2. 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 a detailed explanation and calculation of such amount or amounts)
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.
(4) Anything in this Section 6.2 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 6.2 which are in
connection with the Liquidity Provider Agreement, the Credit Support Agreement
or the credit support provided by the Credit Support Provider
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("Section 6.2 Costs") to the Debtor and each Other Transferor; provided,
however, that if such Section 6.2 Costs are attributable to the Debtor, the
Bank, the Guarantor, any Designated Seller or the Servicer and not attributable
to any Other Transferor, the Debtor shall be solely liable for such Section 6.2
Costs or if such Section 6.2 Costs are attributable to Other Transferors and not
attributable to the Debtor, any Designated Seller or the Servicer, such Other
Transferors shall be solely liable for such Section 6.2 Costs.
Section 1.22 Taxes. All payments made hereunder by the Debtor (the
"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 items other
than Excluded Taxes 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:
(1) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(2) promptly forward to the Agent an official receipt or other
documentation satisfactory to the Agent evidencing such payment to such
authority; and
(3) 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
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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 1.23 Other Costs, Expenses and Related Matters. (a) The Debtor
agrees, upon receipt of a written invoice, to pay or cause to be paid, and to
save the Company, the Bank Investors and the Agent harmless against liability
for the payment of, all reasonable out-of-pocket expenses (including, without
limitation, reasonable 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 Guaranty and Security 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 security interest in the
Collateral ) (in the case of this clause (i), such attorneys' fees and expenses
incurred by or on behalf of the Agent, the Company or the Bank Investors shall
be limited to those of Skadden, Arps, Slate, Meagher & Flom LLP) 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 security interest in the Collateral under this
Agreement), or (c) arising in connection with any audit, dispute, disagreement,
litigation or preparation for litigation involving this
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Agreement, the Guaranty and Security Agreement, or any of the other Transaction
Documents, except to the extent resulting from the gross negligence or willful
misconduct of the Company, such Bank Investor or the Agent (all of such amounts,
collectively, "Transaction Costs").
(1) The Debtor 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 receipt by the Company or any Bank Investor of any
amounts applied in reduction of the Net Investment on any day other than a
Remittance Date or the last day of any applicable funding period (in the case of
any LIBOR-based funding).
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ARTICLE VII
THE AGENT; BANK COMMITMENT
Section 1.124 Authorization and Action. (a) 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 7.4 and the first sentence of Section 7.3 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 Debtor, the Bank, the Guarantor 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 Debtor,
the Bank, the Guarantor or the Servicer or the satisfaction of any condition or
to inspect the property (including the books and records) of any of the Debtor,
the Bank, the Guarantor 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 mis-
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conduct of any such agents or attorneys-in-fact selected by it with reasonable
care.
Section 1.25 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 Debtor, the Bank, the Guarantor 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 1.26 Non-Reliance. 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 Debtor, the Bank, the Guarantor
and the Servicer and their 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
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concerning the affairs, financial condition, or business of any of the Debtor,
the Bank, the Guarantor 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 1.27 Indemnification of the Agent. The Bank Investors agree to
indemnify the Agent (to the extent not reimbursed by the Debtor), 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
Investors 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 Issuer. The agreements contained in this Section shall survive payment in
full of the Net Investment and all other amounts payable under this Agreement.
Section 1.28 Termination Events. The Agent shall not be deemed to have
knowledge or notice of the occurrence of a Potential Termination Event or a
Termination Event unless the Agent has received written notice from the Company,
any Bank Investor, the Servicer or the Debtor specifying such Potential
Termination Event or Termination Event and stating that such notice is a "No-
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tice of 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 each Bank Investor.
The Agent shall (subject to Section 7.2 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 1.29 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 Debtor,
the Bank, the Guarantor 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 Debtor, the Bank, the Guarantor 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 1.30 Resignation of Agent. The Agent may resign at any time by
giving notice thereof to the Company, the Bank Investors and the Debtor. Upon
any such resignation, the Bank Investors which hold Commitments aggregating in
excess of 51% of the Facility Limit as of such date shall have the right to
appoint a successor Agent. If no successor Agent shall have been so appointed
and shall have accepted such appointment within
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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 of America 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 VII 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 1.31 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 1.32 Bank Commitment; Assignment to Bank Investors.
(1) Bank Commitment. At any time on or prior to the Commitment
Termination Date, in the event that the Company does not effect an Advance as
requested under Section 2.1, then at any time, the Debtor shall have the right
to require the Company to assign its interest in the Net Investment in whole to
the Bank Investors pursuant to this Section 7.9 on a date designated by the
Debtor. In addition, at any time on or prior to the Commitment Termination Date
(i) upon the
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occurrence of a Termination Event that results in the Termination Date, or (ii)
the Company elects to give notice to the Debtor of a Company Termination Date,
the Debtor hereby requests and directs that the Company assign its interest in
the Net Investment in whole to the Bank Investors pursuant to this Section 7.9
and the Debtor hereby agrees to pay the amounts described in Section 7.9(d)
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 Event 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, or
the date of any assignment as described in the first sentence of this Section
7.9(a), 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 Note and shall assume its
Pro Rata Share 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. Upon such payment, such Non-Defaulting Bank Investor shall
assume its
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proportionate share of such Defaulting Bank Investor's obligations. 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 "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 Advances hereunder.
(2) Assignment by a Bank Investor. No Bank Investor may assign
all or any portion of its interest in the Net Investment, the Note and its
rights and obligations hereunder to any Person unless approved in writing by the
Debtor and 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(s) an Assignment and Assumption Agreement
in substantially the form of Exhibit C attached hereto, duly executed, assigning
to the 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 Net
Investment, the Note and the assignor's rights and obligations hereunder and the
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
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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 the assigned portion of such assignor's
Commitment and interest in the Net Investment and the Note 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 (it being understood
that the Bank Investors, as assignees, shall (x) be obligated to fund Advances
under Section 2.1(a) in accordance with the terms thereof, notwithstanding that
the Company was not so obligated and (y) not have the right to elect the
commencement of the amortization of the Net Investment pursuant to the
definition of "Company Termination Date", notwithstanding that the Company had
such right), 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
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 Debtor. NationsBank, as the initial Bank
Investor, shall not assign or syndicate any portion of its Commitment unless
requested to do so by the Debtor. If NationsBank is requested by the Debtor to
assign or syndicate any portion of its Commitment, all reasonable costs and
expenses of the Agent and NationsBank incurred in connection with any assignment
hereunder shall be borne by the Debtor and not by the Agent or NationsBank. 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.
(3) Effects of Assignment. 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 Assign-
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ment 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 of this Agreement, the other Transaction
Documents or any such other instrument or document; (ii) the assignor makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of Debtor, the Bank, the Guarantor or the Servicer or the
performance or observance by the Debtor, the Bank, the Guarantor or the Servicer
or any of their respective obligations under this 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 Note, the Guaranty and Security Agreement, the Receivables
Purchase Agreements 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 Guaranty and Security Agreement and the other
Transaction Documents; (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
8.8 prior to the date which is one year and one day after
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the payment in full of all Commercial Paper issued by the Company or Conduit
Assignee.
(4) Debtor's Obligation to Pay Certain Amounts; Additional
Assignment Amount. The Debtor 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 this Section 7.9, an aggregate amount equal to all Carrying Costs to
accrue with respect to obligations already entered into by the Company under its
Commercial Paper program as a result of or in connection with this Agreement. If
the Debtor 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.
(5) Administration of Agreement After Assignment. After any
assignment by the Company to the Bank Investors pursuant to this Section 7.9
(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.
(6) Payments. After any assignment by the Company to the Bank
Investors pursuant to this Section 7.9, all payments to be made hereunder by the
Debtor or the Servicer to the Bank Investors shall be made to the Agent's
account as such account shall have been notified to the Debtor and the Servicer.
In the event that the aggregate of the Assignment Amounts paid by the Bank
Investors pursuant to Section 7.9(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 Company.
(7) Downgrade of Bank Investor. If at any time prior to any
assignment by the Company to the
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Bank Investors as contemplated pursuant to this Section 7.9, 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 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, the
Agent and the Debtor(which such acceptance shall not be unreasonably withheld)).
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,
the Agent and the Debtor (which such acceptance of the Debtor shall not be
unreasonably withheld). 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 Advances and to pay its Assignment Amount upon an assignment in accordance
with the applicable provisions of this Section 7.9. 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 two preceding sentences shall affect or diminish in any way any such
downgraded Bank Investor's commitment to the Issuer or the Company or such
downgraded Bank Investor's other obligations and liabilities hereunder and under
the other Transaction Documents.
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ARTICLE VIII
MISCELLANEOUS
Section 1.33 Notices, etc. 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 8.1 and confirmation is received, (ii)
if given by mail, three (3) Business Days following such posting, postage
prepaid, or 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 8.1. However, anything in this Section 8.1 to
the contrary notwithstanding, the Debtor hereby authorizes the Company to effect
Advances, funding period and interest rate selections based on telephonic
notices made by any Person which the Company in good faith believes to be acting
on behalf of the Debtor. The Debtor agrees to deliver promptly to the Company a
written confirmation of each telephonic notice signed by an authorized officer
of Debtor. 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.
If to the Company:
Enterprise Funding Corporation
c/o Global Securitization Services, LLC
25 West 43rd St., Suite 704
New York, New York 10036
Attention: Kevin Burns
Telephone: (212) 302-8331
Telecopy: (212) 302-8767
(with a copy to the Administrative Agent)
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If to the Debtor:
Belk, Inc.
2801 West Tyvola Road
Charlotte, North Carolina 28217
Attention: Terry Scott
Telephone: (704) 357-1064, ext: 4273
Telecopy: (704) 357-0711
Payment Information:
Wachovia Bank, N.A.
ABA 053-100-494
For the Account of: Belk, Inc.
Account Number: 1869-007808
If to Belk Center
The Belk Center, Inc.
2801 West Tyvola Road
Charlotte, North Carolina 28217
Telephone: (704) 357-1064, extension 7000
Telecopy: (704) 357-1861
Attn: Oakley Orser
If to the Agent:
NationsBank N.A.
Bank of America Corporate
Center - 10th Floor
100 North Tryon Street
NC1-007-10-01
Charlotte, North Carolina 28255-0001
Attention: Michelle M. Heath
Global Asset Backed
Securitization
Telephone: (704) 386-7922
Telecopy: (704) 388-9169
Payment Information:
NationsBank, N.A.
ABA 053-000-196
For the Account of: Global Investment Bank Operations
Account No. 1093601650000
Attn.: Camille Zerbinos
Section 1.34 Waivers; Amendments. No failure or delay on the part of
the Agent, the Company, the
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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.
Any provision of this Agreement may be amended or waived if, but only
if, such amendment or waiver is in writing and is signed by the Debtor, the
Servicer, the Company, and the Majority Investors; 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 or the number 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 (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 Collateral Agent shall have obtained
sufficient consent hereunder.
Section 1.35 Successors and Assigns. (a) This Agreement shall be
binding upon the Debtor, the Agent, the Company, the Bank Investors, the
Servicer and their respective successors and permitted assigns and shall inure
to the benefit of the Debtor, the Servicer, the Agent, the Company, the Bank
Investors and their
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respective successors and permitted assigns including the Liquidity Support
Provider; provided that neither the Servicer nor the Debtor shall assign any of
its rights or obligations hereunder without the prior written consent of the
Agent acting upon written instruction of each of the Company and the Bank
Investors. The Debtor and the Agent hereby acknowledge that the Company has
granted a security interest in all of its rights hereunder to the Collateral
Agent. In addition, the Debtor hereby acknowledges that the Company may at any
time and from time to time assign all or a portion of its rights hereunder to
the Liquidity Provider pursuant to the Liquidity Agreement. Except as expressly
permitted hereunder or in the agreements establishing the Company's commercial
paper program, the Company shall not assign any of its rights or obligations
hereunder without the prior written consent of the Debtor. No Bank Investor may
assign, participate, grant a security interest in or otherwise transfer any of
its rights and/or obligations hereunder or any portion of its interest in the
Note without the prior written consent of the Debtor, such consent not to be
unreasonably withheld.
(b) Without limiting the foregoing, the Company may, from time to time,
with prior or concurrent notice to the Debtor, the Bank and the Servicer, in one
transaction or a series of transactions, assign all or a portion of the Net
Investment and its rights and obligations under this Agreement and any other
Transaction Documents to which it is a party to a 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 Net
Investment, (ii) the related administrative agent for such Conduit Assignee will
be either NationsBank or Bank of America National Trust and Savings Association
(as identified by the Agent in a notice to the Debtor) and 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 Provider(s) and Credit Support Provider(s),
respectively, herein and in the other Transaction Documents (including, without
limita-
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tion, 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 Agent or applicable 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 defined terms and other
terms and provisions of this Agreement and the other Transaction Documents shall
be interpreted in accordance with the foregoing, and (vii) 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 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 2.1 to make any
Advance not made by the Company or such Conduit Assignee or under Section 7.9 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 8.3(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
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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.
Section 1.36 Severability Clause. Any provisions of this Agreement
which are prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 1.37 Governing Law; Submission to Jurisdiction; Integration.
(1) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. THE DEBTOR HEREBY SUBMITS TO
THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE
WESTERN DISTRICT OF NORTH CAROLINA AND OF ANY NORTH CAROLINA STATE COURT SITTING
IN MECKLENBURG COUNTY, NORTH CAROLINA FOR PURPOSES OF ALL LEGAL PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY. The Debtor 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 8.5 shall affect the right of the
Company to bring any action or proceeding against the Debtor or its property in
the courts of other jurisdictions.
(2) 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
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hereof superseding all prior oral or written understandings.
(3) The Debtor and the Servicer each hereby appoints Luther T.
Moore 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 Western
District of North Carolina and of any North Carolina State court sitting in
Mecklenburg County, North Carolina by the Company, the Agent, any Bank Investor,
the Collateral Agent or any assignee of any of them.
Section 1.38 Confidentiality Agreement - Company, Agent, Administrative
Agent, Collateral Agent, Liquidity Providers and Bank Investors. Each of the
Company, the Agent, the Administrative Agent, the Collateral Agent, each
Liquidity Provider and each Bank Investor hereby agrees that it will not
disclose the contents of this Agreement, the Guaranty and Security Agreement,
any other Transaction Document or any other proprietary or confidential
information of the Debtor, any Subsidiary of the Debtor or the Servicer, to any
other Person except (i) NationsBank (and any affiliate thereof), any Credit
Support Provider, any potential Bank Investor or potential Liquidity Support
Provider or Credit Support Provider, or such disclosing party's auditors and
attorneys, employees or financial advisors and any nationally recognized rating
agency; provided such entities, auditors, attorneys, employees, financial
advisors or rating agencies are informed of the highly confidential nature of
such information and agree not to disclose it to any other Person, or (ii) as
otherwise required by applicable law or order of a court of competent
jurisdiction or other Governmental Authority.
Section 1.39 Confidentiality Agreement. Each of the Debtor and the
Servicer hereby agrees that it will not disclose the contents of this Agreement
or any other proprietary or confidential information of the Company, the Agent,
the Administrative Agent, the Collateral Agent, any Credit Support Provider, 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
84
<PAGE> 86
recognized rating agency, provided such auditors, attorneys, employees,
financial advisors or rating agencies are informed of the highly confidential
nature of such information and agree not to disclose it to any other Person or
(ii) as otherwise required by applicable law, order of a court of competent
jurisdiction or other Governmental Authority.
Section 1.40 No Bankruptcy Petition Against the Company or the Debtor.
The Debtor and each of the other parties hereto covenant and agree that, and
each such Person agrees that it shall cause any successor Servicer appointed
pursuant to Section 5.1 of the Guaranty and Security Agreement to covenant and
agree that, prior to the date which is one year and one day after the payment in
full of the later of (i) all amounts due under the Note or (ii) all Commercial
Paper issued by the Company (or, if the Net Investment (or any portion thereof)
has been assigned to a Conduit Assignee, one year and one day after the payment
in full of all Commercial Paper issued by such Conduit Assignee); it will not
institute against, or join any other Person in instituting against the Company
or any Conduit Assignee any bankruptcy, reorganization, arrangement, insolvency
or liquidation proceedings, or other proceedings under any federal or state
bankruptcy or similar law.
Section 1.41 Setoff. The Debtor hereby irrevocably and unconditionally
waives all right of setoff that it may have under contract (including this
Agreement), applicable law or otherwise with respect to any funds or monies of
the Debtor at any time held by or in the possession of the Agent in the accounts
established pursuant to this Agreement.
Section 1.42 No Recourse Against the Company. Notwithstanding anything
to the contrary contained in this Agreement, the obligations of the Company
under this Agreement and all other Transaction Documents are solely the
corporate obligations of the Company and shall be payable solely from the assets
of the Company in excess of funds necessary to pay matured and maturing
Commercial Paper.
Section 1.43 Further Assurances. Each of the Servicer and the Debtor
agrees to do such further acts and things and to execute and deliver to the
Company, the
85
<PAGE> 87
Bank Investors, the Administrative Agent, or the Agent such additional
assignments, agreements, powers and instruments as are reasonably requested by
the Agent to carry into effect the purposes of this Agreement or to better
assure and confirm unto the Agent, the Company or the Bank Investors its rights,
powers and remedies hereunder.
Section 1.44 Counterparts. This Agreement may be executed (which
execution may be by facsimile) in any number of copies, and by the different
parties hereto on the same or separate counterparts, each of which shall be
deemed to be an original instrument.
Section 1.45 Headings. Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
86
<PAGE> 88
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Note Purchase Agreement as of the date first written above.
ENTERPRISE FUNDING CORPORATION,
as Company
By:
-------------------------------------
Name:
Title:
BELK, INC.,
as Debtor
By:
-------------------------------------
Name:
Title:
THE BELK CENTER, INC.,
as Servicer
By:
-------------------------------------
Name:
Title:
Commitment NATIONSBANK, N.A., as Agent
$300,000,000 and a Bank Investor
By:
-------------------------------------
Name:
Title:
<PAGE> 89
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1 Certain Defined Terms........................................... 1
Section 1.2 Other Terms.................................................... 28
Section 1.3 Computation of Time Periods.................................... 28
ARTICLE II
ADVANCES; SETTLEMENTS
Section 2.1 Advances; the Note; Eligible Receivables....................... 29
Section 2.2 Fundings....................................................... 32
Section 2.3 Carrying Costs, Fees and Other Costs and Expenses.............. 36
Section 2.4 Allocations of Collections; Non-Liquidation Settlement
Procedures................................................. 37
Section 2.5 Liquidation Settlement Procedures.............................. 39
Section 2.6 Fees........................................................... 39
Section 2.7 Deemed Collections; Application of Payments.................... 40
Section 2.8 Payments and Computations, Etc. ............................... 41
Section 2.9 Sharing of Payments, Etc. ..................................... 41
Section 2.10 Right of Setoff................................................ 42
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1 Representations and Warranties of the Debtor................... 43
Section 3.2 Reaffirmation of Representations and Warranties by the Debtor.. 46
ARTICLE IV
CONDITIONS PRECEDENT
Section 4.1 Conditions to Closing.......................................... 47
ARTICLE V
COVENANTS
Section 5.1 Affirmative Covenants of Debtor................................ 52
i
<PAGE> 90
Section 5.2 Negative Covenants of the Debtor............................... 55
Section 5.3 Financial Covenants of Debtor.................................. 56
ARTICLE VI
INDEMNIFICATION; EXPENSES; RELATED MATTERS
Section 6.1 Indemnities by the Debtor...................................... 57
Section 6.2 Indemnity for Taxes, Reserves and Expenses..................... 60
Section 6.3 Taxes.......................................................... 63
Section 6.4 Other Costs, Expenses and Related Matters...................... 65
ARTICLE VII
THE AGENT; BANK COMMITMENT
Section 7.1 Authorization and Action....................................... 67
Section 7.2 Agent's Reliance, Etc. ........................................ 68
Section 7.3 Non-Reliance................................................... 68
Section 7.4 Indemnification of the Agent................................... 69
Section 7.5 Termination Events............................................. 69
Section 7.6 Rights as Bank Investor........................................ 70
Section 7.7 Resignation of Agent........................................... 70
Section 7.8 Payments by the Agent.......................................... 71
Section 7.9 Bank Commitment; Assignment to Bank Investors.................. 71
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Notices, etc. ................................................. 78
Section 8.2 Waivers; Amendments............................................ 79
Section 8.3 Successors and Assigns......................................... 80
Section 8.4 Severability Clause............................................ 83
Section 8.5 Governing Law; Submission to Jurisdiction; Integration......... 83
Section 8.6 Confidentiality Agreement - Company, Company, Agent,
Administrative Agent, Collateral Agent, Liquidity
Providers and Bank Investors............................... 84
Section 8.7 Confidentiality Agreement...................................... 84
Section 8.8 No Bankruptcy Petition Against the Company or the Debtor....... 85
Section 8.9 Setoff......................................................... 85
Section 8.10 No Recourse Against Stockholders, Officers or Directors........ 85
ii
<PAGE> 91
Section 8.11 Further Assurances............................................. 85
Section 8.12 Counterparts................................................... 86
Section 8.13 Headings....................................................... 86
iii
<PAGE> 92
EXHIBITS
EXHIBIT A Forms of Account Agreement
EXHIBIT B Form of Additional Advance Certificate
EXHIBIT C Form of Assignment and Assumption Agreement
EXHIBIT D Credit Guidelines
EXHIBIT E Form of Post Office Box Agreement
EXHIBIT F Form of Servicer Account Agreement
EXHIBIT G List of Servicer Account Banks
EXHIBIT H Form of Servicer Report
EXHIBIT I Form of Note
EXHIBIT J List of Actions and Suits
EXHIBIT K List of Subsidiaries, Divisions and Tradenames
EXHIBIT L Forms of Secretary's Certificate
EXHIBIT M Form of Opinions
EXHIBIT N Financial Covenant Definitions
iv
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-2000
<PERIOD-START> JAN-31-1999
<PERIOD-END> OCT-30-1999
<CASH> 21,874
<SECURITIES> 23,604
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0
0
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<TOTAL-LIABILITY-AND-EQUITY> 1,720,184
<SALES> 1,474,483
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<CGS> 1,012,598
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<OTHER-EXPENSES> 7,510
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